1. ENBALA Power Networks | 360 Bay Street, Suite 401 | Toronto | M5H 2V6
www.enbala.com
Smart Grid: The Future of the Electric
Power System
An Introduction to the Smart Grid
September 2011
ENBALA Power Networks

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Contents
1. Introduction ..........................................................................................................................................3
2. What is the Smart Grid?........................................................................................................................4
3. Why the Smart Grid Matters.................................................................................................................5
4. History of the Smart Grid......................................................................................................................5
5. Where we are now?..............................................................................................................................6
5.1. Smart Meters to Grid Balance...........................................................................................................6
5.2. Around the World.............................................................................................................................6
6. The Benefits of the Smart Grid .............................................................................................................7
7. Next Steps .............................................................................................................................................8
8. Conclusion.............................................................................................................................................9

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1. Introduction
The first electric utility in North America was started in 1882 in New York City by Thomas
Edison. From modest beginnings, a grid has grown to cover the entire continent, providing
almost everyone with a reliable source of electricity.
Electricity, considered by most to be energy, is actually an energy currency. Power collected
from a variety of sources, such as falling water, burning fuel, wind and solar is used to create
electricity for delivery to customers. Electricity has proven to be a convenient and efficient
means of delivering energy. Electricity is delivered at the speed of light and is consumed the
instant it is created. There is no means to store electricity without converting it to another form
of energy. As a result, the demand for power, driven by users, must match the supply of power
from the available sources (e.g. generators and energy storage devices) at all times.
The utility industry, committed to providing quality and simplicity for customers, is currently
facing three main challenges in the design and operation of the power grid of tomorrow.
 Meeting the Demand – Utilities have taken responsibility to meet the demand of
customers with little or no advance notice.
 Reliability – The grid is designed for reliability. Even at the annual peak load, a
contingency loss of generation or a single transmission element will not cause serious
losses for customers.
 Quality – Power system frequency and voltages are maintained within acceptable limits,
regardless of the loads applied.
These standards have become a part of the daily life for users, most of whom have little idea of
the challenges they create.
Two recent trends have started what may become a paradigm shift in the way that power
systems are designed and operated:
 The addition and rapid growth in renewable energy systems as sources of supply.
 The computerization of industrial equipment and the increase in the use of office/home
computers, server farms, data banks, electronics and other non-linear loads.
These trends are increasing the need for a Smart Grid that relies on communication between
Independent System Operators (ISOs)/Regional Transmission Organizations (RTOs) and
consumers so that renewable energy can be used more efficiently, the electric power system
can run more reliably and greenhouse gases can be reduced.

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2. What is the Smart Grid?
“The Smart Grid is ultimately about using megabytes of data to move megawatts of electricity
more efficiently and affordably.” – Ontario Smart Grid Forum report, May 2011
There are different views of what it takes to make a Smart Grid. In some cases, attaching smart
meters to houses is enough; in other cases, it’s the radical redesign of a region’s power grid that
allows consumers to control their fridges and air conditioning units from anywhere in the world
via the internet, responding to price changes and the availability of power.
What is true of all the Smart Grid projects is that they turn the electric power system from a
one-way delivery system into a network based on a two-way communications channel between
producers and consumers.
This new layer of communication makes the electric power system more intelligent and easier
to balance. Instead of generators simply producing electricity and the consumer using that
electricity in a one-way transaction, the Smart Grid allows for the consumer to communicate
with the system and plan usage based on price and/or availability. It can also allow consumers
to respond to requests from ISOs/RTOs.
Connecting to the Smart Grid gives the operators of industrial, commercial and municipal
buildings, as well as homeowners, an opportunity to take part in the greening of the grid and in
building more efficient power systems in their regions. The Smart Grid is providing a new set of
technology-based tools that allow the grid to be fully optimized, using both loads and
generators to achieve the best and most efficient means of operation while still fulfilling the
primary obligations of loads.
Different jurisdictions are advancing the use of Smart Grid technologies at different speeds,
with some regions conducting dramatic regional overhauls while others remain tentative.
On the demand side, the Smart Grid is made up of smart meters and process measurement
tools, and on the supply side, there are upgraded transformers, transmitters and plants.
Together, these tools give users information to help them make intelligent decisions about
usage and move information from the consumer to the provider, allowing the ISOs/RTOs to
manage distribution in a more sophisticated manner.

