The rise of smart grids

Mar 24, 2020

In 1882, the first electric grid powered up in lower Manhattan. Today, the U.S. electric grid is an engineering wonder with more than 9,200 electric generating units and 1 million megawatts of generating capacity that’s connected to more than 600,000 miles of transmission lines. Now more than 125 years later, the electric transmission infrastructure is aging and being pushed to do more than it was originally designed to do. So what’s next? The grid is being modernized to make it smarter and more resilient through the addition of cutting-edge technologies, equipment and controls that communicate and work together. What makes a smart grid is the connection of new technologies, but the infrastructure remains the same. 

The power behind smart grids

Smart grid technologies are made possible by two-way communication technologies, control systems and computer processing. Key smart grid technologies include: 

  • Advanced sensors that allow operators to assess grid stability
  • Digital meters that automatically report outages
  • Automated feeder switches that reroute power around problems 

Smart grid technology is relatively cost-efficient, lowers electricity rates, ensures better transmission of electricity and allows for rapid restoration of power. In terms of efficiency alone, smart grid technology is poised to increase the efficiency of today's system by 9% by 2030, saving more than 400 billion kilowatt-hours each year. With the global smart grid market expected to surpass US$400 billion worldwide this year, it’s clear that smart grid capabilities are here to stay, and for good reasons. Smart grids make our electric power system more resilient and better prepared to address emergencies such as severe storms, earthquakes, large solar flares and other environmental factors. What’s more, smart grid technology can play a key role in protecting the environment. According to the U.S. Department of Energy's Pacific Northwest National Laboratory, a smart electrical power grid could decrease annual electric energy use and utility sector carbon emissions at least 12% by 2030. 

Great promise, potential threats

The emerging smart grid represents an unprecedented opportunity to move the energy industry into a new era of smart energy that fosters reliability, availability and efficiency. However, at the same time, it presents new challenges, especially when it comes to cybersecurity. This is because of the increased interdependency between information technology-based electric power systems (Operational Technology) and corporate information technology, and also the potential vulnerabilities of the technology that is connected to the grid. Energy companies are transforming the way they interact with their customers while using cloud services, machine learning and big data to stay competitive in an already pressured industry. As a result, new threats arise too. The biggest one is the possibility of a cybersecurity attack affecting an entire city or country. This presents a unique opportunity for the energy sector and a new market for companies who can play key roles in protecting the electric grid infrastructure. 

As we implement the new smart energy grid components, we should also evaluate what improvements in grid infrastructure will be needed to help ensure a sustainable source of energy. According to the U.S. Energy Department, cyberthreats to the electricity system are increasing in sophistication, magnitude and frequency. While the industry is being subjected to rapidly evolving threats, deploying defense measures is coming much slower. 

Measures to take

To combat security issues, the energy industry needs to stay ahead of the technology curve. 

For starters, energy companies need to develop an understanding of technology interdependencies, including all devices that make use of the smart grid communication network and interaction with third parties and internal corporate systems. They should also ensure the hardware and software they use is from trustworthy sources and has not been tampered with or modified, which would allow unauthorized users access to the grid infrastructure. And any company that is part of an electrical grid should participate in exercises designed to improve cybersecurity preparedness and share best practices. In parallel to these security measures, companies need to explore ways to reduce cybersecurity risks among emerging technologies such as cloud computing, blockchain, machine learning and big data analytics.

A smarter future

Smart grid technology is a game changer with regard to how we receive and interact with energy. To ensure the delivery of safe, reliable and affordable energy to consumers, utilities will need to make significant investments in digital transformation projects. In this new energy paradigm, the future utility leaders will be the ones that embrace the new digital era with smart grid technologies and adapt their business model to leverage these technologies into opportunities for growth. 

As the world moves forward in the digital age, energy companies are transforming themselves and becoming technology companies focused on power delivery, but they need to understand the risks this entails. As companies continue to focus on the use of technology to improve the grid and make it smarter, the companies that successfully manage their operational and cybersecurity risks are the ones that will eventually prevail. 

RSM contributors

  • David Llorens
    David Llorens

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