Electric intelligence: establishing a smart grid requires regulatory reform, not subsidies.

• Author: Kiesling, Lynne

How much thought have you given to your electricity consumption? If it hasn't gone beyond "I flip the switch and the light comes on," you're not alone, which is one of many reasons electricity usage in the United States is inefficient. But that's beginning to change.

The digital communication technology revolution that has created mass productivity gains throughout the economy during the last 20 years is finally creeping into the electricity industry as well, under the broad moniker of the "smart grid." The basic concept of the smart grid is to replace the faceless, impersonal "grid" of networked electricity delivery with a transparent, interactive system that allows users to see and select from pricing choices in near-real time. President Barack Obama included $4.5 billion in smart grid subsidies in the stimulus package Congress enacted in February. But absent substantial regulatory reform, mostly at the state level, such federal spending may simply reinforce a century-old model that is all but obsolete.

Imagine a future in which your home has a system that connects all its appliances, entertainment systems, heating and cooling, laundry, and lighting into one communication network. The network would be accessible through a computer screen or a Web-based portal. Through this interface, your electricity company would communicate real-time information about how much electricity you're consuming, the price you're paying at different times of the day, and whether the juice is coming from renewable or conventional sources.

Using that information, you could change the settings on your various devices in response to prices. If you knew that you could save money by lowering the temperature of your water heater five degrees when the price per kilowatt hour increases from nine to 12 cents, you would be more likely to lower the temperature of your water heater. Furthermore, if you could program your appliances to take care of the price response work for you, you'd be even more likely to do it. And once plug-in electric vehicles become more widespread, you could set up your home network to charge the car during less expensive, off-peak hours, and maybe even sell your excess energy to neighbors when prices are high, since electric vehicles are essentially energy storage devices.

Such systems are becoming increasingly feasible as information technology costs fall. Intelligent devices such as your thermostat, water heater, television, and plug-in vehicle...