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There is no doubt that new technology can alter consumer and business behaviors on a profound scale. When Apple debuted the iPhone in 2007, few recognized the significance of integrating voice, data communications, and multimedia in a single mobile device. In only three years, the iPhone has changed the way we do business, communicate, entertain ourselves, and learn.

We are on the cusp of another profound change, as electric power prepares for a top-to-bottom, digital technology redesign. Just as electricity touches all corners of the world, so, too, will the new energy age of digital modernization. Significant changes lay ahead in how we produce, distribute, and use electricity. Smart grid is the glue that holds this new world together.

The Not-So-Smart Grid
Today's power system revolves around a small number of large power plants that distribute power in one direction: out to the consumer. The system was designed when energy was cheap and considerations like consumer choice and the environment weren't a priority. As long as power remained cheap, plentiful, and benign, consumers tolerated an inefficient power system. Under the current system, millions of devices draw power when they aren't even being used. And lacking real-time demand information, electric utilities must maintain large "spinning reserves" on standby. We waste billions of dollars generating energy that never reaches a single light bulb, or arrives at a dormant device. Enough electricity is lost annually around the world to power India, Germany, and Canada for an entire year. Power system challenges continue to mount. The demand for more electricity grows with population and the increased use of electrically-powered devices. Simultaneously, producing clean power to support sensitive electronic equipment using semiconductors chips is becoming difficult as the grid's reliability weakens. In 1980, chip load on the U.S. grid was relatively small. But in the 1990s, chip load share increased sharply. Today, chip and automated manufacturing loads have risen to 40 percent, and the load is expected to increase to more than 60 percent by 2015.

There have been five major blackouts in the past 40 years, three of which occurred in the past nine years. System failures large and small are growing in terms of the number of events and the number of consumers affected. Power outages and interruptions cost Americans at least $150 billion each year, about $500 per person.

Power shortages and a weakened grid aren't the only concerns. The days of cheap power are over. Many power plants in the aging U.S. fleet are due for replacement or modernization. Clean air regulations for mercury, SOx (sulfur oxides), and NOx (nitrogen oxides) stemming from 1990s legislation are just now coming due. With compliance targeted for 2015, up to 30 percent of U.S. coal units could be decommissioned because the older technology makes plant upgrades expensive. Similarly, aging nuclear power plants will require costly upgrades or replacement in the coming years. Electric power from replacement plants will be significantly more expensive.

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The Smart Grid Solution
Smart grid will be to the power system what iPhone was to cell phones: technology that gives consumers choices and spurs an avalanche of new products and services to meet consumer demands.

Unlike virtually every other commodity, consumers currently have little choice when it comes to electric power. Likewise, grid operators lack data intelligence to balance loads and monitor power flows. As a result, electricity generated by sources such as wind and solar is difficult to manage. Even if data were available, inefficiency and waste persist because of slow mechanical switch response times, a lack of automated analytics, and the inability to know what is happening in real time in the grid.

With a smart grid, the power system is equipped with intelligent monitoring systems - devices in homes and factories, on distribution lines and substations, in the transmission system, and at centralized and distributed power sources. These devices track all electricity in the system and can generate the real cost of power at different points in time. With pricing information, the consumer can make choices that put the "invisible hand" of free-market capitalism to work. Residential and industrial consumers can automatically turn appliances and factory processes on and off based on predetermined parameters for cost tolerance and device criticality.

As the grid load-curve levels itself through efficient power management and consumer actions, spinning reserves will be minimized. Inefficient and expensive peaker plants - which only run when there is high demand - can be closed, deferring investment in new and expensive generating plants. With increased asset optimization, the most efficient power plants will supply electricity, including renewable power.

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Products Flooding the Market
Grid modernization will require significant investments. Some estimates say it will take decades and trillions of dollars. But the process is already well under way. Analog electric meters with digital bi-directional smart units are already being replaced at U.S. homes and businesses. Nearly 15 million smart meters have already been deployed, and more than 50 million are expected by 2014.

The meter's ability to support two-way communication between users and producers is the key to the smart grid. Smart grid giants such as Siemens, General Electric, ABB, and Schneider offer multifaceted ways to manage low- and medium-voltage equipment, and industrial and commercial energy systems. Devices that bypass electric meters and instead use home broadband connections are now entering the market. French company Schneider Electric recently introduced Wiser Home Control, an energy management system that includes a networked thermostat, an energy display, and an Internet gateway for consumers and utilities to communicate.

New distribution, transmission, and power generation products are also arriving. Watertown, Massachusetts-based A123 Systems produces batteries that support substation-level distribution. A123 recently announced that it would supply a 20-megawatt lithium ion battery for grid storage in northern Chile. The batteries are used for "spinning reserves" to ensure grid reliability by filling power gaps.

Devices that support real-time monitoring of customer power use, system security, and power quality are emerging. Once data is captured, other products support system modeling of the automation of distribution operations, demand management, voltage control, and distributed energy resources. A robust and secure grid keeps it all running, from communication infrastructure and power transport technologies to wireless communications and data warehousing.

Location Strategy in a Smart Grid World
Companies locating manufacturing plants, distribution facilities, R&D centers, service centers, and offices must balance considerations such as operating costs, work force requirements, and, of course, electric power reliability. While corporate executives know these factors vary, it is less known how smart grids should factor into location decisions. Recognizing that we are on the brink of a new era for energy the answer is quite simple. Companies are advised to always locate in places that support smart grid concepts or are moving quickly in that direction.

The reason is simple: With the price of electric power expected to increase at a faster rate than inflation, and with grid reliability in question, companies can mitigate energy risks by choosing smart grid-equipped communities.

Start by listing states that support renewable and clean energy portfolio standards. Smart grids are needed to take advantage of renewable energy, so states that champion renewable energy are more likely to be smart grid proponents.

State renewable portfolio standards (RPS) require utilities to use renewable energy or renewable energy credits (RECs) to account for a percentage of their retail electricity sales or generating capacity according to a specified schedule. At press time, 29 states had an RPS, and seven others have adopted portfolio goals that are not legally binding.

The Texas RPS has spurred several smart grid initiatives. Smart Meter Texas partners the energy companies Oncor, American Electric Power, and others to deploy more than seven million advanced meters. These meters enable consumers to make informed energy choices, enroll in energy supply contracts, and take advantage of innovative energy services.

A number of large cities have embraced smart grid development. Miami; Austin; and Boulder, Colorado, adopted smart meters and wireless communication systems that linked power suppliers to consumers early on. Smaller metros such as Jackson, Tennessee, and Ponca City, Oklahoma, have established similar initiatives with great success.

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A Political Bump in the Road
Smart energy is practical because it is non-ideological. But since the government is promoting smart grids to address energy independence, global warming, and emergency resilience, the subject gets tangled in politics. As a result, a comprehensive national energy policy in support of smart grids has been elusive.

But no matter how the political debate proceeds, we will eventually see an electric power grid that is smarter, more transparent, more efficient, more accessible, and more resilient. The anticipated uneven adoption of smart grid technologies across the country will require location selectors to be mindful of the differences. Choose wisely.