SMART GRID IS A HOT TOPIC IN THE UTILITY BUSINESS TODAY. All of the industry's stakeholders are interested in this subject and involved at some level. But, it is not obvious to me, at any level, that there is a simple, clear framework in place that will allow the industry to modernize the grid and deliver the value that utility executives are seeking.

So, what is the smart grid? I see the smart grid as an intelligent two-way network used to deliver base load and alternative energy supply to our customers. It integrates energy efficiency, demand response and distributed-resources technologies to enable the grid operators to make intelligent decisions that help them run the grid more efficiently, reliably and at a lower cost. Ultimately, technology can greatly improve the ability of the system to react in an automated manner in real time, but let's walk first before we run.

So, while the grid is the delivery channel by which we can introduce these tools and technologies into the mix, demand response, distributed resources, alternative energy and energy efficiency have fundamental differences.

For example, Jimmy Ervin, a commissioner for the North Carolina Utility Commission, correctly states that energy efficiency is a tool to reduce the need for base load, while demand response is used primarily to reduce peak loads. These are two very different tools to deliver very different outcomes, but we often hear energy efficiency and demand response talked about as if they are interchangeable. They are complementary perhaps, but not the same.

We similarly see renewables and distributed resources grouped together. In fact, I've seen alternative-energy portfolio standards legislation where all of these disparate options are lumped together in umbrella legislation. We need to get clarity about how each of these can help solve the increasingly difficult and complex problem of meeting the rising demand in a clean, efficient, reliable and cost-effective way.

We need to be careful to understand the differences in these technologies and their purposes, or we will add to the confusion and make it difficult to promote consistent, clear legislation and regulation.

It appears that much of what is being developed today is focused on communications platforms and protocols to move data. Moving data, however, will not make utilities any smarter about how to optimally operate the grid. In fact, more data might make things worse. If the data can't be harnessed and converted into grid intelligence, then the notion of a smart grid won't evolve beyond the conceptual stage.

As a former COO of an investor-owned electric utility, it concerns me when I hear folks continue to say that the reason utilities haven't made more progress is that they won't change how they do business. Quite the opposite is true. We have restructured, deregulated, improved the efficiency of our collective capital investment, extended useful lives of assets and gone to a process-based approach to managing our infrastructure. The fact that the real price of electricity is lower today than in the past speaks volumes about the industry's ability to innovate and operate more efficiently.

We also have invested a significant amount in technology, but it has not delivered the value promised. Typically that has been blamed on the utilities' inability to integrate technology, but that has not been the sole reason. Oftentimes, the technology itself has required utilities to change their core processes to make the applications work. This is fundamentally wrong. Only recently have a few vendors begun to approach the development of solutions from an enterprise perspective.

A significant number of organizations are now focusing on various aspects of grid intelligence. But it is unclear how these groups ultimately might converge and agree on common open architectures, protocols and standards necessary to create the framework that will allow us to build the 21st century grid.

We hear a lot of talk that the market will create the solutions necessary to make the grid smart. I'm not sure. If our “efficient markets” truly drove proper investments, would we need the U.S. Department of Energy to identify national transmission corridors?

It's been my experience that utility executives are eager to implement new technologies to help us optimize the operation of the grid. Unfortunately, the framework that would align policy, technology, our customers and the grid is not in place today. Absent that, we'll only make incremental progress.

We must clearly articulate our vision for modernizing the grid and then, with strong leadership, use our people, processes and technologies to create innovative solutions. Let's first take the time to understand what we want to get out of a smart grid, then figure out how to develop it in a way and in a time frame that will enable us to address the well-chronicled challenges we face.

Joe Belechak is vice president of strategy for Westinghouse Electric Co. He previously served as senior vice president and COO of Duquesne Light Co.