This is a guest post by Steve Piper. Steve has a M. S. in Public Management and has been a consultant in the utilities business (primarily electricity) for the last 20 years.

The Smart Grid was in the news recently when $4.5 billion in grants for qualified projects relating to grid enhancements were included in the American Reinvestment and Recovery Act, in the first quarter of 2009.

The Smart Grid is best understood as a set of measures for modernizing the nation's electricity delivery system that has both institutional and technology components. That is, in order to get the most benefit from the technological component, institutions (utilities) will need to change they way they do business and interact with customers. While many potential technologies might be pitched under Smart Grid’s expanding tent, current efforts focus mainly on

• Two-way communications between the grid and utility end-users, and
• Appliances that can utilize this communication.

There are many benefits that can be gained from the Smart Grid. For utilities, there is the possibility of limiting growth in the use of electricity at peak times, and in reducing the year-to-year growth in electricity demand. For residential users, there is the possibility of reducing electricity bills. For residential users with home-based power generation, there is the possibility of better compensation for home-generated power, when added to the grid.

The scale of deployment is potentially huge: the U.S. served 147 million electric meters in 2007, with nearly 15 million 'Smart' Meters under deployment last year. (subscription required) At recent cost levels, the $4.5 billion appropriated (if used entirely for new Smart Meters) would be enough to pay for about 12 million more Smart Meters. Because of their cost-savings benefits, growth is expected well beyond what has been funded by recent legislation.