Promises and Pitfalls of Smart Grid - Smart Grid (R) Evolution: Electric Power Struggles - page 27

This spans both investments in hardware, such as new smart meters and new operations,
and investments in software and new management tools. Opportunities for new actors
can be seen clearly with the increase in demand response programs and the growth of
companies that facilitate changes in efficiency and electricity demand. These companies,
sometimes referred to as third-party demand response aggregators, have become active
market participants in some areas and demand response has become a valuable grid
resource that influences overall management of the grid (ISO-NE 2013 ; PJM 2013 ) .
Societal Economic Benefits from a Smarter Grid
The economic benefits of smart grid also include indirect benefits resulting from a
strengthened, more robust and efficient infrastructure and internalizing environmental
externalities, discussed in more detail later in the chapter. By reducing the frequency and
duration of costly power outages and improving system efficiency, a smarter grid has the
potential to provide diffuse economic benefits to all members of society. These benefits
result directly and indirectly from lowering the societal cost of generating, transmitting,
and distributing electricity and enhancing management of consumer demand, and ensuring
a robust and reliable system with minimal disruptions. Moving toward a smart grid system
requires significant investment, but initial estimates by the Electric Power Research
Institute (EPRI) project an excellent rate of return, with a cost-to-benefit ratio of 4:5
(EPRI 2011 ) . Other potential economic benefits for society include an expanded high-tech
industry, a growing renewable energy sector, and higher quality power. With smart grid
the United States has an opportunity to improve the robustness of the economy through
investment in its aging energy infrastructure, and potentially raise the D+ grade received
on the American Society of Civil Engineers' infrastructure report card (ASCE 2013 ).
Smart grid promises increased efficiency across the power system by providing ways to
use capital-intensive resources more efficiently (EPRI 2008 ). To ensure system reliability,
some power plants only run for a few hours per year. Despite the inefficiency, these power
plants are maintained and kept in service because the system must be able to handle peak
loads. Commentators quip that this is like sizing a church to handle Easter Sunday crowds,
or building a mall parking structure large enough for all of the Black Friday customers to
park. System operators know that demand varies during the day and seasonally, but the
current power system does not allow them to manage demand as efficiently as they could.
Development of a smart grid would let system operators monitor and manage demand
and generation. Advances in smart metering could allow direct control of industrial,
commercial, and residential customer load, not just in response to system emergencies,
but as part of normal system operation. Chapter 5 explores more details of smart meters'
potential to contribute to efficiency improvements.