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Smart grids – a smart idea?

Kari Larsen

With the EU’s goal of 20% renewable energy by 2020, and the UK government’s plan to roll out smart meters to all domestic customers by the same time, the way has been paved for smart grids. Global energy consumption is set to triple by 2050, and power networks need to transform into intelligent systems that will save energy, accommodate increasing amounts of renewable energy, and ensure supply security.

What is a smart grid?

Katherine Hamilton, president at GridWise Alliance, tells Renewable Energy Focus, “while putting smart meters out there gives the utility more in-formation, it doesn’t make your grid really smart until the consumer is involved. A smart grid has to be dynamic and have constant two-way communi-cation. The consumer has to be part of the smart grid by being given choices and tools to help them decide how to use their energy more efficiently.”

A smart grid, she says, is a means to an end: “You can have the most digitised, sophisticated grid in the world, but if it doesn’t put renewable energy online, and make your system more efficient, more reliable and more flexible, it isn’t really very smart.”

And according to David J. Leeds, smart grid analyst at Greentech Media’s GTM Research, the smart grid is a system comprised of three layers: the physical power layer (transmission and distribution); the data transport and control layer (communications and control); and the applications layer (applications and services).

Key characteristics of a smart grid, he suggested in a webinar hosted by Greentech Media in August – include:

  • Advanced metering infrastructure (AMI) – smart meters;
  • Demand response – utilities offer incentives to customers to reduce consumption at peak times;
  • Grid optimisation – system reliability, operational efficiency, and asset utilisation and protection;
  • Distributed generation – not only traditional large power stations, but also individual PV panels, micro-wind, etc;
  • Grid-scale storage;
  • Plug-in hybrid electric vehicles (PHEVs) and vehicle to grid (V2G) – the latter being 5 to 10 years off;
  • Advanced utility control systems – energy management systems (EMS), SCADA, distribution management systems (DMS), meter data management (MDM), and geographic information systems (GIS);
  • Smart homes and networks – home communications networks and home energy management systems.

Leeds believes smart grids to be essential to the adoption of more renewable energy: “Without a smart grid infrastructure in place, large-scale integration of renewables will be nearly impossible.” And grid-scale energy storage offers “abundant” opportunities for innovation and investment.

The economics of smart meters and smart grids

The Institute for Electric Efficiency (IEE) white paper Moving Toward Utility-Scale Deployment of Dynamic Pricing in Mass Markets looks at the economic case for dynamic pricing in the energy market, one of the prerequisites of which is the installation of automated metering infra-structure (AMI), or smart meters.

Venture capital investments in smart grids: 2005-2009

YearVC funding in smart grid firms
H1 2009US$37.5
Source: GTM Research's white paper The Smart Grid in 2010

The paper states that the cost of smart meters is US$100-US$175 per device, and reaches US$200-US525 if demand response components – such as customer signalling – and demand control functions are added. In either case, the paper finds that the investment pays off for utilities in the long run.

Similarly, the Electric Power Research Institute (EPRI) in the USA, has predicted that the implementation of a smart grid would save 5%-10% of electric power without reducing comfort levels.

According to the GTM Research white paper The Smart Grid in 2010, the EPRI has estimated the cost of building a smart grid at US$165bn over the next 20 years. Net firm Cisco told the BBC earlier this year that it believes the smart grid market could be worth up to US$20bn a year.

Already, Leeds reckons that about US$1.3bn in venture capital was invested in the smart grid between 2005 and 2009, with a large proportion going to com-munications network infrastructure for AMI deployments.

In the USA, President Obama has pledged large sums of money to renewable energy and the development of smart grids. In July, the Department of Energy (DoE) announced more than US$57m in Recovery Act Funding to advance smart grid development for 8 projects in 7 States. This adds to the US$17m allocated in 2008 to these projects.


In its directive on energy efficiency and service, the European Union stated that customers must receive more information about their energy consumption. According to the German Ministry for Economics and Technology, meters detecting wasteful electricity use could save 9.5 TWh annually.

Following many other EU countries, the German parliament implemented the EU directive in June 2008. From 2010, smart meters will be installed in new buildings, and a quarter of the country’s old meters will need to have been replaced by 2015.

From 2011, German utilities will have to provide load-based or time–of–day-based power saving incentives. All the major German energy suppliers are now testing smart meters. However, Siemens notes that only one in every 10,000 meters is currently 'smart', and upfront cost is an obstacle – Accenture estimates that replacing 25% of Germany’s electric meters will cost €1 billion and take 5000 person years.

Hamilton at GridWise Alliance says all US states are required to have a smart grid docket, but the USA is not necessarily close to a nationwide smart grid: “That’s going to take a while. It’s going to go out piecemeal…but I think in 20 years our grid is going to function completely differently than it does now, in ways we can’t even imagine. Just like 30 years ago you wouldn’t have known our phones would be able to give us directions to our favourite restaurant.”

