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How a Smart Grid Will Spur Energy Entrepreneurship

BW’s Rachael King explains the details behind a buzzword we hear a lot now, the smart grid. In essence, the smart grid would do for power what the Internet did for information: replace a one-way distribution system with a two-way, interactive network.

Government bodies and utility providers are in the early stages of this multibillion-dollar upgrade to transform the existing grid into a two-way network where power and information flow in both directions between the utility and the customer, not just from the provider to the user.

The tech sector’s interest is fitting considering the similarities between the energy-grid upgrade and the computing revolution of the 1980s that saw hulking, centralized mainframes give way to PCs. The existing U.S. power grid dispenses electricity but is limited in its ability to gather intelligence from end users—hence the monthly visit from a meter reader. Now utilities are replacing outmoded meters with so-called smart meters that foster a back-and-forth between customer and utility. In much the same way PCs opened the door to third-party software and services and use of the Internet, smart meters are paving the way for tools and services that make the system more responsive to shifts in energy demands.

Energy entrepreneurs are developing new technologies for generating, storing, and conserving power. Cleantech investing is beginning to recover from the hit it took last year. But changing the underlying energy infrastructure from a one-way power grid to a smart two-way grid could open the gates for more energy entrepreneurs, at different scales.

If the grid is something more like an open network, small producers can sell energy back to utilities. So maybe local farmers have an incentive to generate their own power with solar panels or wind turbines. As King notes, smart meters create opportunities for new technology as well: Software that helps households and businesses reduce their usage at peak times, for example.

The broader point here is that this is the kind of shift entrepreneurs should be attuned to. Any major systemic change — in this case to a piece of infrastructure that everyone uses constantly — opens up opportunity. Not everyone recognized the shift in the early days of the Internet (and a lot of those who didn’t — think industries like news and music — paid dearly). Don’t miss the story and special report on the smart grid.

Steve Ballmer, Power Forward
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