Smart grids – a smart idea?

62 renewable energy focus September/October 2009

Feature article

WITH THE EU’S GOAL OF 20% RENEWABLES BY 2020, AND THE UK

GOVERNMENT’S PLAN TO ROLL OUT SMART METERS TO ALL DOMESTIC

CUSTOMERS BY THE SAME TIME, THE WAY HAS BEEN PAVED FOR SMART

GRIDS. GLOBAL ENERGY CONSUMPTION IS SET TO TRIPLE BY 2050, AND

POWER NETWORKS NEED TO TRANSFORM INTO INTELLIGENT SYSTEMS

THAT WILL SAVE ENERGY, ACCOMMODATE INCREASING AMOUNTS OF

RENEWABLES, AND ENSURE SUPPLY SECURITY.

Smart grids – a smart idea?

What is a smart grid?

Katherine Hamilton, president at GridWise

Alliance, tells Renewable Energy Focus,

“while putting smart meters out there gives

the utility more information, it doesn’t make

your grid really smart until the consumer is

involved. A smart grid has to be dynamic and

have constant two-way communication. The

consumer has to be part of the smart grid by

being given choices and tools to help them

decide how to use their energy more effi-

ciently.”

A smart grid, she says, is a means to an end:

“You can have the most digitised, sophisti-

cated grid in the world, but if it doesn’t put

renewable energy online, and make your

system more efficient, more reliable and

more flexible, it isn’t really very smart.”

And according to David J. Leeds, smart grid

analyst at Greentech Media’s GTM Research,

the smart grid is a system comprised of three

layers: the physical power layer (transmis-

sion and distribution); the data transport and

control layer (communications and control);

and the applications layer (applications and

services).

Key characteristics of a smart grid, he

suggested in a webinar hosted by Greentech

Media in August – include:

■ Advanced metering infrastructure (AMI) –

smart meters;

■ Demand response – utilities offer incen-

tives to customers to reduce consumption

at peak times;

■ Grid optimisation – system reliability, oper-

ational efficiency, and asset utilisation and

protection;

■ Distributed generation – not only tradi-

tional large power stations, but also indi-

vidual PV panels, micro-wind, etc;

■ Grid-scale storage;

■ Plug-in hybrid electric vehicles (PHEVs) and

vehicle to grid (V2G) – the latter being 5 to

10 years off;

renewable energy focus September/October 2009 63

Infrastructure/smart grids

■ Advanced utility control systems – energy

management systems (EMS), SCADA, distri-

bution management systems (DMS), meter

data management (MDM), and geographic

information systems (GIS);

■ Smart homes and networks – home commu-

nications networks and home energy

management systems.

Leeds believes smart grids to be essential to

the adoption of more renewables: “Without

a smart grid infrastructure in place, large-

scale integration of renewables will be nearly

impossible.” And grid-scale energy storage

offers “abundant” opportunities for innovation

and investment.

The economics of smart meters and smart grids

The Institute for Electric Efficiency (IEE)

white paper Moving Toward Utility-Scale

Deployment of Dynamic Pricing in Mass

Markets looks at the economic case for

dynamic pricing in the energy market, one of

the prerequisites of which is the installation

of automated metering infrastructure (AMI),

or smart meters.

The paper states that the cost of smart meters

is US$100-US$175 per device, and reaches

US$200-US525 if demand response compo-

nents – such as customer signalling – and

demand control functions are added. In either

case, the paper finds that the investment pays

off for utilities in the long run.

Similarly, the Electric Power Research Insti-

tute (EPRI) in the USA, has predicted that the

implementation of a smart grid would save

5%-10% of electric power without reducing

comfort levels.

According to the GTM Research white paper

The Smart Grid in 2010, the EPRI has estimated

the cost of building a smart grid at US$165bn

over the next 20 years. Net firm Cisco told the

BBC earlier this year that it believes the smart

grid market could be worth up to US$20bn

a year.

Already, Leeds reckons that about US$1.3bn

in venture capital was invested in the smart

grid between 2005 and 2009, with a large

proportion going to communications network

infrastructure for AMI deployments.

In the USA, President Obama has pledged

large sums of money to renewable energy

and the development of smart grids. In July,

the Department of Energy (DoE) announced

more than US$57m in Recovery Act Funding

to advance smart grid development for 8

projects in 7 States. This adds to the US$17m

allocated in 2008 to these projects.

