Smart Grid: A Must for Energy Efficiency

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At the same time, the smart grid will give consumers the ability to monitor their electrical usage online, assess their needs more accurately, and even make remote use of their electrical accounts—for such potential purposes as recharging an electric car away from home.

Just as important for purposes of emissions reduction, the smart grid will make it simpler for utilities to buy energy from other producers on the open market and integrate these sources into their supply without extended planning or long-term contracts. Thus, a homeowner with a wind turbine in the backyard or a solar array on the roof could sell excess power back to the grid as easily as he or she could buy extra power to supplement a shortfall. And utilities can more easily buy excess power from other producers to make up for temporary shortfalls in local production capacity.

Reliable Power Supply

The smart grid, driven by innovative software, represents a major leap forward in converting what has previously been a necessarily regulated natural monopoly into an increasingly efficient free market. The potential benefits are immense. Not only will the smart grid result in a more reliable power supply, even in the face of rising demand, but it also should save at least $46 billion over 20 years in reduced investment in power plants and transmission networks. The costs associated with transmission congestion could be slashed by nearly $5 billion annually. And the smart grid would enable renewable energy projects that could cut U.S. carbon emissions by 700 million tons annually from current levels.

In October, the Obama Administration committed $3.4 billion of stimulus funds to updating the U.S. power grid. This represents an important, if somewhat symbolic, boost to an ongoing transformation. Many private enterprises, including ours, have long been working on the technology that soon will make the smart grid a reality. But the government's investment is welcome in this transition period, as a significant threshold of capital investment must be crossed before substantial benefits begin to accrue.

Thomas Edison's first power station was a money loser for its first two years. Being the first of its kind was not an immediate guarantee of success. Like Edison and the men who backed him, we need to remember that we are building something of lasting value, an asset with public as well as private dimensions that will contribute to economic growth while improving our environment and our efficient use of precious natural resources.

The Pearl Street station was decommissioned in 1895, only 13 years after it was built. It had become obsolete. But it represented the first major investment in a technology that grew into one of the world's greatest and most life-changing industries. The smart grid represents the next vital step in that evolution, and continued investment will be necessary to ensure that we reap its many long-term benefits.

Apotheker served formerly as the CEO and member of the Executive Board of SAP.

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