Imagine that Alexander Graham Bell and Thomas Edison came back to life today and observed the industries they were instrumental in creating. If Bell were handed a smartphone and asked to make a call, he would not know how to do it. Edison, on the other hand, would be able to explain, in fairly technical detail, how every aspect of today's electric system works. It has not changed in about 100 years, and is increasingly unreliable.
That, in a nutshell, is the reason for what is known as the Smart Grid. The Smart Grid is an important concept. After all, buildings depend on energy, particularly electricity. The U.S. Energy Information Administration (EIA) reports that buildings represent 17 percent of U.S. energy use overall and account for 35 percent of electric consumption. EIA data also indicates that electricity amounts to 75 percent of the energy bill for commercial buildings. So when the supply of electricity falters, building occupants feel the impact. Power outages cost U.S. businesses $80 billion per year, hampering productivity and detracting from comfort.
The Smart Grid promises to reshape the way electricity is purchased and consumed. It represents an opportunity for new building revenue streams, allowing them to become virtual power plants and energy profit centers. But most building owners are not aware of what the Smart Grid could mean to buildings.
A Smart Grid is an interconnected system that combines information and communication technologies with electricity generation, transmission, distribution and end-use technologies. The goal is to enable consumers — in this case, building owners — to manage electricity use and choose the most economically efficient offering. At the same time, the Smart Grid aims to maintain delivery-system reliability and stability, using automation and environmentally optimal generation alternatives including renewables and energy storage. That is a lot to take in, but it gets to the heart of what is underway.
Bob Galvin, former chairman of Motorola and founder of the Galvin Electricity Initiative, was instrumental in starting the cell phone industry. He compares electricity today to telecom in the early 1980s. It has a monopoly business model, a pent-up need for innovation, and no way to unleash entrepreneurial business models. The Smart Grid is about transforming the electricity business model.
The Smart Grid is essential because the electric industry is dangerously outdated. As a result, the electric grid is increasingly unreliable. Remember the great blackout of Aug. 14, 2003? On that day the U.S. Eastern seaboard went dark from a massive power outage. This was not an isolated event; outages continue to occur regularly, fortunately not on that scale, but with significant impacts.
There was actually one good thing about the economic downturn: It gave electric providers a breather, since electricity use was down. But with Wall Street recovering, Main Street will follow, and the demand for electricity will again grow. Before the downturn, the Department of Energy (DOE) was projecting a 40 percent increase in electric demand over twenty years. DOE estimated that it would cost roughly $1 trillion to build new infrastructure to keep the lights on. With economic recovery, our digital economy will escalate the demand for electricity, putting more strain on the aging infrastructure. Utilities and state public utility commissions will be hard pressed to justify rate increases to fund needed investments in electric infrastructure. So they will turn to energy users with Smart Grid programs.
Why should building owners care? The answer is simple: money.
No one disputes that the investments building owners have made in efficiency are cost effective. It makes sense to optimize building energy consumption because it reduces building operating costs. These investments also help utilities, but only with one of their two concerns.
When considering electricity, there are two important topics: energy use and energy demand. Efficiency helps utilities with energy use. But energy demand is a completely different topic, one that is far less well known to building owners. True those with graying temples remember demand-limiting and such programs from the 1980s, but that is just part of the story.
To understand energy demand, facility managers should remember that utilities have to build and maintain an electric infrastructure to deliver power at periods of peak demand. For most of the time, the infrastructure operates at far less than peak levels. Few realize that 25 percent of the multibillion dollar electric infrastructure (power plants, transmission and distribution lines, etc.) exists to provide capacity for peak periods that total roughly 100 hours per year.
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