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The U.S. is in the process of deploying $3.4 billion of federal Smart Grid Investment Grant Program funds, matched by $7 billion of state, local, and ratepayer funds for technological improvements to our electricity grid. The largest portion of these funds is to install smart meters, electronic versions of the old analog (dial-based) meters, along with systems that allow those smart meters to communicate. While smart meters can provide detailed "information" about energy usage, they won’t necessarily be compelling enough to spur consumers to save energy.
So what will we get back on this investment? The installation of a smart meter and communication system in a typical home can cost up to $500, which is about the same as that home’s electricity bill for several months. Smart meters provide value to the utility providers—they facilitate automatic billing, for example. While having efficient utilities to service us is beneficial, that alone is not enough. This investment to digitize our metering systems needs to be the core enabler for replacing fossil fuel-based sources of electricity with renewable sources. True, wind and solar energy will be major contributors toward this end over time, but the single cheapest and quickest means of reducing pollution and our carbon footprint is energy efficiency.
Our Smart Grid investments must motivate behavior by creating greater economic incentives. While doing good for society is some incentive, we all know that economic incentives work wonderfully. For example, to encourage consumers to install solar panels, we could offer to "buy back" any energy the panels generate in excess of what the consumers use for their own homes. Aligned financial incentives (and disincentives, such as charging higher rates for consumers who don’t conserve enough) are essential to deliver a return on the Smart Grid Investment Grant Program. This is what truly will stimulate us to behave differently—in our purchase and use of major appliances, in our management of equipment in our workplaces, and in our day-to-day behavior.
Knowledge is power. In the case of smart meters, it’s a more efficient use of power. The U.S. government was galvanized to invest in smart meters by the sheer numbers: Smart meters save consumers $60 to $180 per year, according to the Energy Information Administration. As Nobel Prize winner Al Gore said, "Energy efficiency is ‘the single largest solution to the climate crisis,’ and the smart grid will ‘play a crucial role’ in achieving that efficiency." But don’t take our word for it. A recent DOE study showed that when consumers can track their energy usage through smart meters, their usage declines as much as 15%.
If just half of U.S. households cut their demand by 10%, the electricity savings would be greater than today’s total U.S. wind and solar power output. The Energy Information Administration’s Clean Energy Calculator indicates that the amount of CO2 emissions avoided would be equal to taking approximately 8 million cars off the road. And with the addition of dynamic pricing, programmable appliances, and other incentives, the potential for savings could be significantly greater.
Extrapolate this savings across 338 million meters in the U.S., and you get more than $40 billion (back of the envelope calculation: $120 average savings x 338 million meters = $40.5 billion). Considering the $3.8 billion government investment in the smart grid, the data show a clear return to ratepayers. At SmartSynch, we also believe that using existing public wireless networks to build this grid—rather than costly private networks—will make the government money go even further.
Other major infrastructures, such as the telephone network, Internet, transcontinental railway, and interstate highway system, have moved to digital, and the time for electricity—the most integral network powering modern life—has finally come.
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