What about security?

“The addition of millions of sensors and smart meters dramatically increases the number of points that could be targeted and become potentially vulnerable to cyber attack. However, while these concerns should not obstruct the implementation and the deployment of smart grid technologies, they do need to be adequately addressed by governments, utilities and companies providing grid hardware and software,” GTM Research says.

One of the options for relaying information across smart grids is the internet. Jon Geater, director of technical strategy, Information Systems Security at information security and encryption specialist Thales, tells Renewable Energy Focus, “many of the challenges with smart grids are very similar to the traditional challenges that we have seen in the information security market for quite a long time. You have to identify where the points in your com-munication chain are, you need to know how to trust them, and you need to secure the information that flows between them.”

Geater does not believe it very likely that someone would hack into the consumer smart energy system and turn off a whole power station, but “obviously, the more feedback features you put in, the more opportunity there is for attack or accident.”

Most smart meter units, he says, have the capability of embedding a ‘key’ or some other form of identity. However, securing the meters themselves is not enough. “Where you have to be careful is making sure you keep track of the information and have security on each link.”

Moreover: “Just having security from the big box at the end of the road to the utility provider does not stop someone from patching a wire across to their neighbour’s house, or using wireless, to enter at that point and interfere with the system and usage information. It’s really all about having a coherent, consistent approach to the whole system.”

Geater recommends encrypting data sent between households and utilities. “Being able to monitor and analyse your own detailed energy usage is a fantastic innovation. However, you don’t necessarily want people to see your energy usage, you don’t want to be leaking information about your lifestyle, about where you are at certain times of the day, etc. And you don’t want to be leaking information such as account details.”

He advocates the use of authentication methods, as with email for example, to ensure that the utility and consumer know that information received is bona fide – not modified or copied from elsewhere, and not a virus, for example.

Geater also highlights the security implications of running more than one utility function through the same smart meter. In Germany, for example, heat is a distinct utility: “You don’t want a company you’re not affiliated with accidentally receiving data about your usage. And certainly there are many reasons why the utility companies would not want their customer data to be sent to the wrong place.”

He points out that the data could also be used for surveillance, both by criminals and law enforcement agencies, of people’s work/home, in/out, upstairs/downstairs patterns.

It is vital, he concludes, to put security in place at the same time as the infrastructure is being put together – it is much easier to design a secure system than to secure an existing one.

Case study 1: SYSLAB – RISØ DTU

Risø at the Technical University of Denmark already operates a smart grid which incorporates renewable energy and energy storage at its Risø National Laboratory for Sustainable Energy (SYSLAB) laboratory for intelligent distributed control.

Smart grid activities in Germany

The use of information and communication technologies (ICT) and novel intelligent optimisation algorithms that control connected units are the basis of 'smart' grid operation.

The German development initiative E-Energy has an overall budget of €140m over four years and is partly funded by the Ministries of Economics and Environment. 6 model regions were selected to show example solutions of smart grids. An additional focus is the integration of electrical vehicles in these smart grid solutions.

The Regenerative Model Region Harz is one of the most exciting sites because it aims at aggregating various renewable energy sources (such as wind turbines, photovoltaic (PV) and biomass plants), consumers (residential and commercial) and storage (electrical vehicles and a pumped hydropower plant) in a virtual power plant.

Some units can be controlled centrally and directly by the virtual power plant. Other units such as residential consumers or users of electrical vehicles may want to decide locally and independently. For the latter ones it is possible ot implement enhanced smart meter devices (BEMI = Bidirectional Energy Management Interface) that use time-variable electricity prices as incentives for local control decisions. By enhancing and finally using the controllability of the different units the RegModHarz consortium is demonstrating that future power systems with large shares of renewable energy / distributed energy units are stable, reliable and economic.

Dr. Martin Braun, Group Manager Decentralised Ancillary Services Division Systems Engineering and Grid Integration.

The system uses a standard computer, data storage, measurement hardware, I/O interfaces, backup power and an Ethernet switch. Each of the components of Risø’s microgrid has been equipped with a dedicated node system, providing monitoring, supervisory functions, and communication.

The Risø grid consists of:

  • 60 kVA diesel generator;
  • 11 kW Gaia wind turbine;
  • 55 kW Bonus wind turbine;
  • 75 kW dump load;
  • 45 kVA back-to-back power converter;
  • 10 kW deferrable load (space heating);
  • A plug-in electric vehicle (PHEV);
  • 15 kW Vanadium redox-flow battery;
  • 7 kW PV;
  • 3x 36 kW of load.

Oliver Gehrke of the Wind Energy Division at SYSLAB, tells Renewable Energy Focus that SYSLAB has no central control location: “Instead we made a standard design for what we call a SYSLAB node, which is something like a standard computer, I/O and local storage and networking. We’ve put one of these computers at each of the energy devices.”