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3. Why the Smart Grid Matters
The way it’s utilized today, the electric power system is created to manage peak demands that
happen once every several years. Because the system is created to handle critical peak loads,
the system is being substantially underutilized much of the time.
The Smart Grid would drastically improve the flexibility of the electric power system, making it
easier for electricity system operators to balance the supply and demand. This would help
flatten the consumption profile, make generation run more efficiently and delay or replace
transmission projects or new generation.
By flattening out consumption, the system could potentially run at 80% capacity instead of 50%.
This is a more efficient and cheaper option because load distribution will reduce the
requirement to increase transmission and generation when demand spikes.
Another benefit of demand-side balancing is that it allows fossil-fired generation to run flatter
and at a more constant rate, substantially reducing greenhouse gas emissions by running more
efficiently.
4. History of the Smart Grid
The Smart Grid remains a fairly young idea, with the term introduced in the late-1990s and the
first practical large-scale example introduced in the early 2000s. Because of the reliance of most
electric power systems on old infrastructure and older ideas, the grid is poorly prepared for the
challenges of the 21st
Century that are outlined above.
The first Smart Grid implementation is usually credited to Italy, where the country’s largest
energy provider, Enel S.p.A., set up the ENEL Telegestore Project, starting in 2000. To date, the
company has installed more than 30 million smart meters across the country.
In the US, Austin, Texas, began setting up its Smart Grid in 2003. It now has 200,000 devices
online with another 300,000 expected to join the network. Austin was followed by Boulder,
Colorado. With the moniker SmartGridCity, Boulder is considered the home of the first fully
functional Smart Grid-enabled city in the US, with a network of more than 23,000 smart meters.
Since then, many other jurisdictions, mostly in North America and Europe, have taken early
steps toward embracing Smart Grid technology and transitioning from one-way systems to fully
bi-directional systems.
At this stage, there is a still a very long way to go before Smart Grids are the norm, but the
number of municipalities with projects starting or in progress shows that buy-in is enthusiastic
across North America and the world.

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5. Where we are now?
"Right now, [the US has] a dumb grid. We need to build a not-so-dumb grid, and then maybe
in 10 years, we'll have an average intelligence grid. Then 10 years after that, it will really be
the Smart Grid." – Mike Zimmerman, Founder, Building IQ, April 2011
5.1. Smart Meters to Grid Balance
One of the early steps taken in making a Smart Grid was to install smart meters on most
commercial and residential loads. Many users saw this as a threat, but in fact, charging prices
that go up at peak and down when there’s surplus makes sense, provided people are willing to
embrace the concept. Smart consumers will understand and will shift unnecessary loads to
cheaper times.
That’s the first step in participating in the Smart Grid. Shifting loads, such as dishwashers and
clothes dryers, to operate at night reduces user costs and greenhouse gas and smog-related
emissions, and might help to defer new expenditures to grow the power system. This lowers
future costs for everyone in the region.
Unlike residential customers, industrial electricity users in many regions have been billed based
on peak demand and energy use for years. This approach has driven cost-sensitive corporations
to manage their use based on current pricing. Industrial customers can achieve new savings by
implementing programs to reduce costs at peak periods. As with residential users, this cuts
current costs and may reduce future electricity costs.
Newer technology is now being implemented to allow large commercial and industrial users to
participate in other Smart Grid programs. Large electricity users can now get paid to harness
the flexibility of their loads to help balance the grid. In many cases, these changes can be done
in ways that are almost invisible to the users. Demand Response programs (dropping load for
periods around peak demand) and Grid Balance (allowing utilities to rely on demand-side assets
to provide continuous balance between supply and demand) are two examples of this
approach.
5.2. Around the World
Many US cities have already begun the transition to the Smart Grid, with cities such as
Sacramento and San Diego connecting millions of smart meters over the past several years.
More US cities are signing on each month, with cities such as Burlington, Vermont, and
Pullman, Washington, and several more expected to start setting up smart meters at homes
and businesses this year.

