What is a Smart Meter?

What is a smart meter and why should you care? Think about it this way: our lives are packed with smart phones, portable computers and other energy-sucking gear, robotic devices are being recruited for next-generation manufacturing, health care and household chores, and our buildings are well on their way to becoming interactive energy hubs that not only use energy but harvest and exchange it, too.

This energy-enriched environment means that it is becoming more important for utility customers to get the information they need to manage their energy use, and to make informed decisions about investing in conservation upgrades. In other words, the good old-fashioned spinning dial just won't cut it any more.

So, what is a smart meter?

Going by the definition of a "smart meter" used by the U.S. Energy Information Agency (EIA), a smart meter generally refers to a meter that updates energy consumption at least once an hour, and provides that information to both the consumer and the utility at least once a day.

The technology is fairly new but smart meters are by no means unusual. As of last year, EIA counted 37,290,374 smart meter installations in the U.S, about 90 percent of which were for residential customers. A fair number of these, 5 million to be exact, were installed with federal Recovery Act funding to help modernize the national grid.

By enabling utility customers to estimate their annual bill and compare their energy consumption with other households in their area, smart meters can help consumers assess their energy habits, set goals for conservation and monitor their progress.

The key advantage of the hourly breakdown is to enable utilities to fine-tune their peak rate charges, and to enable consumers to take more advantage of lower off-peak rates by shifting their energy consumption to off-peak hours as much as possible.

Ideally, by interacting in this way, utility customers and utilities will both be focused on a common bottom-line goal, which is to avoid brownouts and blackouts, and forestall the need to build expensive new power plants.

Smoothing out the demand bumps

For many residential customers, peak demand charges can be eased without having to make any upfront investments in energy efficiency. One obvious example is to run non-essential appliances like dishwashers and laundry machines during off-peak hours.

Many appliances can be programmed to work around peak hours, but that's just the beginning. The potential for wireless communication between smart meters, appliances and consumers enables the property owner (or tenant) to take advantage of mobile energy management apps to make additional adjustments while they're away from home.

Depending on the potential for mobile interaction, smart meters could also enable customers to help forestall brownouts more effectively by turning appliances down or off even when they are not at home. That's on top of taking common-sense energy conservation steps like turning off lights when not in use, replacing older light bulbs with energy-saving compact fluorescent bulbs or LEDs, and replacing broken or worn-out appliances with more efficient models.

A bump in the road for commercial customers

For some businesses, the need for lighting, equipment and customer comfort are all considerations that can weigh heavily against basic conservation strategies during peak hours.

This is where things start to get really interesting. To get to the next level, businesses have to start thinking about investing in energy conservation. That means new equipment as well as building improvements such as weatherization, water conserving fixtures and more efficient HVAC systems.

In the past, businesses could calculate the return on their investment simply by projecting utility rates into the future. That can provide a sufficient incentive for upgrades in some cases, but not necessarily in others. The emergence of alternative energy and electric vehicles has provided businesses with a much stronger bottom-line incentive, and that's where the interplay between smart meters and a smart national grid comes in.

Smart meters and the smart grid

The national grid is rapidly transitioning from a reliance on massive, centralized power plants to a distributed model in which small, medium and large renewable energy resources play an increasingly dominant role. Given that much of the renewable input is currently from intermittent sources, namely wind and solar power, energy storage is also a critical element.

The end result is that utility companies must be much more nimble, flexible and precise in matching supply to demand, with the added complication that many of the utility's customers are now, or have the potential to be, its energy suppliers and its storage reservoirs, too. Managing such a system through conventional meters, with their lack of interactivity and monthly readings, would be all but impossible.

In terms of the utility customer as an energy supplier, that trend is already firmly established by the rapidly growing number of grid-connected solar installations on rooftops and other relatively small sites.

The latest twist is the use of electric vehicles (EVs) as mini-distributed energy storage facilities. The basic idea is that utility customers can charge up their EVs during off-peak hours, and then use the stored energy in the EV battery to power their homes or businesses during peak hours. That relieves pressure on the central grid while enabling EV owners to cut peak hour rates for their household systems and appliances.

It's worth noting that EV manufacturers are aggressively pushing this trend by packaging an EV purchase with a free or discounted EV charging station. Some packages also include rooftop solar panels, which enables the owner to offset their EV energy consumption with renewable energy.

Above and beyond the smart meter

That brings us right around to the secondary benefits of the smart meter/smart grid for businesses. The cost of energy has always been an important bottom line factor, but in recent years two overlapping trends have come together to make energy use a front-and-center concern.

One is the urgency of addressing climate change, which depends on using energy more efficiently while transitioning to more sustainable resources. The other is that consumers are becoming more aware of the public health benefits of conservation and clean energy, and they are increasingly attracted to businesses that share their concerns.

That gives an edge to businesses that install solar panels and other forms of renewable energy on site. In addition to profiting from the sale of excess energy to the local utility, businesses stand to benefit from the potential to attract new customers.

[Image: Digital display by subcircle]

Follow me on Google+ and Twitter.