VentureBeat

When I was a kid in rural Virginia, losing electricity was a yearly event around Christmas. Situated on the outskirts of a large utility’s territory, my family was among the last to have its power restored when, inevitably, a big winter storm knocked trees onto lines around the county. So for a day or two, or even a week, the daily entree was grilled cheese from the fireplace, and we all went to bed early.

Was it a serious problem? More of a minor irritation; remote farmhouses are well suited to losing power. The story is different elsewhere. Millions of dollars are lost during even brief power lapses in metropolitan areas. That’s more true every year, as more of our economic output shifts to knowledge workers who are tied to computers and, by extension, electricity.

Policymakers got an inkling of that when, five years ago this morning, a domino-effect blackout took out the power of some 50 million people in northeastern North America. Multiple culprits were responsible, but the main two were aging infrastructure — from lines and transformers to outdated computer systems — and an inability by the utilities to intelligently react to rapidly shifting conditions. Once an initial failure occurred in Ohio, the grid tried to compensate, but ended up overloading several plants. The outage lasted almost three days, causing enormous economic losses.

It’s one of the stories that a new generation of “smart grid” startups is fond of telling, along with the argument that they can prevent another massive blackout by teaching the electrical grid to cope in case of local problems like the one in Ohio.

There are several ways to approach the problem. Some companies — Silver Spring Networks, SmartSynch and Trilliant place communication devices in meters at homes and businesses, so utilities can see real-time demand and shift resources as needed. EMeter and Optimal Technologies make demand-response software for utilities. Tendril Networks and Control4 aim to give energy users power over their consumption. Several of the aforementioned, and others unnamed, handle more than one aspect of the business.

This year alone, smart grid startups have taken over $100 million in funding, and the number is still rising. But the story is a bit more complex than just sending technology to the rescue. While venture capitalists are happy to throw cash at startups, there still isn’t enough movement from utilities and government to fund updates, with many just “dipping their toes in the water,” according to Bill Vogel, Trilliant’s CEO.

That means infrastructure, in part. It’s easier to wait until things break than replace them, even if transformers, substations and other equipment are well past their expiration dates. But another aspect of the problem is a lack of will to build new generating capacity. Utilities are afraid to build new coal plants, in the face of possible carbon regulations, but not enough funding has gone into other sources — natural gas, nuclear, renewables — to make up for old coal plants going offline.

At the same time, power demand is expected to rise 29 percent by 2030, as this Associated Press article points out. The problem with the grid is that you can’t just provide enough power to handle everyday needs; excess generation capacity is needed for “surprise” moments like the one in Ohio, not to mention sources like wind power, which come and go with their source.

The AP article suggests that we’re on the road to another major blowout. That’s not at all an unlikely scenario. But in the long-term, an energy crunch could by good. Disasters drive action; following the 2003 blackout, infrastructure funding almost doubled, according to Vogel. The next time around, there may be enough of a backlash to benefit projects like rooftop solar or biomass plants, which can provide steady energy from trash streams.

In the meantime, the smart grid startups are trying to give utilities the ability to operate with less breathing room, although that may mean cutting or reducing power to low-priority customers in case of an emergency. And there are some bright-eyed visionaries like Optimal, which says its software can virtually rebuild a utility’s response abilities by relying on specialized algorithms. Its CEO, Roland Schoettle, accuses the power industry of still relying on “the old paradigm of more heavy iron”, rather than changing their operating practices.

The U.S. DOE will invest up to $50 million in nine electric grid efficiency demonstration projects over the next 5 years, an an effort to reduce peak load demand in ways that could prevent the need for more power plants.

These so-called Renewable and Distributed Systems Integration (RDSI) technologies have become a key focus for the federal and local governments, which hope to reduce peak load electricity demand by at least 15% at distribution points.

Though it may lack the pizzazz of wind or solar energy, smart grid technologies have been all the rage in investment circles, with startups like Silver Spring Networks, Ambient, eMeter and GridPoint raking in several funding rounds over the last few months. Other companies, like San Bruno, Calif., Greenbox, are taking energy efficiency online by bringing a Web 2.0 approach to home energy monitoring.

The DOE has selected projects in West Virginia, Illinois, Nevada, California and several other locations. The projects will be overseen by industry-academic partnerships. In San Diego, for example, San Diego Gas and Electric will partner with Horizon Energy Group, Advanced Control Systems, Pacific Northwest National Laboratory, the University of San Diego, Motorola and Lockheed Martin.

For its part, the Santa Monica, Calif., X Prize Foundation has announced it will invest $100 million in various clean energy projects, ranging from energy storage and biofuels to efficiency improvements in basic utilities. One grant will be specifically targeted for technologies that promote innovation in grid efficiency and the building of energy-efficient homes.

[Image credit: Argonne Lab]