The importance of replacing the outdated U.S. electrical grid with smart grid infrastructure can’t be overstated.  The benefits include energy efficiency gains, reduced greenhouse gas emissions and increased opportunities to bring innovations that benefit cities and businesses alike.  Those motivations are more than sufficient to warrant rapid deployment of proven technologies, but the most compelling reason for upgrading to smart technology is defensive: The existing grid is breaking down.

This can be seen in the skyrocketing cost of power outages. The Department of Energy calculates that outages cost Americans $150 billion annually –nearly $500 per person every year. Other estimates in recent years have put the cost at $50 billion to $180 billion, depending on what impacts are included in the equation. But everyone agrees that the cost is mounting rapidly.

• The annual number of blackouts affecting more than 50,000 U.S. customers increased from 140 during  2000-2004 to 303 during 2005-2009, and the trend has continued with 52 such blackouts in 2010 and 109 in 2011, according to Massoud Amin, an electrical engineering professor at the University of Minnesota.
• Electric customers spent 43 percent more to maintain and repair existing infrastructure in 2011 than in 2002, but the average customer still spent 112 minutes without power in 2011, a recent Associated Press study of utilities found.
• When outages due to weather events are removed from the equation, the number of grid related failures has decreased slightly over the past decade, but the average recovery time is longer, AP reported.

How does reliability-oriented power loss cost cities and businesses? Consider the largest outage of 2011, which affected nearly 7 million people. Originating from a technician’s error in repairing a capacitor bank, the system failure knocked out switching stations like dominos across five utilities in Southern California, Arizona and Sonora, Mexico. Economic damage included four-hour commuter delays and numerous car accidents from failed traffic signals; contamination of beaches and unsafe water supply as sewage treatment plants failed; and a host of problems for hospitals, grocery stores, restaurants and other businesses—not to mention lost productivity for millions of workers.

A functioning smart grid would reduce the cost of power failure in several ways. First, outages caused by faulty equipment would be greatly reduced, as smart systems are able to identify weakening components before they fail. Also, local failures would not have the opportunity to spread across multiple grids, limiting the scope of problems when they occur. Finally, smart grids have the capacity to repair themselves, reducing the period of time people are left without power.

Amin of the University of Minnesota calculates that smart grid technology would save businesses and families $49 billion annually by avoiding power loss, plus another $20 billion due to energy efficiency. The $20 billion in energy efficiency would be saved mainly by utilities, which pass through most of the savings to (commercial and residential) electrical customers. Other sources note that annual investment of $20 billion to $30 billion would bring about a fully functioning grid within two decades, and would pay for itself many times over during that time. This argument leaves aside an achievable 20 percent reduction in carbon emissions from smart grid efficiencies.

Everywhere you look, the societal value that a universal smart grid can unlock is increasing rapidly:

• As data centers and other mission-critical facilities use an increasing share of electricity, the cost of power failure and the value of reliability and resiliency are increasing geometrically. Data center capacity is increasing by about 10 percent per year.
• As more utilities and companies turn to strategies such as demand response and distributed generation, the smart grid makes these strategies more effective.
• Large companies are turning to smart-building systems to improve energy efficiency and prevent power failures across their portfolios. The best of these systems duplicate many of the benefits of a smart grid on a smaller scale: 18 to 24 percent energy savings, the ability to manage energy portfolio-wide from a centralized location, automated diagnostic and adjustment capabilities, and short payback periods on implementation costs. The availability of a smart grid would expand these benefits significantly.

Businesses are starting to outpace cities and utilities in capturing the benefits that smart systems offer. Smart portfolio monitoring and control systems such as Jones Lang LaSalle’s IntelliCommand^SM use cloud computing and algorithmic calculations to help corporate facility portfolios run at peak efficiency while minimizing downtime risk. These systems don’t need smart infrastructure to work, but a smart grid would supercharge the value of current technology and would open the door to a new world of innovation.

To understand how today’s smart building automation is ready for smart grid implementation, look at onsite power generation. Many facilities with heat-intensive uses, such as manufacturing plants, are already investing in co-generation, while facilities such as data centers are exploring combined heat and power (CHP) strategies.  With the focus on energy efficiency and carbon reduction, distributed power strategies are expanding to other types of facilities.

Smart grid infrastructure would provide a market for excess energy generated at the site level, and would reduce the amount of energy lost in transmission.  It is estimated that about 10 percent of energy from power plants is lost on the way to its destination, but the loss factor increases as the distance between the source and the end-use increases.

The U.S. Environmental Protection Agency, via its ENERGY STAR program, estimates that the country’s 4.8 million commercial buildings spend about $108 billion on energy, and 350,000 industrial plants use another $85 billion. ENERGY STAR also notes that about 30 percent of that energy is wasted. That’s potentially $65 billion a year that could be saved from better monitoring and management of energy in commercial buildings.

The reduction in greenhouse gas emissions is a bonus for cities, where governments are concerned about the effects of climate change. Cities also care about efficiency. But more than any other issue, city leaders are continually focused on competiveness for business attraction and expansion. Cities that work with their utilities and business communities to accelerate installation of smart grids stand a good chance of winning in the future.