Legislation

In its directive on energy efficiency and

service, the European Union stated that

customers must receive more information

about their energy consumption. According

to the German Ministry for Economics and

Technology, meters detecting wasteful elec-

tricity use could save 9.5 TWh annually.

Following many other EU countries, the

German parliament implemented the EU

directive in June 2008. From 2010, smart

meters will be installed in new buildings,

and a quarter of the country’s old meters will

need to have been replaced by 2015.

From 2011, German utilities will have to

provide load-based or time–of–day-based

power saving incentives. All the major

German energy suppliers are now testing

smart meters. However, Siemens notes that

only one in every 10,000 meters is currently

“smart”, and upfront cost is an obstacle –

Accenture estimates that replacing 25% of

Germany’s electric meters will cost €1 billion

and take 5000 person years.

Hamilton at GridWise Alliance says all US

states are required to have a smart grid

docket, but the USA is not necessarily close

to a nationwide smart grid: “That’s going to

take a while. It’s going to go out piecemeal…

but I think in 20 years our grid is going to

function completely differently than it does

now, in ways we can’t even imagine. Just like

30 years ago you wouldn’t have known our

phones would be able to give us directions

to our favourite restaurant.”

Smart grid activities in Germany

The use of information and communica-

tion technologies (ICT) and novel intelli-

gent optimisation algorithms that control

connected units are the basis of ‘smart’

grid operation.

The German development initiative

‘E-Energy’ [www.e-energie.info] has an

overall budget of €140m over four years

and is partly funded by the Ministries of

Economics and Environment. 6 model

regions were selected to show example

solutions of smart grids. An additional fo-

cus is the integration of electrical vehicles

in these smart grid solutions.

The Regenerative Model Region Harz

[www.regmodharz.de] is one of the

most exciting sites because it aims at

aggregating various RES (such as wind

turbines, photovoltaic and biomass

plants), consumers (residential and com-

mercial) and storage (electrical vehicles

and a pumped hydro power plant) in a

virtual power plant.

Some units can be controlled centrally and

directly by the virtual power plant. Other

units such as residential consumers or users

of electrical vehicles may want to decide

locally and independently. For the latter

ones it is possible to implement enhanced

smart meter devices (BEMI = Bidirectional

Energy Management Interface) that use

time-variable electricity prices as incentives

for local control decisions. By enhancing

and finally using the controllability of the

different units the RegModHarz consortium

is demonstrating that future power systems

with large shares of RES/DER units are stable,

reliable and economic.

Dr. Martin Braun, Group Manager

Decentralised Ancillary Services

Division Systems Engineering and

Grid Integration.

http://www.e-energie.info

http://www.regmodharz.de



What about security?

“The addition of millions of sensors and

smart meters dramatically increases the

number of points that could be targeted and

become potentially vulnerable to cyber attack.

However, while these concerns should not

obstruct the implementation and the deploy-

ment of smart grid technologies, they do need

to be adequately addressed by governments,

utilities and companies providing grid hard-

ware and software,” GTM Research says.

One of the options for relaying information across

smart grids is the internet. Jon Geater, director of

technical strategy, Information Systems Security

at information security and encryption specialist

Thales, tells Renewable Energy Focus, “many of

the challenges with smart grids are very similar

to the traditional challenges that we have seen

in the information security market for quite a

long time. You have to identify where the points

in your communication chain are, you need to

know how to trust them, and you need to secure

the information that flows between them.”

Geater does not believe it very likely that

someone would hack into the consumer

smart energy system and turn off a whole

power station, but “obviously, the more feed-

back features you put in, the more opportu-

nity there is for attack or accident.”

Most smart meter units, he says, have the

capability of embedding a ‘key’ or some other

form of identity. However, securing the meters

themselves is not enough. “Where you have to

be careful is making sure you keep track of the

information and have security on each link”.

Moreover: “Just having security from the big

box at the end of the road to the utility provider

does not stop someone from patching a wire

across to their neighbour’s house, or using

wireless, to enter at that point and interfere

with the system and usage information. It’s

really all about having a coherent, consistent

approach to the whole system.”

Geater recommends encrypting data sent

between households and utilities. “Being able

to monitor and analyse your own detailed

energy usage is a fantastic innovation.

However, you don’t necessarily want people to

see your energy usage, you don’t want to be

leaking information about your lifestyle, about

where you are at certain times of the day, etc.

