Modern electricity grids are designed as centralized systems where electricity is typically generated at large-scale power plants and then sent through long-distance transmission lines before being distributed to consumers. The model is based on Nikola Tesla’s alternating currents theory, which provided an effective way to move electricity over long distances through transmission lines. The competing technology at the time was Thomas Edison’s direct current, which lacked a reliable long-distance transmission method, a problem newer technology has since resolved.

The Electric Grid: Present and Future

 

 As a result, we have large power grids that operate in a predictable manner: Power is generated at a central station and is sent through high-voltage transmission lines to a substation closer to consumers, where the voltage is lowered. The electricity then travels across lower-voltage lines to transformers, which convert it to an even lower voltage before it is delivered to households and businesses. This is a hierarchical, one-way transmission and communication system. In contrast, smart grids act as an enabler, bridging a host of other technologies to slowly convert the power grid from a hierarchical transmission system to one that is increasingly bidirectional.  

While highly optimized for existing technology, the current grid has many severe limitations that may become more pronounced in the future as central stations and substations become more vulnerable to threats. One of the key problems is the grid’s centralized and passive architecture. The centralization of power generation at key substations means that the system is not particularly flexible and remains vulnerable to disturbances. This becomes most evident during natural disasters or in accidents where key nodes are disrupted. Widespread power outage often follows when the power grid lacks enough redundancies, or backups, to continue functioning. The higher up the hierarchical system this accident happens, the more end users are affected. 

Moreover, the current grid is not incredibly efficient. Transporting electricity long distances by using alternating current lines leads to high electricity losses. The complicated architecture also means that there is little communication between consumers and producers, which leads to imbalances between the demand for and supply of electricity. The inefficiencies and losses can actually be quite pronounced. One estimate, based on research in South Korea, found that real-time communication about electricity supply and demand levels — which affect prices — can result in up to a 10 percent drop in electricity consumption during winter months. Such efficiency is becoming more critical for countries such as South Korea and Japan that have large account deficits stemming from high levels of imported energy. 

Integrating more recently developed renewable energy sources, such as solar photovoltaic devices and energy storage mechanisms, is also problematic under the current grid’s setup. Right now, there is no clear way for energy storage providers to profit. Furthermore, these renewable sources require more active management, because of their intermittent nature, than do traditional power generation systems based on nuclear or thermal power. They also tend to be more economical on a smaller scale and can be installed by individual users, who eventually may generate enough electricity that they actually contribute to the grid at times. This is done either by releasing energy from storage or from small-scale renewable sources, such as rooftop solar photovoltaic modules. 

How Smart Grids Help

Smart electricity grids act as technology multipliers, allowing for a more seamless integration of various technologies that each target one or two of the deficiencies in the existing system. Machine-to-machine communication not only allows for automation of the grid but also facilitates better planning and improved management of electricity demand.

Distributed generation, a more decentralized model, is one method whose value increases immensely with machine-to-machine communication. The concept envisions much of the grid’s power generation capacity as smaller in scale but located closer to consumption centers. Solar rooftop panels are one example. Bringing panels into a smart grid would catalyze more active communication between the central power-generating sources and local sources, and once power generation was sufficiently distributed, it would make the entire power grid more redundant and resilient. A disruption in one section of the grid would affect a smaller portion of users, and an alternative supply source would be available to limit power interruptions.

Energy storage mechanisms will be essential to grid operation in the future. Usually batteries come to mind when thinking about energy storage, but there are several other technologies, such as storing heat in molten salt, currently being developed. With effective, automated communication between energy storage devices and the rest of the grid, stored energy could help solve many problems. Renewable energy such as solar could be stored for later use, providing backup support in the event of a power failure and helping to optimize transmission levels. In a world of aging infrastructure, power storage could also help manage voltage fluctuation and respond to demand without wearing down the grid. Stored energy would help stabilize power transmission, keeping it efficient throughout the day while accumulating stored energy during the night.

