What's Really Wrong With the Smart Grid

It was only a matter of time before the Tea Party turned on the Smart Grid. First there were lone citizens who tried to bar their local utilities from coming on their property to change their power meter, leading to news items like this one from Placerville, CA. Then this week Jerome Corsi, who was involved in the Swiftboating of John Kerry,as well as an interesting call to impeach George W. Bush, penned an indictment of the Smart Grid as the beginning of "energy police," "energy criminals," and a government invasion of privacy driven by a "green ideological agenda," and abetted by Google.

I don't buy Corsi's argument, but I think the fact that he's making it demonstrates that the biggest problems with the $1.5 trillion installation of the Smart Grid are not the dicey technological, financial, and regulatory riddles that currently obsess bureaucrats, but chewy philosophical ones.The Smart Grid is rolling out lickety split because all the right interest groups love it: Utilities like the idea of cutting labor costs and being able to manage electricity usage; environmentalists want to integrate renewables onto the grid while stimulating energy efficiency; manufacturers want to sell appliances; regulators are trying to forestall the electrical outages that already cost our economy $119 billion a year; Congress and the DOE wanted to throw money at such an eminently popular, modern, "smart," concept. This enthusiasm covers up the fact that there is no coherent ideology there at all, never mind a green one. And that's the problem: Nobody has bothered to explain why the Smart Grid is good for you and me and then turn that into a policy.

Consumers, who are seeing their unspoken agreement with their utilities rewritten for the first time since the 1920's, have been left out of the discussion. Across the country Smart Meters have become increasingly unpopular as they malfunction, overcharge customers, allow utilities to quickly disconnect homes, and put the burden of equipment installation on ratepayers. (For detailed tracking see Jerry Richman's excellent blog.) While there's a tendency to see each bit of bad news as an isolated event, together I think they reflect a failure of the country's leaders to articulate a clear philosophy of the Smart Grid and its relationship to consumers. We really need to define the Smart Grid not in what it might offer interest groups, or why it's a "good idea," but in how it will empower consumers to save energy and money, encourage innovation in technology and markets, and create a stable atmosphere for investment and productive competition.

What would that look like? For starters, a consumer-focused grid would make cooperation between utilities and their customers part of the contract. Right now, utilities are switching to "time of use" electricity pricing, allowing them to charge customers more for using energy at peak hours. In theory, users could install more efficient appliances or use them at different times of the day to save money, but many cannot make the investment or change their timing, or simply have no idea how to change their habits so they end up paying higher bills--charged, Corsi says, for being "energy criminals." At the moment utilities have no explicit incentive to reduce consumers' bills. A proper contract would put the onus on the utilities.

Here's an idea: For the first five years after installation, the utility has to charge the consumer the lesser charge--either calculating by time of use or by the old utility contract of static pricing. Utilities, however, are given the option of making more regulated profits by reselling power to other utilities, giving them a clear incentive to help their customers use less power or less expensive power by helping them change behavior or buy more efficient appliances. (And utilities could use the low-interest publicly guaranteed credit lines they use to build power plants to instead invest in their clients appliances--passing along the low interest rate of course.) Consumers, given the option of buying cheaper power at less popular times, would be able to--without paying a penalty (yet) for using more expensive power.

Looking at the current marketing of the grid, and its vulnerability to charges like Corsi's, one gets the sense that utility marketing departments, so secure in their support from Congress and regulators, have fallen asleep at the switch. Americans love low prices, why not pitch the Smart Grid as the Value Grid, where you can shop for cheap electricity in the middle of the night? Corsi (and many consumer advocates) fulminate against time of use pricing, but in fact it's a time-honored American tradition. Happy Hours and Early Bird Specials are beloved examples of time of use discounts. Expensive Mother's Day dinners, last minute air tickets, World Series tickets are examples of peak pricing that make instinctive sense to all of us. In wholesale electricity markets, off peak power can cost a third the price of peak power. Walmart, I'm sure, would figure out how to market bargain basement power prices to its frugal customers. The problem in much of the half-hearted marketing of the Smart Grid is that it suggests that the grid is the smart thing, without empowering consumers to be the "Smart" ones.

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Lisa Margonelli is a writer on energy and environment. She spent four years and traveled 100,000 miles to write her book, "Oil On the Brain: Petroleum's Long Strange Trip to Your Tank." More

Lisa Margonelli directs the New America Foundation's Energy Productivity Initiative, which works to promote energy efficiency as a way of ensuring energy security, greenhouse gas emissions reductions, and economic security for American families. She spent roughly four years and traveled 100,000 miles to report her book about the oil supply chain, Oil On the Brain: Petroleum's Long Strange Trip to Your Tank, which the American Library Association named one of the 25 Notable Books of 2007. She spent her childhood in Maine where, during the energy crisis of the 1970s, her family heated the house with wood hauled by a horse. Later, fortunately, they got a tractor. The experience instilled a strong appreciation for the convenience of fossil fuels.

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