These computers are linked in a standard Ethernet network. However, to have a fully decentralised system is not feasible, Gehrke says: “We started off with a vision, that I think was shared by a lot of people, that you could have a fully decentralised control where there’s no central controller at all. But we’ve come to realise, mainly by doing experiments on our system here, that this is something that is either very far off or not realistic at all for a certain system size.”

Unexpectedly, “the real challenge is not how to control the top-level … [but] how to maintain this [grid] as a very large-scale distributed computer system that has real-time requirements.”

However, he points out that the many smart grid projects being carried out in the field at the moment which operate with a single control unit fail to address what SYSLAB sees as the key problem of scalability: “What do you do when the central computer goes down? And what do you do if it’s not 300 houses, but three million?”

Gehrke suggests the possibility of a hierarchy of aggregators in which the central unit talks to 100 autonomous units, which each talk to another 100 autonomous units, and so on. The number of relations between units is kept to a controllable magnitude.

Ethernet was preferred to power line communication in SYSLAB’s smart grid as it was already in place – in 5 to 10 years, this will be the case in most households, and the amount of bandwidth needed to provide auxiliary services to the grid is “extremely small”, according to Gehrke.

Whichever line of communication is chosen, Gehrke believes a smart grid would in fact increase operational security. If more intelligence is put into peripheral parts of the grid, for example on what to do if a communication line fails, such a failure could be bridged for a couple of minutes, giving time for a meaningful response.

Nevertheless, with the installation of millions of smart meters, Gehrke believes that “sooner or later, this is going to be hacked – I don’t think there’s anything you can do about that. So the key thing to do is to make sure that even if you compromise parts of the system, that the rest of the system doesn’t get affected.

“I’m not sure if the power companies realise all the implications of that right now, but on the other hand, I think it is something that can be overcome.”

When it comes to the integration of renewable energy, he says, “if you have enough reserve in the grid, you can run with any amount of wind penetration – the question is, is it efficient economically, or even environmentally? Because at some point you may have to deploy so much reserve that you don’t have any benefit anymore.”

Denmark has the goal of 50% of wind power in a couple of years’ time, but Gehrke warns that it will not be enough to use only conventional reserves in the grid to deal with intermittency – the load side has to be controlled too. Large-scale dedicated storage, he believes, is too costly.

The challenge when trying to control the load side is the number – quite possibly several million – of units involved. A solution must, Gehrke believes, involve granting local parts of the system a large degree of autonomy, though this “pushes the boundaries of automation, computer science, control engineering, and so on.”

The thought is that various units connected to the grid can act as a service, helping ride out the fluctuations of intermittent energy sources – by matching the thermostat pattern of an electrical heater to fluctuations in the availability of renewable energy, for example.

Plug-in electric vehicles could also be used. As Gehrke remarks, a standard, privately-owned vehicle on average stands still 22 hours a day. If it needs four hours to recharge, there is considerable flexibility to match this to energy generation patterns.

Using appliances already connected in households to control the demand side of the grid is much more economical than expanding the existing grid, Gehrke argues.

Asked whether an EU-wide smart grid, for example, is feasible, Gehrke says that this very much depends on the business structure. Different countries and states have different degrees of liberalisation of the power industry, different ownership models and different market set-ups.

No-one knows exactly what larger smart grids will look like, but, he observes, there will have to be a connection to a market in which power can be traded, and more importantly the ability to trade ancillary services as these are worth more and would therefore provide further economical justification for having smart grids.

Case study 2: GE ENERGY

John McDonald, general manager marketing, GE Energy Transmission & Distribution, tells Renewable Energy Focus that GE has a number of ongo-ing smart grid projects. To GE, a smart grid is the bringing together of the electrical infrastructure and the information infrastructure.

Smart meters are microprocessor-based devices providing two-way communications capability, and will help homeowners manage their electricity usage. Through a website, for example, or a customer portal, parameters as to when loads in the home turn on and off based on the price of electricity could be set. The dishwasher, for instance, could be loaded and set to stand-by until the price of energy is below a certain level – typically off peak – when it would start automatically.

Smart meters should also have the ability to be updated with new functionality and software bugs fixed remotely, including both application upgrades and security patches.

McDonald says smart meter security involves both physical security – to inhibit tampering and theft – and the security of the two-way communications.

“In the United States we have some very stringent cyber security rules that we must follow,” he tells Renewable Energy Focus – the Critical Infrastructure Protection (CIP) standards from the North American Electric Reliability Corporation (NERC).

