Lately, there has been a lot of talk about the smart grid. What is it? What is so smart about it, anyway? And what does it have to do with cheap electricity? We’ll take a look at those questions in this post.
First of all, one of the things that the smart grid is designed to do is to make it easier for information to flow between utilities and customers. That can help the utility by giving them warnings about possible problems on the power grid before they occur, so they don’t need to wait for customers to call them to find out about outages, and so on. More relevant for those of you interested in cheap electricity, it will also allow the utility to send information to customers about changes in electricity prices, so that you can choose to use electricity when it is cheap and not so much when it is expensive, and thus reduce your electricity bill.
Now, you might ask, why would electricity prices change? Aren’t they usually the same all of the time? Yes, that is true for most customers today, but it turns out that the value of electricity is different depending on the time of day, and also depending on the season. This is mostly due to changes in demand; both residential and business electricity customers tend to use more electricity during the day, particularly during the summer when they are running their air conditioners, and less during the night and on winter days. These changes in the value of electricity can be seen in changes in electricity prices in wholesale markets, where electricity is traded between electricity generators and electricity suppliers who then sell the electricity to end users. Today, without the smart grid, end users don’t see these variations in electricity prices, but someday we will be able to use this information about varying electricity prices to make smart choices about when we use electricity. This will tend to ease the strain on electricity supplies at times of peak electricity demand, because people will have incentive to turn down their electricity use as the price goes up. And, as a cheap electricity afficionado, having the opportunity to save money on electricity by choosing to use it when it is cheaper probably sounds pretty good!
At the moment, the smart grid is just in the process of being created, because a lot of infrastructure needs to be put in place before all of this communication between electric companies and consumers can occur. However, the federal government has recently invested $3.4 billion to spur development of the smart grid in the United States, and we should start to see it go live, at least in some places, over the next few years. Already, some big players in the information technology space (and some not-so-large players) are beginning to introduce tools that will be useful once pieces of the smart grid start to fall into place. These include electricity usage monitoring tools like Google Power Meter and Microsoft Hohm. These generally require a partnership with your current utility, and mostly are not functional yet, but you can keep an eye on these links to see when they might go live for you.
If you’re interested in saving money on electricity, please also take a look at our guide to finding the cheapest electricity supplier!