And you don’t want to be leaking information

such as account details.”

He advocates the use of authentication

methods, as with email for example, to ensure

that the utility and consumer know that infor-

mation received is bona fide – not modified

or copied from elsewhere, and not a virus, for

example.

Geater also highlights the security implications

of running more than one utility function

through the same smart meter. In Germany,

for example, heat is a distinct utility: “You

don’t want a company you’re not affiliated with

accidentally receiving data about your usage.

And certainly there are many reasons why

the utility companies would not want their

customer data to be sent to the wrong place.”

He points out that the data could also be

used for surveillance, both by criminals and

law enforcement agencies, of people’s work/

home, in/out, upstairs/downstairs patterns.

It is vital, he concludes, to put security in place at

the same time as the infrastructure is being put

together – it is much easier to design a secure

system than to secure an existing one.

Case study 1: SYSLAB – RISØ DTU

Risø at the Technical University of Denmark

already operates a smart grid which incorpo-

rates renewable energy and energy storage

at its Risø National Laboratory for Sustain-

able Energy (SYSLAB) laboratory for intelli-

gent distributed control.

The system uses a standard computer, data

storage, measurement hardware, I/O inter-

faces, backup power and an Ethernet switch.

Each of the components of Risø’s microgrid has

been equipped with a dedicated node system,

providing monitoring, supervisory functions,

and communication.

The Risø grid consists of:

■ 60 kVA diesel generator;

■ 11 kW Gaia wind turbine;

■ 55 kW Bonus wind turbine;

■ 75 kW dump load;

■ 45 kVA back-to-back power converter;

■ 10 kW deferrable load (space heating);

■ A plug-in electric vehicle (PHEV);

■ 15 kW Vanadium redox-flow battery;

■ 7 kW PV;

■ 3x 36 kW of load.

Oliver Gehrke of the Wind Energy Division

at SYSLAB, tells Renewable Energy Focus

that SYSLAB has no central control location:

“Instead we made a standard design for what

we call a SYSLAB node, which is something like

a standard computer, I/O and local storage and

networking. We’ve put one of these computers

at each of the energy devices.”

These computers are linked in a standard

Ethernet network. However, to have a fully decen-

tralised system is not feasible, Gehrke says: “We

started off with a vision, that I think was shared



by a lot of people, that you could have a fully

decentralised control where there’s no central

controller at all. But we’ve come to realise, mainly

by doing experiments on our system here, that

this is something that is either very far off or not

realistic at all for a certain system size.”

Unexpectedly, “the real challenge is not how

to control the top-level … [but] how to main-

tain this [grid] as a very large-scale distributed

computer system that has real-time require-

ments.”

However, he points out that the many smart

grid projects being carried out in the field at

the moment which operate with a single control

unit fail to address what SYSLAB sees as the key

problem of scalability: “What do you do when

the central computer goes down? And what do

you do if it’s not 300 houses, but three million?”

Gehrke suggests the possibility of a hierarchy of

aggregators in which the central unit talks to 100

autonomous units, which each talk to another

100 autonomous units, and so on. The number

of relations between units is kept to a control-

lable magnitude.

Ethernet was preferred to power line communi-

cation in SYSLAB’s smart grid as it was already in

place – in 5 to 10 years, this will be the case in

most households, and the amount of bandwidth

needed to provide auxiliary services to the grid is

“extremely small”, according to Gehrke.

Whichever line of communication is chosen,

Gehrke believes a smart grid would in fact

increase operational security. If more intelli-

gence is put into peripheral parts of the grid,

for example on what to do if a communica-

tion line fails, such a failure could be bridged

for a couple of minutes, giving time for a

meaningful response.

Nevertheless, with the installation of millions of

smart meters, Gehrke believes that “sooner or

later, this is going to be hacked – I don’t think

there’s anything you can do about that. So the

key thing to do is to make sure that even if you

compromise parts of the system, that the rest of

the system doesn’t get affected.

“I’m not sure if the power companies realise all

the implications of that right now, but on the

other hand, I think it is something that can be

overcome.”

When it comes to the integration of renewable

energy, he says, “if you have enough reserve

in the grid, you can run with any amount of

wind penetration – the question is, is it efficient

economically, or even environmentally? Because

at some point you may have to deploy so much

reserve that you don’t have any benefit anymore.”

