What the Climate Bill will mean for the Smart Grid

This post is sponsored by IBM’s A Smarter Planet blog.

Referred to by many simply as the “Climate Bill,” the American Clean Energy and Security Act of 2009, sponsored by Edward Markey (D-Mass.) and Henry Waxman (D-Calif.), has sparked such controversy in Congress, you’d almost believe the fate of the planet hangs in the balance.

In particular, its potential to establish a cap and trade system for carbon emissions has senators on both sides of the aisle up in arms. Republicans are squarely opposed, and Democrats from industrial states are defecting across party lines, arguing that both emissions trading and renewable energy mandates will place financial burdens on constituencies already battered by the recession. But the national dialogue on the bill has largely neglected its other provisions, including those for the Smart Grid — a top priority for government and utility companies across the country.

The Smart Grid refers to the leaner, more efficient electrical grid taking shape right now. It includes smart meters that can beam consumption data between consumers and their utilities; energy management devices showing homeowners how much energy they are using, which appliances use the most, and what it’s costing them; and new technology that can balance electrical loads based on shifts in supply in demand, promoting grid health and reducing maintenance costs.

Upon closer inspection, the Waxman-Markey legislation represents a double-edged sword for the Smart Grid. On one hand, it earmarks resources for:

  • Advanced energy research
  • Integration of alternative energy sources into electrical grids
  • Updates to transmission systems
  • Electric transportation infrastructure and appliance efficiency certifications

All of these programs, in addition to a new requirement for state governments to systematically report and reduce peak energy demand, would accelerate Smart Grid development. Alternatively, the proposed cap-and-trade (if it were to pass in it’s current form, which is unlikely), would hike costs for utilities and reduce overall consumption, undercutting immediate need for the Smart Grid.

If cap and trade becomes a reality, utilities could become less bullish on innovation. They’ll have new fiscal and political challenges to contend with, and it wouldn’t be surprising if some of their Smart Grid initiatives stalled. That said, emissions trading is the least popular part of the bill, and will probably be diluted even more before it comes to a vote in the Senate. In any case, it’s unlikely that the final version will reduce the amount of power used in the U.S. enough to render Smart Grid unnecessary. The efficiency and conservation behavior spurred by Smart Grid may even help utilities and power plants stay under emissions quotas.

Assuming the bill does pass with lighter emissions restrictions, the Smart Grid ecosystem — encompassing advanced meter makers, utilities, and startups creating programmable appliances and thermostats — stands to benefit in a big way. New research programs and efficiency requirements could give it the boost it needs for rapid adoption. Of course, with so many politicians and industry and utility lobbyists angling for the Climate Bill’s failure, Smart Grid may have to stay the course of government stimulus support and gradual, piecemeal rollouts.