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In Canada, Ontario is the leader in the Smart Grid arena, equipping every home and small
business in the province with a smart meter and enabling time-of-use pricing. New Brunswick is
also exploring Smart Grid opportunities as part of the New Brunswick Power Smart Grid
research project.
In Britain, northeast England is expected to be home to the UK’s first Smart Grid system, a $54
million project led by CE Electric UK.
Meanwhile, developing economies are showing growing interest. In the first half of 2011, both
China and India signed up global corporations Honeywell and IBM, respectively, to help them
develop and implement their first Smart Grid Pilot Projects. IBM is also helping Brazil develop
its Smart Grid strategy, while Enel, the Italian Smart Grid pioneer, is installing smart power
meters in Brazil to help promote Smart Grid development in the country and, eventually, across
South America.
6. The Benefits of the Smart Grid
While the Smart Grid hasn’t been used for a long time in any region, the benefits are already
being seen in jurisdictions that created their systems early. Preliminary results from studies
being conducted at Colorado University into Boulder’s SmartGridCity project show that Smart
Grid tools are allowing Xcel Energy, the company running the project, to predict equipment
failure and successfully make repairs before power outages occur. The study has also found
that by giving users a choice of when they use energy, and how much and what kind of energy
they consume, they are getting more use out of green power sources and customers are
actively changing how they use the system, with many taking advantage of remote
management of appliances and HVAC units via the internet.
Other benefits of the Smart Grid include:
1. Create a clean environment – Reduce carbon emissions and improve energy efficiency
through reduction in losses and by integrating renewable generation.
2. Decrease demand – The Electric Power Research Institute conducted a study that suggested
Smart Grid technologies could reduce electricity consumption in the US by 10 to 15% by 2025.
3. Increase efficiency and reliability – By flattening the consumption profile, the system can run
much more efficiently and can respond more intelligently, with the potential, as previously
mentioned, of running at 80% capacity instead of 50%.

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4. Build the economy – a study by the Electric Power Research Institute illustrated that Smart
Grid technologies could deliver between $1.3 trillion and $2 trillion in benefits over the next 20
years.
5. Increased consumer participation – The Smart Grid has the ability to change the way
consumers use electricity by showing them exactly how much electricity is being used and how
much it costs throughout each day. This helps consumers save money and more intelligently
control their usage.
6. Support intelligent loads – The development of intelligent loads, whether appliances in the
home or larger loads in industrial settings, will be encouraged through the expansion and
adoption of the Smart Grid. These loads will be able to sense fluctuations and automatically
respond to grid emergencies in real-time. They will also give consumers more control over how
they use electricity.
7. Connect private renewable generation – The bi-directional nature of the Smart Grid allows
consumers to connect their own private generation, such as solar panels, to the grid. This adds
flexibility and reduces greenhouse gases while putting less stress on the system and reducing
losses.
7. Next Steps
Market research firm Zpryme released a report in 2009 that said the Smart Grid market in the
US is expected to double over five years. Valued at $21.4 million in 2009, it’s expected to grow
to $42.8 billion by 2014. Growth is expected to be even quicker globally, from $69.3 billion in
2009 to $171.4 billion in 2014.
The first next step is to put in place systems to measure and collect data through smart meters,
synchro phasers and other tools. In conjunction with that expansion, it is of the utmost
importance that security remain a priority.
Once the data is moving in a secure fashion, and information is being collected in a usable way,
the system can be managed so that system operators can more effectively utilize generation
and transmission and increase the capacity factor. As the Smart Grid grows, smart appliances
and electric vehicles will be able to manage their loads in such a way that they’d even be able
to sell extra electricity back to the grid. These advances will extend to intelligent HVAC and
water heaters. This gives consumers the opportunity to interact fully with the system and
become a partner instead of simply a consumer.
Interacting with the system will empower consumers and will help them change their habits,
live more efficiently and reduce their energy costs.

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Industrial loads will also continue to become more intelligent and many will completely change
their consumption patterns. The information the asset owners will receive by connecting to the
Smart Grid will give those owners new and strategic ways to manage usage. Inefficient loads
will be altered and poorly performing equipment replaced with more intelligent equipment.
There are also new, more intelligent ways to use existing assets by having them deliver Grid
Balance to, and get paid by, electricity system operators. As more money can be saved, and
with the potential to create revenue through intelligent usage, companies will find ways to
work smarter.
8. Conclusion
As the Smart Grid continues to evolve, and demand-side management, which is available today,
builds on its growing reputation as a cost-effective way for industrial users to manage energy
usage and costs, buy-in from both residential and industrial consumers will become simpler.
There is minimal cost to get involved today. Connecting requires the simple installation of
meters to monitor equipment more closely. By monitoring the equipment, smarter decisions
regarding usage can be made. The next step, connecting a network of loads to a regional
electricity system operator, allows companies to respond to the needs of the grid and start
offering Grid Balance. This creates a new revenue stream for companies with connected loads.
Though the days of full integration are still many years away, the future is now, and companies
that embrace innovation today and connect first will stay ahead of the game.