A $2 trillion bet on powering America
The stimulus plan might jump-start new energy investments, which could drastically change how we use electricity.
NEW YORK (CNNMoney.com) -- For years we've been hearing about the nation's crumbling and outdated electricity grid.
The 2003 blackout that plunged 50 million people into darkness was a wake-up call. Then this summer T. Boone Pickens, who's planning on investing billions in building wind farms, called for massive investments to revamp our nation's aging grid, so that it can handle wind power distribution.
On Thursday, President-elect Barack Obama called for a similar investment, perhaps billions, to begin work on a new "smart" electric grid to replace the nation's old, fragmented and inefficient system.
"We'll also do more to retrofit America for a global economy," Obama said in a speech stumping for the passage of a massive government stimulus plan to jump-start the economy, expected to pass Congress in the next few weeks. "That means updating the way we get our electricity by starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation."
In 1950, 20% of the nation's economic output was directly dependent on electricity. Now that number is 60% and rising fast, said Jesse Berst, editor of smartgridnews.com, an industry Web site. In an era of energy scarcity and global warming concerns, he said building a better grid is essential for economic growth.
"What you're going to get is the foundation of our future prosperity. It's what will make all the other things we want possible - renewable energy, lower rates, cleaner power."
Berst, a former tech analyst, says the investments made in smart-grid technology over the next couple of decades will dwarf those that fueled the tech boom.
Berst is enthusiastic about the importance the grid will play, and many others who study the energy industry are also thinking big.
The Brattle Group, a think tank, estimates the nation will need to spend up to $1.5 trillion on its electricity system over the next 20 years - and that's just enough to keep the lights on.
An investment in cleaner energy could put the figure at $2 trillion, and would include building new power plants, transmission lines, and focus on conservation.
On the grid alone - the lines, towers, meters and substations - Brattle estimates the first steps towards a smart grid could cost about $900 billion over the next two decades. That includes money for computers, meters and software to digitize the grid.
To make the grid fully smart, money would be needed to change out every utility's entire computer system, allow renewable energy sources to plug into it from various points, and incorporate electric car recharging stations that also use car batteries to double as electric storage devices. The price tag for this isn't known, but it would likely cost hundreds of billions more and wouldn't be ready until sometime after 2030, according to Brattle Group principal Peter Fox-Penner.
The nation has already started down this road, with pilot programs using smart electric meters running in several communities. The coming stimulus package will most likely accelerate things further.
Digitizing the grid is what makes it smart. Berst compared it to our telecommunications system - decades ago a human operator connected calls manually via a series of tubes. Now it's all done electronically, which helps increase telephone traffic capacity.
Digitizing the electric grid would require new smart home meters and appliances with the ability to talk to one another, and software and hardware to send all this information back to the utility.
It would also require various policy changes that encourage transparent pricing, give utilities incentives to conserve, better connect the nation's fragmented power grid, and eliminate the need to build some new power plants.
Currently most electricity is sold at a fixed price, no matter when it's used. That means a utility must build enough power plants and lines to meet maximum demand at the peak time - an expensive proposition that leads to lots of overbuilding.
With a smart grid, power could be better managed as consumers would be encouraged, through electricity prices that varied throughout the day, to use power at different times.
For example, a person could load their dishwasher at 7 p.m., when electricity costs, say, 15 cents a kilowatt hour and program the dishwasher to begin washing when electricity dropped to 5 cents, maybe a couple of hours later in the evening.
Utilities could also use it to manage power in people's homes, if consumers agreed to it. The utility would have the ability to turn on or off certain non-essential functions, like a pool filter or air conditioner, maybe in exchange for giving the consumer a lower rate.
This would let the utility distribute electricity usage more evenly, eliminating the need to build expensive new power plants.
A smart grid would also reduce overall electricity consumption by reminding households of their energy consumption. Smart meters, which can look similar to a computer screen, are mounted inside the house where they constantly monitor energy use. Today's meters are located outside, out of plain sight.
"If you have information on how much you're using, you might turn off that TV you're not using," said Melissa McHenry, a spokeswoman for American Electric Power, one of the country's largest utilities.
The utility industry estimates smart meters can cut electricity consumption by 20-30% during peak hours.
The smart meters - meters than can communicate with appliances and the larger grid - would be a prerequisite to any larger, smarter grid.
McHenry says this is one area where lawmakers may spend some stimulus money. The money could be doled out as grants either to utilities or state agencies, and it would put people to work both building and installing meters.
The utility industry estimates it would cost about $50 billion to equip every home in the country with a smart meter, with each costing about $200, or roughly twice the cost of a normal meter.
A coalition of environmental groups and the utility industry is urging lawmakers to set aside roughly $1 billion to begin this program as part of the stimulus package.
McHenry, along with people like Pickens, say the country needs to build more high-voltage transmission lines that would move renewable energy from isolated areas - like wind in the Midwest or solar in the Southwest - to cities.
McHenry says an investment of $60 billion would enable the country to transport enough energy to offset 20% of its current total electricity use with renewable power.
She said high-voltage lines are also 10% more efficient than their smaller cousins.
Environmentalists cautiously support building more transmission lines, but stress they should be used to transport clean, renewable energy, not power from dirty, old coal plants.
"We have to make sure these individual decisions reflect our long-term priorities," said Dave Hamilton, director for global warming and energy projects at the Sierra Club. "We can't do it wrong, we aren't going to be able to go back and do it again."