Discussing the future of the smart grid implies that we now have a “dumb grid,” which I don't accept since our nation's record of electric reliability is probably as good as any country in the world. The grid of today, which in many ways is similar to the grid of 50 years ago, can be improved and improved substantially. But do we need a smart grid or just a smarter grid, and if so, how much smarter? As we ponder needed improvements, the question comes down to cost: What's the total price and who will pay for it?

As an advocate for consumers, I know of few consumers, large or small, who want a smart grid or its first offspring, a smart meter, right now.

The smart grid price tag is a major consideration. No one knows what the total will be, but estimates are in excess of US$1 trillion. And as technology evolves, a logical question is whether this mammoth investment will produce long-lived assets or will next year's new products make this year's investments quickly obsolete, thus strapping consumers with large amounts of stranded costs. I believe that large and small consumers have reason to be concerned. Maybe that is why the development of a smart grid is so strongly supported by vendors and utilities but not by consumers.

Even without a precise definition, we know some of the benefits that proponents claim a smart grid will bring. First, it will allow for the remote identification of outages. Currently, if there is a breakdown in the transmission system, utilities generally have to send out teams of employees to visually determine the site of the problem. A smart grid may change that. Second, a smart grid will assist in getting power from renewable energy sources, often located away from load, to where it is needed. And third, it will help send real-time price signals to consumers. Many, but certainly not all, believe that if consumers have some “skin in the game” — if they have to pay more for power at 5 p.m. than they do at 5 a.m. — they will respond accordingly by using less power during peak periods, thus avoiding the need for new generation and transmission.

Only time will tell if these are benefits that consumers really want and if the consumer benefits exceed the real costs.

In fact, in California, where Pacific Gas and Electric Co. (PG&E) began one of the largest installations of smart meters in the country in 2007, there has been considerable pushback. Some of the opposition resulted from huge increases in consumers' electric bills. The opposition was bolstered when it was revealed that thousands of the new smart meters were not functioning properly. And consumer outrage was intensified because of PG&E's abysmal public relations effort. Now with consumer turmoil in full boil, PG&E believes it understands at least part of the reason for its botched program was because the company didn't do “a good job of seeing the world through the lens of the customer,” said a senior executive. In fact, they had simply instituted the program without ever explaining how the consumer would benefit.

For large industrial electricity consumers, the questions raised are similar but not identical. Many, perhaps most, industrial consumers already have interval meters and many are subject to time-differentiated rates. Thus, the potential benefits to such consumers may be minimal.

Industrial customers are also concerned about costs. While regulators recognize that cost-of-service rates generally result in large consumers paying less per kilowatt hour — because they have a large and constant load often fed through their own substation — politicians, who must face the voters, may push more of the financial burden onto the industrial sector.

America's manufacturers are suffering already; they cannot afford to construct a smart grid through even higher electricity bills.

And finally, the sleeping lion in the room is the issue of cyber security. If we believe government experts, then there are literally thousands of foreign and domestic operatives trying to hack their way into our electric power systems. We know that as we make the grid smarter — and there is greater two-way communication between utilities and consumers — the computer systems governing the grid will become more vulnerable to cascading failures. If proper safeguards and firewalls are not erected, the smart grid could become the ex-grid in very short order. Since virtually every component of our society is dependent on electricity, the impact would be enormous and the costs to consumers and society exorbitant.

In conclusion, if a smart grid is to be successful, consumers must be convinced that the net benefits outweigh the costs, and those must be benefits that consumers truly want and understand. That has not been the case to date. Advocates of the smart grid must communicate clearly with electricity end users and address their concerns. As an advocate for electricity consumers, I support the development of a smarter grid. Let's make sure we go about doing that in a smart way.

John Anderson (janderson@elcon.org) is president and CEO of the Electricity Consumers Resource Council (ELCON), which represents the large industrial users of electricity.