There is a lot of talk about the installment of ‘smart electricity grids’, as part of the solution against global warming.

But is that really so?

Here is an interesting contribution to the debate by Bill St. Arnaud, from the arch-econ mailing list. He insists that a key enabler would be for systems that allow users independent access to renewable energy.

(Note that GHG stands for carbon emissions)

Bill St. Arnaud:

“A good example is smart grids with the first generation of smart meters. The major beneficiary of this technology is NOT the consumer, NOR the environment – but only the utility. Smart grids help the utility to better manage peak load and thereby reduce the need to build more power plants. It does not reduce overall power demand or GHG emissions – it only displaces them to different periods of the day.

The second generation of smart grids will allow consumers to monitor energy consumption in real time and thereby reduce their energy bill. There is a small number of studies that indicate there may be a positive effect here. But it is too early to tell if this effect will be enduring or simply an artifact of a committed study group. Nevertheless smart grids of any generation do NOT reduce GHG emissions in any meaningful way.

Rather than building an expensive SMART grid, we are much better off with the inefficient STUPID grid we have today. With a stupid grid, and structural separation of energy supply and infrastructure consumers would be able to purchase renewable or nuclear power independent of their network operator. This is possible in Canada, most of Europe and some US states.

Providing incentives for consumers to purchase renewable power (and waste as much energy as they want) will be much more effective in reducing GHG emissions than deploying incredibly expensive smart grids which will only result in marginal gains.

I think “third generation” smart grid, independent of the utilities, will play a critical role in reducing GHG emission.

But the current generation of smart grids and smart meters serve only to benefit the utilities and will have minimal impact on GHG emissions. Reducing GHG emission is the real issue – not energy conservation or efficiency. Even the next second generation of smart meters and grids will largely only benefit the utilities and not have a measurable impact on GHG reduction.

In terms of impact, a much better investment in the short term, than smart grids in reducing GHG emission would be:

(a) to build higher capacity transmission lines so that we can bring renewable energy to consumers who want it;

(b) structurally separate ownership of transmission facilities from power producers;

(c) introduce concept of network neutrality to electrical transmission systems (which today’s smart grid technology much like “intelligent” networks will inhibit); and

(d) introduce carbon taxes ( or better still carbon credits) to encourage consumers to use renewable energy and adopt energy reduction strategies, and there by demand smart meters to monitor their usage ( the cart following the horse)

In terms of smart grids it is essential, in my opinion that we build a smart grid architecture independent of the utilities. The utilities and electrical distribution companies are the enemy for any strategy in reducing GHG emissions. They are married to their dirty coal plants and antiquated network architectures for transmission lines.

What would a third generation smart grid look like? Here is one possible scenario:

The biggest challenge for renewable power companies is establishing direct relations with their customers. Renewable power sources must sell their power to utilities and distribution companies who then bundle their power with more traditional sources to deliver to consumers. In some cases consumers or businesses can pay a premium and buy REPs – renewable energy credits, whose price is supposed to reflect the bundling of new renewable power. And in jurisdictions where there is structural separation they can buy energy directly from ESCOs (energy service companies), some of whom specialize in delivery of green power.

The challenge for renewable power companies is linking their production to consumption. Most renewable power is unpredictable in terms of its supply (wind, solar) and so deployment of renewable power has not eliminated the need for traditional coal plants who must stay on line in case of disruption in the renewable source.

With a third generation smart meter/grid, the renewable power companies would have a direct Internet connection to their customer’s power meter, independent of the utility. Such meters already exist. The customer’s meter may be “multi-homed” to several different power suppliers such that the customer can switch energy suppliers automatically based on price and availability of power. This will much more effective in reducing GHG than demand displacement systems mart grids that are being advocated today. The tricky part will be negotiating a settlement system between the various power operators and the owner of the transmission lines.”