Denmark has the goal of 50% of wind power in

a couple of years’ time, but Gehrke warns that

it will not be enough to use only conventional

reserves in the grid to deal with intermittency

– the load side has to be controlled too. Large-

scale dedicated storage, he believes, is too costly.

The challenge when trying to control the

load side is the number – quite possibly

several million – of units involved. A solu-

tion must, Gehrke believes, involve granting

local parts of the system a large degree of

autonomy, though this “pushes the bounda-

ries of automation, computer science, control

engineering, and so on.”

The thought is that various units connected to

the grid can act as a service, helping ride out the

fluctuations of intermittent energy sources – by

matching the thermostat pattern of an electrical

heater to fluctuations in the availability of renew-

ables, for example.

Plug-in electric vehicles could also be used. As

Gehrke remarks, a standard, privately-owned

vehicle on average stands still 22 hours a day.

If it needs four hours to recharge, there is

considerable flexibility to match this to energy

generation patterns.

Using appliances already connected in house-

holds to control the demand side of the grid

is much more economical than expanding the

existing grid, Gehrke argues.

Asked whether an EU-wide smart grid, for

example, is feasible, Gehrke says that this

very much depends on the business struc-

ture. Different countries and States have

different degrees of liberalisation of the

power industry, different ownership models

and different market set-ups.

No-one knows exactly what larger smart

grids will look like, but, he observes, there

will have to be a connection to a market in

which power can be traded, and more impor-

tantly the ability to trade ancillary services as

these are worth more and would therefore

provide further economical justification for

having smart grids.

Case study 2: GE ENERGY

John McDonald, general manager marketing,

GE Energy Transmission & Distribution,

tells Renewable Energy Focus that GE has a

number of ongoing smart grid projects. To

GE, a smart grid is the bringing together of

the electrical infrastructure and the informa-

tion infrastructure.

Smart meters are microprocessor-based

devices providing two-way communications

capability, and will help homeowners manage

their electricity usage. Through a website, for

example, or a customer portal, parameters as

to when loads in the home turn on and off

based on the price of electricity could be set.

The dishwasher, for instance, could be loaded

and set to stand-by until the price of energy

is below a certain level – typically off peak –

when it would start automatically.

Smart meters should also have the ability

to be updated with new functionality and

software bugs fixed remotely, including both

application upgrades and security patches.

McDonald says smart meter security involves

both physical security – to inhibit tampering

and theft – and the security of the two-way

communications.

“In the United States we have some very

stringent cyber security rules that we must

follow,” he tells Renewable Energy Focus – the

Venture capital investments in Smart Grids: 2005-2009

YearVC funding in Smart Grid firms

2005 US$60m

2006 US$281m

2007 US$419m

2008 US$461m

H1 2009 US$37.5m

Source: GTM Research’s white paper The Smart Grid in 2010



Critical Infrastructure Protection (CIP) standards

from the North American Electric Reliability

Corporation (NERC).

Regarding the organisation of GE’s smart

grids, McDonald says the metering informa-

tion typically goes to a central computer,

different from the SCADA system. “Typically

for SCADA systems [in the USA], the master

station is centralised. We do have some smart

grid applications [introduced] on a substa-

tion basis – more decentralised. An example

is an integrated Volt/Var control, where we

put logic in the substation, constantly moni-

toring both the substation and its feeders.”

By putting logic in a substation that can

manage voltage and reactive power resources

such as capacitor banks on the feeders, losses

are minimised and peak demand on the

system is reduced.

Challenges

McDonald recognises that smart grids still

face many challenges, one of which is scal-

ability. This is why he promotes the impor-

tance of city-scale smart grid roll-outs, as

opposed to smaller pilots, “as these will

deliver the scalability necessary to ensure

the viability of the technologies being imple-

mented. Florida Power and Light’s Energy

Smart Miami initiative and American Electric

Power’s GridSmart project in Columbus, Ohio

are two such examples of large scale smart

grid initiatives that will prove technology

readiness.”

Another challenge, also raised by Leeds

of GTM Research, is the lack of a common

standard. “Ideally, it would be nice to have

a situation where all the standards were

written for all parts of the smart grid before

the deployment takes place.”

“We must ensure the creation of stand-

ards doesn’t unnecessarily slow the process

of implementation, and we are actively

engaged in the development of standards

to help speed innovation and deployment,”

McDonald adds.

He encourages active participation and lead-

ership in smart grid standards development

efforts. In this way, the knowledge of planned

changes to existing and new standards can

be incorporated into product and system

development plans to ensure these plans are

aligned with the direction of the industry.

