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Putting a Jolt in the National Grid


Utilities such as Dominion Virginia, Austin Energy, and Xcel Energy are spending big on cost-saving "smart-grid" technology

When it comes to business opportunities in smart infrastructure, one of the largest is in upgrading America's electricity network. U.S. utilities already spend about $20 billion a year on information technology, and as part of the federal stimulus bill, the government plans to spend another $11 billion over the next 20 months to help modernize the national grid. So it's little wonder that everyone from giants like Accenture (ACN) and Hewlett-Packard (HPQ) to hot startups like Silver Spring Networks are angling for a piece of the action.

The idea is that "smart grid" technology will lower energy consumption and save utilities and consumers money. With smart meters and other technologies that provide power usage information in real time, consumers could make intelligent choices about cutting back. If prices spike early in the evening, they could wait to wash the dishes. Dominion Virginia Power says that in trials, customers with wireless monitors that give them real-time information about their electricity use have cut their usage by as much as 30%.

Utilities don't do this just to be good citizens. If smart technologies get corporate customers or consumers to reduce their electricity usage at peak times, the utilities don't have to build as much generating capacity. By not building new plants or rehabbing old ones, utilities can save billions.

One company in the vanguard of this movement is Austin Energy, which serves Austin, Tex. It started rolling out wireless thermostats for homes and businesses in 2004 and expects to complete its first-generation smart grid this year. The effort has made Austin Energy more efficient because it increasingly uses smart meters and sensors to monitor equipment rather than sending out employees in trucks. "Everybody should come see what we're doing," says Andres E. Carvallo, Austin Energy's chief information officer and architect of its smart grid.

But even the most supportive utilities caution that these are early days for this kind of technology. Minneapolis-based Xcel Energy (XEL) is upgrading its system in Boulder, Colo., to create what it calls the first smart city in the nation. It will include everything from smart meters to solar generators to a system for electric-car owners to sell charges from their vehicles' batteries back to the utility when power demand is high. But the company doesn't know which technologies will pay off and which won't. "That's what we're trying to figure out," says Roy Palmer, vice-president for federal and state affairs.

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Hamm is a senior writer for BusinessWeek in New York and author of the Globespotting blog.

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