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How smart can the grid get?

Charlie Riedel / AP file
Click for video: Smarter grids can save money and the environment. Click on the image above to watch a video from NBC's TODAY show.

Utilities and energy companies are flocking to roll out pilot projects for a smarter electric grid, taking advantage of billions of dollars in federal stimulus money. The idea is to deliver energy more efficiently and cut back on fossil-fuel use.

Great idea ... but just how smart should a power grid get? That's a question raised when you pair the reports about potential electric-grid investments with reports about potential electric-grid intrusions.

"You hear some people say, 'At last I can have a programmable thermostat,'" said Stewart Baker, a former assistant secretary for the Department of Homeland Security. "I almost expect them to add, '... and someone from Nigeria can program it for me.'"

Baker, who now specializes in technology and security issues at the law firm Steptoe & Johnson in Washington, isn't opposed to smart-grid technology per se. "We have only begun to see the most obvious ways in which a smarter grid would help us," he said. He's just worried that security concerns might get brushed aside in the rush to computerize the country's antiquated electric distribution systems.

The discussions over the electric grid's future touch on a tangle of top issues - not just national security, but energy, economics, the environment and engineering as well.

The payoff from a smarter grid

Experts say there's a crying need for grid modernization. More efficient transmission and use of electricity is good for the environment: Smoothing out the peaks and valleys of power consumption could reduce the need for more power facilities, many of which are fueled by non-renewable, carbon-emitting sources such as coal, oil and natural gas.

In addition to the environmental factors, there are economic factors to consider: Some experts claim that grid glitches cost the American economy more than $100 billion a year. At the same time, upgrading the grid doesn't come cheap: The total price tag, spread out over years or even decades, has been set at figures ranging from $200 billion to more than $800 billion.

In light of those numbers, the nearly $4 billion in stimulus money offered last week by the Energy Department for smart-grid projects might look like a pittance. But it's enough to get the attention of power-industry heavyweights.

Among the companies announcing projects in the wake of last week's announcement are National Grid, which is planning a $240 million smart-grid upgrade in upstate New York; a Northwest utility consortium led by the Bonneville Power Administration that's reportedly seeking around $200 million; and another consortium led by Florida Power & Light that is planning a $200 million initiative in Miami-Dade County. (One of FPL's partners is GE, which owns NBC Universal, which in turn is a partner in the joint venture.)

The Miami project would involve installing high-tech control systems at power stations, as well as encouraging the use of energy-smart appliances, thermostats and electric meters in homes and businesses. For example, smart washers and dryers can be programmed to do their business during off-peak hours, leveling the load on the local grid. Smart thermostats can automatically adjust themselves to your daily routine. Smart meters can show you how to trim back on power consumption (and your power bill).

The cost savings can range from less than 5 percent to more than 25 percent, depending on whether you're a lackadaisical power user or the home-electricity equivalent of a hypermiler. Kevin and Jodi Linn, a Miami couple profiled on NBC's TODAY show as early adopters of smart-grid technology, say they're saving $100 a month by keeping a close watch on their in-home energy display.

"You can see the fruits of your labor - you really can. You can see it on a graph, and eventually you'll see it in your bill," Kevin Linn said.

"He doesn't compare his bill with his neighbors," Jodi Linn added. "He shows off his bill to his neighbors."

Working out the financial angle

The Miami project will start out with infrastructure upgrades that will benefit about 1 million customers over the next two years. About 1,000 homes will be enrolled in a trial of advanced technology like the Linns' "eco-panel" energy display. If the $200 million project goes well, Florida Power & Light would move forward with a $500 million second phase, extending the program to all of its 4.5 million Florida customers.

One little snag is that the Energy Department's draft guidelines would limit its matching grants for smart-grid upgrades to a range of $100,000 to $20 million. But the companies behind most of these projects want the federal government to cover half the cost, which means they're hoping for grants on the order of $100 million per project.

It looks as if something's got to give: The grant limit will have to be raised, or larger projects will have to be broken up into smaller pieces, or companies will have to pick up more of the bill for grid upgrades. All this could be sorted out next month when federal officials are due to meet with energy-industry executives.

Working out the security angle

And then there are the computer security concerns: Some security experts say the increased level of computer networking that comes along with smart-grid technology could leave utilities more vulnerable to cyberattacks. That's not a happy thought, particularly in light of reports that foreign governments have been mapping out network vulnerabilities at U.S. utilities.'s Red Tape chronicler, Bob Sullivan, reported that the issue generated a lot of buzz at a recent conference. He quoted Alan Paller of the security firm SANS as saying, "There was real anger by the security guys, saying these people are out selling new meters that can be taken over by a computer worm."

Baker shares that concern. "It is all too easy to imagine that people would sabotage the system," he told me this week.

He said he had "no doubt that people are trying to improve the security of this system and trying to build it in from the start," but he worried that the job required the kind of spy-vs.-spy mind-set that companies aren't accustomed to using.

"You can't expect companies to fully protect themselves from threats that might include nation-state attacks," Baker said.

Some security experts worry that smart-grid networks tend to rely on Internet Protocol, or IP, the same open standard that's used on the Internet. But Mark Bubriski, a spokesman for Florida Power & Light, told me that next-generation power management systems will take advantage of all the security measures that have been developed since the Internet was born.

He noted that FPL's partners included a couple of the biggest names in networking. "Over the past 20 years, we have witnessed the transition of key infrastructure to IP, and Cisco Systems has actually helped lead this transition," Bubriski said. "GE has been a global leader in providing grid automation and protection for more than 25 years."

He voiced confidence that the "most extensive and holistic smart-grid implementation in the country" would be secure from cyberattackers as well.

Baker said the utilities and their network-savvy partners might have to walk a fine line in order to make their smart-grid systems easy for consumers to use and hard for hackers to ruin. "When you're done, some of the advantages that you want to have start to diminish," he said. "It's a lot less attractive if what you have to do is remember a 15-character password that changes every three months."

It just goes to show that whenever you're talking about vital infrastructure, saving money and saving the environment aren't the only factors you have to consider.

"We should not say, 'Oh, gosh, that sounds great! I want to have a system for the grid that's just like the system we have on the Internet!'" Baker said. "We ought to be a little conservative, and we ought to build in safeguards."