Smarter grids — and the decentralized structure that allows them to incorporate residential and utility-scale projects — allow flexibility in developing new technologies. For example, battery technology has always had a problem with scalability. Smart grids address this issue by aggregating stored energy by incorporating many smaller batteries into the grid. For instance, batteries used for electric vehicles would be designed primarily to store electricity for the car’s use during the day, but at night the electricity they have stored could be drawn upon to respond to fluctuations in demand. Improvements in battery technology are still needed, and smart grid technology does not entirely eliminate the need for utility-scale storage; it just allows for significant gains to be made without it. The same goes for renewable energy technology: It allows for residential and utility-scale platforms that, with improved flexibility in energy storage technology, will allow for quicker integration with the power grid.

Challenges in Implementation

Developing a smarter grid, of course, comes with its own challenges and issues. Central governments have long used their authority to regulate the electricity supply as a key policy tool. In most developed countries, electricity has historically been a heavily regulated sector, with the government setting out clear prices and controls. In many developing countries the power grid has been central to implementing development policies. Though the system has been gradually deregulated in many countries, in some places like South Korea and Japan, the process of full deregulation remains ongoing.

Governments have generally struggled to move from centralized control to an automated, decentralized system. There are also some technical issues surrounding implementation: How do you deregulate, and what is the role of the government in managing all of the systems? In general, decentralized, compartmentalized systems are difficult for central governments to control, a problem that is compounded in many countries where systems are managed via the Internet. Such systems represent a considerable break from the hierarchical workings of state-controlled utilities. 

Securing the grid from cyberattacks will be an issue of growing importance. With much of the grid becoming automated, hackers can easily penetrate and disrupt energy flows. Protecting hardware, data, system control and personal information will be critical. This threat is not entirely new; in fact, electricity grids have long been targets for cyber as well as traditional attacks. The smarter a grid is, the more devices connect to it and the more vulnerable it becomes. Ultimately, before a smart grid can revolutionize the way power grids operate, it will need to be secure enough to earn widespread acceptance.

Cost is also a concern, both in building the infrastructure needed to support the smart grid and in developing the technologies incorporated into the system. Renewable energy and energy storage techniques are expensive, but with time, their cost is expected to decline. Several renewable energy sources, such as onshore wind energy and photovoltaic modules, are expected to reach grid parity levels within a few years. This means that using the technology will be as cheap as buying electricity off the grid, something that has already happened in a few cases. Solar photovoltaic use has reached grid parity levels in some areas with considerable sunlight and in areas, such as southern Germany, where the government subsidizes the costs. Sometime between 2030 and 2050, these sources are expected to become more cost-efficient than building new thermal power plants. Developing energy storage technology, based on nanotechnology and on alternative materials for battery and ultra capacitor construction, could help increase efficiency in a similar timeframe. 

Potential Impacts

The impact will differ by country and by region, but almost all countries will benefit from increased efficiency, better environmental standards and a more resilient network. 

North America, for instance, has always been relatively isolated. Its power grid has always been self-contained, involving only Canada and the United States; though in the future it may extend to Mexico. The energy supplies that support this grid, including natural gas, coal, nuclear and hydropower, are all sourced from North America, which has helped enable a characteristic flexibility in U.S. foreign policy. While isolated, the grid is robust, and the recent development of shale gas resources has driven a push for more efficient power production with lower emissions standards. Importantly, extremely low electricity prices support industry. The United States has also been at the forefront of smart grid development, and while renewables may catch on more slowly in the country due to shale gas development, smart grids will make it easier for the United States to optimize efficiency and slowly phase out its aging power grid infrastructure. This will ensure that North American power prices stay low compared to other developed economies.

On the other hand, the United States’ status as a global power has made it a frequent target for attacks, digital and otherwise. This will remain a problem with smart grids and will require the United States to implement the most robust and costly cybersecurity protocols. While Washington supports the implementation of a smarter grid, if the necessary cybersecurity advances are not made, authorities may have to limit the expansion of smart grid architecture. 

Smart grids that enable more effective management of renewable energy sources and energy storage, will revolutionize the relationship between Europe and Russia. Europe heavily relies on Russian energy, especially natural gas, and this defines many of the region’s policy constraints. This reliance is one reason Germany, Denmark and other European countries have been at the fore of renewable energy, energy storage and smart grid implementation — so far largely through subsidy mechanisms. Electricity prices are also structurally higher than in North America because importing feedstock and integrating renewables increase costs. While renewables are not yet competitive with natural gas or coal-fired power plants, Europe will adopt the sources quickly as they become more cost competitive. Right now, as Europe struggles with a sluggish economy, progress is slow.