The smart grid is a hot topic these days. President Obama touted the smart grid during his campaign  and continues to be a booster . The 2009 stimulus bill (the American Recovery and Reinvestment Act , ARRA) provided nearly $4.5 billion  to the Department of Energy (DOE) for smart grid investments. In October, DOE made  $3.4 billion in awards under the Smart Grid Investment Grant Program, and, in November, DOE announced  awards totaling $620 million as part of the Smart Grid Regional and Energy Storage Demonstration Project.
Last month, we added a smart grid factsheet  to its Climate Techbook . While it’s not easy to give a short definition of the smart grid, one can think of it as the application of digital technology to the electric power sector to improve reliability, reduce cost, and increase efficiency. Smart grid technologies—including communication networks, advanced sensors, and monitoring devices—provide new ways for utilities to generate and deliver power and for consumers to understand and control their electricity consumption.
The smart grid has several anticipated benefits unrelated to climate change, such as improving electricity reliability (e.g., fewer power outages) and reducing utilities’ operating costs (e.g., by eliminating meter reading). Much of the buzz around the smart grid, however, has to do with the ways that smart grid technology can facilitate greenhouse gas emission reductions.
Efficiency, renewables, and plug-in hybrid electric vehicles (PHEV) are three of the primary climate solutions the smart grid can enable. Initial evidence  suggests that giving consumers direct feedback on their electricity use via smart meters and associated display devices can by itself lead to energy savings of 5-15 percent. One of the challenges that will become increasingly important as the United States relies more on renewable electricity from wind and solar power is that these resources are variable (i.e., they only generate electricity when the wind blows or the sun shines) rather than schedulable like traditional fossil fuel power plants. Smart grid technology makes it easier to add energy storage  to the grid and to exploit demand response (e.g., cycling air conditioners on and off) to more easily balance electricity supply and demand as output from variable renewables fluctuates. Finally, smart grid technology would facilitate charging PHEVs during periods of low electricity demand (when generating costs are lowest and existing capacity is underutilized) so that PHEV charging can be done most cost-effectively.
Achieving greenhouse gas emission reductions at the lowest cost will require deploying a portfolio  of energy efficiency measures and low-carbon energy technologies, several of which can build upon smart grid technology.
Steve Caldwell is a Technology and Policy Fellow