Renewable Energy Focus notes that this way,

one can avoid a situation where today’s tech-

nology could be obsolete tomorrow.

There are already standards in place for

connecting renewables to the grid in the US in

the form of IEEE standard 1547 and its companion

standards. These standards, McDonald says,

provide a good foundation.

He also refers to the National Institute of

Standards and Technology’s (NIST) list of 16

existing standards for smart grid, which can be

found on the NIST website.

Maui – Hawaii

GE is currently working on a smart grid

project in Maui, Hawaii, that heavily involves

renewable energy.

“It’s a very challenging project because it is an

islanded system, so its electric system does not

receive support from any other electric utility,”

McDonald says.

Maui currently has one wind farm, with two

or three more planned to be built. When they

Plug-in Hybrid Electric CarXcel Energy is studying how plug-in electric vehicles can store energy, act as backup generators for homes and supplement the grid during peak hours.

Customer ChoiceCustomers may be offered an opportunity to choose the type and amount of energy they’d like to receive with just the click of a mouse on their computer.

100 percent green power? A mix of sources? The cheapest priced source? In Smart Grid City, it could be up to you.

Smart MeterReal-time pricing signals create increased options for consumers.

Smart AppliancesSmart appliances contain on-board intelligence that “talks” to the grid, senses grid conditions and automatically turns devices on and off as needed.

Smart ThermostatCustomers can opt to use a smart thermostat, which can communicate with the grid and adjust device settings to help optimize load management. Other “smart devices” could control your air conditioner or pool pump.

High-Speed ConnectionsAdvanced sensors distributed throughout the grid and a high-speed communications network tie the entire system together.

The potential benefits:

Xcel Energy’s vision of a Smart House: Xcel Energy’s Smart Grid Consortium envisions a future that would allow consumers to communicate energy choices to the power grid and automatically receive electricity based on personal needs. Image courtesy of Xcel Energy.



are completed, the wind penetration could be

as high as 15% of total electricity generation,

according to McDonald.

“You can imagine, if the wind suddenly dies

down, the system frequency will vary instan-

taneously quite a bit, and the generation

that they have will try to respond, but it can’t

respond quickly enough.” Like Leeds and Gehrke,

McDonald believes that storage and demand-

response management of customers’ loads –

smart homes – is the key.

The smart grid project will include advanced

communications, automation and control tech-

nologies – and possibly an energy storage

system. The management system will control

and dispatch several types of power system

equipment, customer loads, and energy storage

to compensate for sudden changes in wind

power and circuit loads.

Peak load at Maui is currently around 200 MW, of

which up to 30 MW can come from wind energy.

Energy Smart Miami

The Energy Smart Miami will see the deploy-

ment of over one million smart meters in

Miami-Dade County, Florida. The aim is to

expand the project to a total of more than

four million customers in Florida over the

next fi ve years. The project is estimated to

cost US$200m, and the expansion could cost

an additional US$500m.

For this project, GE will use wireless commu-

nication in the form of radio frequency mesh

(RF mesh). The smart meters have a printed

circuit card that supports communications

from one of the project partners, Silver

Spring Networks (SSN).

SSN has implemented cyber security in its

communications system. McDonald underlines

that “cyber security is extremely important.”

Networking technologies company Cisco

will help design and implement a secure

and intelligent communications platform

within the transmission and distribution grid,

and provide customers with home energy

management information and controls.

In addition to smart meters, the project

involves the connection of high-efficiency

transformers, digitised substations, power

generation and other equipment through a

centralised information and control system.

GE says several local universities and schools

will receive solar power installations and

battery for back-up and peak demand. 300

plug-in hybrid electric vehicles will be added to

the FPL fl eet serving the Miami-Dade County,

with around 50 charging stations. PHEVs will

also be rolled out in trials at Miami-Dade

College, Florida International University and

the University of Miami and the city of Miami.

In initial trials, 1000 households will receive

energy displays in their homes, smart appli-

ances, programmable and smart meter

controllable thermostats, and demand

management and demand response software.

Energy Smart Miami could begin later this

year and be completed by the end of 2011,

GE predicts.

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Smart grid case study: National Grid’s Smart Grid pilot proposal for Worcester, Massachusetts, USA. Image courtesy of nationalgrid.

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Smart grids – a smart idea?