Smart Grid: Closing the Gap Between Perception and Reality

Smart Grid: Closing the Gap Between Perception and Reality (Closing the Gap)

A significant gap exists between the popular perception of smart grid's potential and the practical constraints to this technology's success. Indeed, smart grid is considered one of the most possibly disruptive technologies facing the global power industry today. Government and industry have already begun to pour billions of dollars into smart grid investments in high expectation of the grid's potential even though the debate continues concerning its precise definition, scope and benefits. Many recognize that the first to gain insight into the real value of smart grid will be best positioned to seize the opportunities and avoid the pitfalls of ill-timed deployment.

To help our clients navigate this complex landscape, IHS CERA is launching the new multiclient study Smart Grid: Closing the Gap Between Perception and Reality. IHS CERA will lead an in-depth research effort aimed at uncovering the assumptions embedded in the Smart Grid Narrative and answering the key questions the narrative raises. In doing so, Closing the Gap offers a critical and realistic analysis of the future state of smart grid and provides the signposts to track the actual path that it will follow.

Subscribers to Smart Grid: Closing the Gap receive:

• Introductory research briefing
• Introductory conference call via  webinar
• Preliminary workshops
• Final workshops with research and finding
• Final report and executive summary

Smart Grid: Closing the Gap Between Perception and Reality is designed to benefit study members by:

• Delivering insight and research that can inform smart grid capital investment decisions
• Establishing business models that help utilities align with customer behavior
• Informing and influencing policy and regulatory direction
• Guiding smart grid strategy and deployment

Subscribers to Smart Grid: Closing the Gap Between Perception and Reality receive a comprehensive set of study deliverables, including:

• Introductory research briefing:
  • Research agenda
  • Smart grid narrative
  • Key questions arising from the narrative
• Introductory conference call via webinar (May 2010):
  • Presentation and discussion of the research briefing
• Preliminary workshops (July 2010):
  • Held in both the United States and Europe
  • Presentation of in-depth research and discussions among stakeholders
• Final workshops (October 2010):
  • Held in both the United States and Europe
  • Conclusive research and findings from member feedback
• Final report (November 2010) access via IHSCERA.com, including:
  • Executive Summary
  • Answers to questions arising from the narrative
  • Supporting, in-depth research and analysis
  • Revised smart grid narrative
  • Signposts to actual path that smart grid will follow

The Smart Grid Narrative

Smart grid is one of the most potentially disruptive technologies that will transform the power sector by reshaping demand, decentralizing power supply, and lowering power bills. IHS CERA employs the The Smart Grid Narrative as a basis for attempting to synthesize theory with a fully implemented smart grid in practice. The power industry and related stakeholders widely accept this narrative, which, in turn, has had the effects of:

• Influencing government policy and business strategy
• Informing capital investment decisions amounting to billions of dollars
• Shaping early deployment pilots that may run the risk of technological obsolescence or are encountering problems

What is the Smart Grid Narrative?

The Smart Grid Narrative is a vision that embodies a nationwide network of power lines, advanced meters, sensing, communication, and control technologies linked through universal standards and protocols, coordinated with advanced two-way communication and orchestrated by information technologies and complex optimization software. This network will be self-healing, more secure against cyber threats and capable of delivering higher quality and lower cost power service.

Smart grid will take more than a decade to implement fully. Already, more than 8 million advanced meters are in place in the United States, and more are on the way. The economic stimulus has directed over $4 billion toward accelerating smart grid deployment. Many new information companies are poised to make smart grid as transformational in the future as the Internet has been and continues to be.

Smart grid deployment will reshape power use by confronting consumers with real-time power prices. These price signals will alter consumer decisions either directly through behavioral changes or indirectly through pre-programmed smart appliances and control applications. As a result, many market failures will be fixed, and much of the easy wins of the efficiency gap will be obtained. The savings will drive monthly power bills lower.

Eventually, smart grid will make traditional power supply obsolete—as wind, solar, and combined heat and power systems reach “grid parity” and these small-scale distributed generation resources become ubiquitous. This will bring about a significant decarbonization of power supply.

Smart grid will enable the rapid penetration of electric vehicles and, in so doing, will create a roving battery to the power system. Such distributed power storage plus network expansion will capture the geographic diversity of wind and solar production patterns. As time passes, the old linear paradigm of conventional power plants being dispatched to meet fluctuations in power demands will give way to a new fuzzy paradigm in which the degree of load control will depend on distributed small-scale generation patterns.

Smart Grid: Closing the Gap Between Perception and Reality aims to answer important questions arising from "The Smart Grid Narrative." These questions challenge popular perceptions about the smart grid and test its practical limits.

By presenting in-depth research and analysis to answer these questions, Closing the Gap will provide valuable help to our study members by:

• Identifying realistic smart grid opportunities
• Establishing business models that align with client behavior
• Influencing policy and regulatory direction
• Guiding smart grid strategy and deployment

IHS CERA research will address the following questions:

• Do consumers want real-time prices, and how are they likely to respond?
• How will regulators reconcile real-time pricing with regulated cost recovery?
• Is there a first-mover advantage in smart grid deployment or are advanced meters and other smart grid technologies subject to rapid obsolescence?
• How long will pilot projects be conducted and when will smart grid be widely deployed?
• Is market failure widespread in power consumption decisions, and does a massive efficiency gap present "low-hanging fruit" for smart grid to harvest?
• Can entrepreneurs capture and utilize smart grid consumer information given customer privacy concerns?
• What are the limits to reshaping consumer power use?
• Do economies of scale and storage economics favor small-scale and/or renewable generation resources?
• Will the costs of smart grid implementation be offset by the benefits? 

Note: these questions are subject to modification by IHS CERA and based on the input of the Closing the Gap study members

Closing the Gap's Value Proposition

Closing the Gap study brings together a community of stakeholders from the power industry—electric utilities, generation and transmission companies, independent system operators, service and equipment providers, technology companies, and regulators—that share a strong interest in the outcome and success of smart grid.

IHS CERA will lead an in-depth research effort aimed at uncovering the assumptions embedded in the Smart Grid Narrative and answering the key questions the narrative raises. As a result, IHS CERA will develop a revised narrative with signposts that track the actual path that smart grid will follow.

Closing the Gap study members will benefit from the IHS CERA independent and objective assessment of the realistic opportunities and challenges posed by the smart grid and from taking part in a broad stakeholder dialogue.

During the multiclient Study process, both IHS CERA and Closing the Gap members will bring their experience and perspectives to bear on the critical questions.

Specifically, IHS CERA will deliver the following to our study members:

• Thought leadership and original insight into the global power industry
• Integrated perspective on smart grid that reflects its complex, multifaceted nature at the intersection of energy, technology, policy, environment, and the consumer
• Knowledge and lessons learned from analogous initiatives in other energy sectors

Closing the Gap members will bring:

• Shared interest in the long-term success of smart grid
• Collective view of smart grid's opportunities and challenges
• Experience in strategy and early deployment of smart grid