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The need for more electricity is unquestioned, but the current design of the power grid is not suitable for continued electric power growth.

Line loss, greenhouse gas emissions, fuel costs, regulatory concerns, government mandates and myriad other issues necessitate another look at how electricity is generated and delivered.

Offering 99% reliability is no longer sufficient to serve the needs of a highly technological society. Combined with other emerging trends, the increasing global population and the growing development of renewables will place substantial stress on a grid that was designed over 100 years ago.

The smart grid could be the solution. Infused with intelligent sensors and controls, automated smart switches and substations, robust communications and other technologies, the smart grid will be able to integrate all types of electric generation and storage systems, preclude power outages and surges to a degree not possible now, predict problems before they occur, and automatically heal itself if problems do happen.

Electricity demand

On Oct. 31, 2011, the estimated world population reached 7 billion people, and it is growing at a rate of about 215,120 people per day.

Large numbers of people - particularly in China and India - are moving into the middle class and can now afford luxuries, such as refrigerators and air conditioners. More factories are needed to manufacture these products, more businesses are needed to sell them and more service providers are needed to cater to them.

As a consequence, new and larger demands are being made for electric power, and new electric infrastructure is being built at a rapid pace in most underdeveloped countries to keep up.

Since 2005, generating capacity has increased at a 3.2% compound annual growth rate (CAGR), a relatively healthy rate of growth given the poor economic conditions that have existed in many parts of the world since 2008.

Of particular note, however, is the growth of generating capacity in the developing world. In these countries, the rate of growth (5.3%) is almost twice that of the whole world and almost four times that of the 30 most developed countries, where electric generation is growing slowly, at a 1.5% CAGR.

Clearly, demand for electricity is strong and growing quickly for most of the world’s population.

In addition to home appliances, the increased use of electric vehicles (EVs) is seemingly inevitable. Because each EV plugged into the grid will be about the equivalent of load for a home, a smart grid will be required to ensure EVs are not disruptive in terms of voltage control and load demand.

Generation sources

Government regulations seek to limit the production of greenhouse gases in favor of renewable energy. However, efficiently integrating resources such as wind or solar power with the grid is difficult for three main reasons:

  • Utilities have a difficult time planning power needs around these technologies because they generate electricity intermittently. Energy storage systems can help mitigate this problem, but such systems are expensive, are not in widespread use and require planning.
  • Energy flow in the power grid was designed as a one-way process - from centralized generation to end users (at least in the U.S.). Distributed renewable energy sources introduce the need for a two-way power flow, which contributes to difficulties in maintaining voltage along radial feeders.
  • The power grid was designed in an era when one or two changes to the grid per day were common. Renewable energy with intermittent generation necessitates a change in grid operations every few minutes.

Despite the relatively high costs of renewable energy systems, the use of these technologies is growing quickly throughout the world. From 2005 to 2011, worldwide solar power grew at a 37.5% CAGR, while wind power grew at a 21.8% CAGR.

Benefits of a smarter grid

The operation of the power grid has become so complex over the past 50 years that human control is becoming ineffective. The interconnected grid means a disturbance hundreds of miles away can have catastrophic effects on a local system.

With less centralized control, the need for communications and coordination has become crucial. Sensors and other devices are overwhelming utilities and grid operators with vastly greater amounts of data. Therefore, automated, intelligent, real-time response to grid operations and power events will be required.

However, with smart technologies comes the promise of a more reliable and efficient power grid. Utilities will be able to better manage costs because they will be able to discern many problems before they occur, allowing equipment to be replaced or repaired before problems arise.

In addition, actual problems can be isolated before they cause further damage to the grid, and self-healing capabilities will require fewer personnel dispatches to fix problems. The smart grid will also offer enhanced cybersecurity because it continually monitors itself to detect problems and unsafe conditions.

Society as a whole will experience fewer and shorter power outages, brownouts and other power problems - resulting in less downtime and fewer economic losses.

Smart grid market

More than any other technology, smart meters seem to capture the essence of the smart grid. In fact, smart meters account for about half of all smart grid spending today.

Smart meter deployment will come in stages. The initial stage has occurred over the past several years with the installation of almost 80 million smart meters, mainly in Europe and the U.S.

China is rapidly ramping up deployments, as are South Korea and India. Less developed countries are just starting to deploy smart meters, but their growth is more constant, albeit at a far lower level than that of the most developed countries of the world.

Approximately $8 billion has been spent on smart meters through 2011. Another $136 billion will be spent through 2021, when almost 1.4 billion smart meters will have been installed worldwide.

Nonetheless, smart meters constitute but a small part of the overall smart grid market.

Overall, more than $16 billion was spent on smart grid development in 2011. By 2021, the most developed countries of the world will be spending almost $33 billion annually on smart grid improvements.

Less developed countries are expected to spend over $8.2 billion annually. During the next 20 years, over $560 billion is expected to be spent on smart grid development and technologies worldwide.

In summary, the power grid of yesteryear has developed into a very complex system that is now in danger of becoming unable to provide the high-quality, reliable power needed for the economic growth of a high-tech society.

Bernie Galing is an analyst at research firm SBI Energy. This article is edited and adapted from a report titled “World Smart Grid, 2nd Edition.” For more information about the report, click here.

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