Connecting Smart Homes and Smart Grids to Save Energy

What's held back the market? It's quite simple really. Industry lacked a killer application. If you think about why companies automate a building or factory it comes down to improving efficiency and reducing cost. Neither of these applied to the consumer mass market, since home automation solutions are typically very complex, extremely expensive and highly proprietary. For these reasons the home automation market remains relatively small, dominated by small niche players who generate most of their revenue through high-end audio and video integration.

Now there is evidence that market dynamics are starting to change. Electric utilities worldwide are struggling to keep up with peak electricity demand worldwide. Many utilities, such as those in Germany, are predicting shortages as soon as the summer of 2008. Construction of new power plants has come to a stand-still, coal is too dirty and nuclear remains unpopular among the general population. In Germany, renewable energy is playing an important role, but production is unable to keep up with demand.

Given the limited options, many electric utilities are investing in smart grids, or advanced electricity transmission and distribution networks that use two-way communications to improve the efficiency, reliability and safety of power delivery and use. A byproduct of the smart grid involves the installation of smart meters which can read electricity consumption remotely, detect outages, identify electricity theft, remotely connect and disconnect service, and deliver prepaid electricity to customers who require this service.

Smart meters give utilities immediate access to data so that they can better project demand from the grid. When electricity demand is high, typically on hot or humid days, the grid becomes strained forcing utilities to make difficult decisions, such as increasing energy production with environmentally unfriendly coal-fired plants or by reducing electricity consumption among its customers.

Most utilities are opting for the later by implementing demand response programs, which have become a key component of energy management policies, ensuring a balance between supply and demand while simultaneously reducing greenhouse gas emissions. In an electricity grid, any significant imbalance between electricity consumption and production can cause grid instability or severe voltage fluctuations and failures within the grid. Demand response involves a utility notifying its customers of a pending electricity shortfall and asking them to reduce energy use in order to place usable megawatts back on a region's energy grid. This eliminates the need to run coal-fired plants and reduces generation costs. In return, consumers are offered reduced electricity prices or other financial incentives.

Demand response programs can be automatic, with utilities having the right to reduce or turn off certain energy consuming appliances for a short amount of time at customer sites, such as air conditioners, pool pumps and hot water heaters. Signals are transmitted from the utility to the smart meter and from the smart meter to a Home Area Network (HAN).

In a U.S. Department of Energy research project performed by Pacific Northwest National Laboratory on smart grid technologies and their impact on consumers, researchers discovered that consumers were willing to adjust energy consumption based on price signals from the utility. The average consumer reduced their energy consumption, while saving up to 10 percent on their energy bills.