Among the many ends towards which new technologies can be deployed, improved energy efficiency is among the most pressing and holds almost universal appeal. Technologies that help us reduce consumption of limited fossil fuels and greenhouse gas emissions are crucial for curbing climate change, but they also hold the potential to reduce economic costs for users and open up new markets for innovation in renewables and complementary appliances.

Smart grids will be essential for facilitating the integration of renewable energy sources and battery or storage technologies, and will enable the reduction of energy consumption through improved efficiency (e.g. by remotely shutting off unused appliances) and demand management (e.g. by increasing the price of energy at peak hours to reduce demand and avoid the costly process of turning on extra power generation facilities). As Andy summarizes below, the primary challenge facing smart grid implementation is the high front-end costs and a lack of cooperation across sectors (should utility companies, government, or users pay?) and scales (what are the roles of local, state, and federal authorities?).

A few points from this week’s presentation that I found particularly interesting:

Uncertainties in regulation and technology: A major barrier to implementing smart grid technologies is persistent uncertainty regarding how a new network will be regulated and how emerging technologies will affect the market. While the latter is unpredictable and will have to be accommodated over time, regulation is something that public authorities can and must address if smart grids are to be constructed.

The private sector and regulation: Utilities companies are usually publicly owned and operated, or else highly regulated. Smart grids will enable more diverse capabilities for integrated renewable energy. Renewables, however, are largely produced and distributed by private entities. How will these be regulated? Current regulation was designed for the existing system and has already proved insufficient for the more complex network of energy generation and distribution that integrates new energy sources and intermediaries. In developing a new regulatory framework, it will be crucial to find ways to incentivize private investment, but it will also be important to pay careful attention to how a larger network of providers and a more flexible system of provision will affect costs for users.

Piecemeal implementation: Utilities infrastructure was largely developed piecemeal, with most investment managed at the municipal scale. This means that each locality has its own system, often developed without regard to compatibility with neighboring jurisdictions. This poses major problems. European countries, for instance, ostensibly share an energy system, but each country has a separate grid. The lack of cross-border connections means that energy can’t be moved around to achieve the most efficient allocation. With inadequate energy storage capacity, if energy can’t be moved to the site of demand, it is lost (wasted). In light of these concerns about compatibility and distribution, are municipalities the wrong entities to be spearheading the transition to smart grids? These concerns must be weighed against other priorities: local control over utilities, government accountability, and diverse regional interests, needs, and preferences. What is the most appropriate scale for planning, implementing, and (re)regulating utilities?

Consumer preferences and complementary markets: While consumers have expressed interest in smart grids and complementary technologies, there remain a lot of “so what” questions that haven’t been sufficiently addressed. Google and Microsoft recently left this market, failing to see how they could benefit at this stage of consumer awareness. As demand will be necessary to drive smart grid implementation, we must consider how consumer interest can be encouraged. The presenters noted that markets for complementary products are growing relatively fast, and suggested that if these can be effectively differentiated from competitors, it will be possible to drive smart grid interest through increased uptake of compatible products. But there is much work to be done in consumer education in order to build the support necessary to justify the high upfront cost of smart grid implementation.

Energy storage and complementary technologies: Energy storage and flexible distribution remain some of the most important areas for technological and market development. Electric vehicles have the potential to act as a distributed system for storing excess energy, but the size of the market remains to be seen. Enabling flexible two-way energy distribution, such as allowing residents to sell the renewable energy they generate back to the grid, also has the potential to reduce energy losses and increase the market share of renewable energy sources. The benefits of the smart grid can be vastly improved by stimulating demand for complementary technologies and improving storage and transmission capabilities.