Smart Grid: The Biggest Rip-Off in Contemporary Energy Policy (Besides Ethanol)

by William Yeatman on November 2, 2010

in Blog

According to the AP, an administrative judge last week capped at $45 million the cost-overruns of Xcel’s “Smart Grid City” demonstration project in Boulder, Colorado. I haven’t been following this particular project, but I have been tracking similar cases in other cities, and I assure you, smart grid is the biggest rip-off in contemporary energy policy (after ethanol).

Ask anyone what a “smart grid” is, and you’ll get a different answer every time. In Boulder, it’s a fiber optical network. In Baltimore, it’s a “ZigBee” local area network. In Oklahoma City, it’s GE Smart Meters. They all were spawned of the stimulus, which showered more than $3 billion to utilities across the country to subsidize any boondoggle that called itself “smart grid.”

This is the sort of social policy that makes regulated utilities salivate. It’s ill-defined and capital intensive. Moreover, it promises to grow, like the blob. Today, it’s scores of millions of dollars of cost overruns in Boulder; tomorrow, it’s hundreds of millions of dollars in Denver.

And for what? Smart grid is a means to an end–namely, “demand side management.” The idea is to “manage” energy demand by, say, remotely adjusting thermostats in the homes of hundreds of thousands of utility customers , so as to draw down demand and avoid taxing the electricity grid. With smart grid technologies, your local utility can become your Big Brother.

There is, of course, a much easier way to “manage” demand: Price electricity what it costs. ¬†Energy consumers would voluntarily reduce consumption during periods of high demand, because they would have an incentive (higher prices) to do so.

Unfortunately, local politicians have every incentive to maintain control over the price of electricity. After all, energy is the “master-resource,” so controlling its cost is a powerful political chip. Hence, the allure of “demand side management.” It affords local politicians control over the price of electricity AND control over demand. That way, they can avoid the inimical effects of price controls by controlling demand (that is, by controlling your thermostat). The losers, naturally, are the consumers, who must shoulder the added costs and inefficiencies inherent to a “managed” market.

BobRGeologist November 2, 2010 at 11:03 pm

In Tucson AZ it is easy to be your own smart grid if you own a well insulated house. For instance, during the fall months temperatures range from 90 midday to 60 at night. By judicious opening of a bedroom window it is possible to keep your house between 70 and 78. I turned off my air conditioning about mid September. I expect to use the furnace from mid December to mid March when outside temps range from 70 to 40. I am sure this is more economical and easier than letting the power company regulate your use of electricity.

Howard Fisher November 3, 2010 at 1:17 pm

I can't agree with this argument. Smart Grid allows consumers greater control of their energy use. You get 15 minute interval data; you can see how your A/C or washer or dishwasher are impacting your actual energy usage. Many Smart Grid programs were already in place before the stimulus bill (Oncor, in Texas, started their program in 2005, and while their was a delay because the Texas PUC changed the meter standards, they have about 1.4 million deployed as of now, and will have 3.2 million deployed by the end of 2012).

Some utility commissions may allow the utilities to control the thermostats (for a reduced price to the consumer), but most have not. Usually it is solely up to the consumers. As we go forward with smarter appliances, you'll be able to tell your dishwasher or pool pump when to turn on, set your thermostat, etc., all remotely by internet (and thus by using your smart phone). Say I normally have my A/C up to 81 during the day while I'm gone, and it is programmed to go to 76 at 5:30 in the evening, when I normally get home. Then, I have to work late one night, or decide to go to a movie, or a game — I can tell the A/C not to go to 76 at 5:30, but instead wait until I'm leaving for home and then turn down the A/C by using my computer or smart phone. I reduce energy usage and save money. That is not a rip-off.

Robert November 8, 2010 at 9:05 am

Lets face it, people don't care how much of an impact they have on the cost of electricity. You can give everyone all the information in the world and it won't make a difference. You can't seriously believe giving someone the option to control their electricity from their phone will result in a more responsible use of power. The average citizen is more worried about updating their Facebook status than monitoring their power.

The whole point in furthering technology is so that it becomes automated and I don't have to worry about it. Now you are telling me I have to worry spend 5-10 minutes reprogramming my house if I want to stay out late or I'm coming home early; it doesn't make sense. If I want to do laundry or wash dishes I have to pick a time for it start and program it, it goes on and on. No one wants to worry about this stuff, invest in making energy generation and delivery more efficient.

Howard Fisher November 8, 2010 at 1:10 pm

Yes, I do think that people will take advantage of the opportunity to save money on their electricity. Apps will be written so all you have to do is punch in a few things on your iPhone or Droid, and your system will keep the current temp until you tell it otherwise or tell it the new time to change temperatures. Certainly not every one will take advantage of this, but lots of people who are used to using their phones and computers for many purposes will do so. No different than paying bills, depositing checks, ordering tickets, etc. — all of which can be done on your phone and computer right now.

Eldridge Scinto November 10, 2010 at 9:52 pm

This is the second post I've read on this blog and I'm definitely going to bookmark and check back everyday.

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