The current mode of transmission and distribution of electricity has proven to be unreliable and inefficient. This is because the grid technology currently in use has changed very little since it was developed. Researchers are now experimenting with smart grid technologies to overcome the shortcomings of the traditional grid. A smart grid can help reduce greenhouse gas emissions by up to 211 million metric tons and is much more reliable than a traditional grid. This is what is driving investors to put their money in this new technology. By 2020, the industry is expected to have a valuation of over $400 billion.
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What is a Smart Grid?
A smart grid is a modern power generation, transmission and distribution system that can automate and manage the increasing complexity and needs of electricity in the 21st century. The technology aims to; integrate and support renewable energy sources like solar, wind and hydro, empower consumers with real-time information about their energy consumption and assist utility companies to reduce outages.
What Makes up a Smart Grid?
Just like traditional grids, smart grids have a number of moving components. However, smart grids have parts that are more efficient in terms of design and functionality. For instance, there are intelligent appliances that are capable of deciding when to consume power based on the pre-set user preferences. There are also smart substations that control critical and non-critical operational data, such as power factor performance, breaker, battery and transformer status.
Another critical component of a smart grid is the smart power meter that is capable of two-way communication between the consumer and power provider. This makes detection of power outages, billing, data collection and dispatching of repair crews easier and faster. There is also smart distribution characterized by automated monitoring and analysis tools, superconducting cables for long-distance transmission, self-healing, self optimization and self balancing.
Smart generation is another key component of a smart grid. The system is capable of “learning” the unique behavior of power generation resources to optimize energy production and to automatically maintain voltage, frequency and power factor standards based on feedback from multiple points in the grid. There is also universal access to affordable, low-carbon electrical power generation and storage solutions.
The Current Smart Grid Market
The smart grid technologies market in the United States is booming. The market is driven by incentives from the federal government, which has funded R&D programs to the tune of billions of dollars. In 2014, spending on smart grid technologies stood at $2.5 billion. By 2017, spending is expected to increase to around $3.3 billion. The number of smart meter shipments in the United States is expected to increase to 13.3 million in the year 2016. In North America, nonresidential smart meter penetration is expected to be around 71.7% by 2020.
The number of smart grid technology companies in the world is estimated to be around 150, 77.4% of which are based in the United States. The cumulative market capitalization of the largest 25 smart grid vendors stands at around $2.03 trillion. By 2020, the cumulative smart grid technology market is expected to surpass the $400 billion mark, with a compound annual growth rate of 8% worldwide. In the United States alone, the market is expected to continue growing by double digit to reach $26.7 billion by 2017. To date, General Electric, Honeywell, Itron and Trilliant Networks have received between $60-$300 million in funding.
Why Do We need Smart Grids?
Smart grids are not only aligned perfectly with the needs and demands of our time, they are also predicted to have significant long-lasting effects. For instance, the technology will overhaul aging equipment and bring things up to speed. This will help to reduce the likelihood of blackouts, burnouts and power surges. The technology will also reduce both the cost of energy consumption and production. With its full implementation, smart grids will make renewable power feasible and equip the grid to meet increasing energy demands. More importantly, however, the technology will give consumers near real-time control of their energy bills and facilitate large-scale electric vehicle charging.
Switching to a smart grid is all about providing consumers with a financial edge not just improving power management and adopting greener technology. Successful adoption of this technology will enable the average household to save nearly $600 in direct bill savings. By providing real time information on energy consumption, the technology will force consumers to reduce their energy consumption by 5% to 10%. Research has shown that when consumers know exactly how much energy they consume; they are likely to take appropriate measures to reduce their energy use. After one year, the total energy savings attributed to smart grid technology is estimated to be $42 billion. In five years, the annual savings will increase to $48 billion. In 15 years, the savings will increase to $65 billion and $102 billion in 30 years. The energy saved can power the city of Las Vegas 207 times over, a refrigerator for 199 million years, or cool 378 million homes.
The Future is Now
The Department of Energy proposed an investment of $3.5 billion from the year 2016 to 2026 to promote innovation in the smart grid technology industry. Research will focus primarily on machine learning, plug and play technology, self-healing grid and total automation of the grid.