Regarding the organisation of GE’s smart grids, McDonald says the metering information typically goes to a central computer, different from the SCADA system. “Typically for SCADA systems [in the USA], the master station is centralised. We do have some smart grid applications [introduced] on a substation basis – more decentralised. An example is an integrated Volt/Var control, where we put logic in the substation, constantly monitoring both the substation and its feeders.”

By putting logic in a substation that can manage voltage and reactive power resources such as capacitor banks on the feeders, losses are minimised and peak demand on the system is reduced.


McDonald recognises that smart grids still face many challenges, one of which is scalability. This is why he promotes the importance of city-scale smart grid roll-outs, as opposed to smaller pilots, “as these will deliver the scalability necessary to ensure the viability of the technologies being implemented. Florida Power and Light’s Energy Smart Miami initiative and American Electric Power’s GridSmart project in Columbus, Ohio are two such examples of large scale smart grid initiatives that will prove technology readiness.”

Another challenge, also raised by Leeds of GTM Research, is the lack of a common standard. “Ideally, it would be nice to have a situation where all the standards were written for all parts of the smart grid before the deployment takes place.”

“We must ensure the creation of standards doesn’t unnecessarily slow the process of implementation, and we are actively engaged in the develop-ment of standards to help speed innovation and deployment,” McDonald adds.

He encourages active participation and leadership in smart grid standards development efforts. In this way, the knowledge of planned changes to existing and new standards can be incorporated into product and system development plans to ensure these plans are aligned with the direction of the industry. Renewable Energy Focus notes that this way, one can avoid a situation where today’s technology could be obsolete tomorrow.

There are already standards in place for connecting renewable energy to the grid in the US in the form of IEEE standard 1547 and its companion standards. These standards, McDonald says, provide a good foundation.

He also refers to the National Institute of Standards and Technology’s (NIST) list of 16 existing standards for smart grid, which can be found on the NIST website.

Maui – Hawaii

GE is currently working on a smart grid project in Maui, Hawaii, that heavily involves renewable energy.

“It’s a very challenging project because it is an islanded system, so its electric system does not receive support from any other electric utility,” McDonald says.

Maui currently has one wind farm, with two or three more planned to be built. When they are completed, the wind penetration could be as high as 15% of total electricity generation, according to McDonald.

“You can imagine, if the wind suddenly dies down, the system frequency will vary instantaneously quite a bit, and the generation that they have will try to respond, but it can’t respond quickly enough.” Like Leeds and Gehrke, McDonald believes that storage and demand-response management of customers’ loads – smart homes – is the key.

The smart grid project will include advanced communications, automation and control technologies – and possibly an energy storage system. The management system will control and dispatch several types of power system equipment, customer loads, and energy storage to compensate for sudden changes in wind power and circuit loads.

Peak load at Maui is currently around 200 MW, of which up to 30 MW can come from wind energy.

Energy Smart Miami

The Energy Smart Miami will see the deployment of over one million smart meters in Miami-Dade County, Florida. The aim is to expand the project to a total of more than four million customers in Florida over the next five years. The project is estimated to cost US$200m, and the expansion could cost an additional US$500m.

For this project, GE will use wireless communication in the form of radio frequency mesh (RF mesh). The smart meters have a printed circuit card that supports communications from one of the project partners, Silver Spring Networks (SSN).

SSN has implemented cyber security in its communications system. McDonald underlines that “cyber security is extremely important.”

Networking technologies company Cisco will help design and implement a secure and intelligent communications platform within the transmission and distribution grid, and provide customers with home energy management information and controls.

In addition to smart meters, the project involves the connection of high-efficiency transformers, digitised substations, power generation and other equipment through a centralised information and control system.

GE says several local universities and schools will receive solar power installations and battery for back-up and peak demand. 300 plug-in hybrid electric vehicles will be added to the FPL fleet serving the Miami-Dade County, with around 50 charging stations. PHEVs will also be rolled out in trials at Miami-Dade College, Florida International University and the University of Miami and the city of Miami.

In initial trials, 1000 households will receive energy displays in their homes, smart appliances, programmable and smart meter controllable thermostats, and demand management and demand response software.

Energy Smart Miami could begin later this year and be completed by the end of 2011, GE predicts.

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thomas.tripold said

31 May 2011
Hi - interesting article. Thanks a lot for posting! I'm glad you could clarify a lot of questions. It seems like everyone is throwing around with 'green' terms but nobody really understands them. I find the idea of smart grids very interesting - it's an excellent way to stop the waste of energy. I did some research on the web and found this Siemens website: They really seem to focus on those issues now.

Having traveled to Europe a couple of times, I must also say that the American ppl still need to change a lot. We sometimes lack this environmental awareness but we are (hopefully) getting there. New York City is currently putting a lot of effort in becoming greener:

Reho said

05 November 2009
Many thanks for all these info and better future ahead,please i want to intergrate all of these Smart grid to africa can Someone get intouch with me for kick-off.

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