The Smart Grid Transition Has No Silver Bullet

By Ben Hoster

Power grids worldwide are under pressure from a more volatile climate, growing demand for renewable energy, and rising urbanization. However, technology improvements have gradually enabled the energy industry to explore "smart grid 1.0" capabilities to meet these challenges. Additional benefits provided by novel combinations of technologies such as 5G, AI/ML, IoT, etc., have further encouraged business leaders to move towards a “smart grid 2.0” that incorporates distributed energy resources (DERs), increases reliability, and facilitates real-time communication with consumers.

Although smart grid technology deployment benefits are substantial, many risks accompany their implementation and use. As business leaders navigate towards the smart grid 2.0, they must be mindful of technology-related pitfalls, economic constraints, regulatory dynamics, and workforce realities.

Exhibit: Smart grid challenges – in numbers

As an industry that has only recently started to integrate smart technologies, utility firms must be cautious regarding technology risks. For instance, when operationalizing AI tools, businesses should not underestimate the scale of data collection required, as an inadequate data sample can lead to suboptimal or potentially biased results. The increased number of connected devices will also widen the cyberattack surface, creating new vulnerabilities for threat actors to exploit. As utilities make up part of a nation's critical infrastructure, grids are especially vulnerable to potential cybersecurity attacks. Data misuse – profit motivated or unintentional – can also negatively impact brand image and stakeholder trust. The development of additional standards will also be critical to ensuring the interoperability of the multiple generations of hardware that will ultimately co-exist across the smart grid.?

Utility providers will need to time the deployment and integration of smart technology solutions while maintaining and operating existing grid systems. Managing this transition requires navigating a labyrinth of differing federal and state regulations and incentives; utility providers must engage effectively with these regulators to maintain transition timelines and profitability. Additionally, investor appetite for grid infrastructure upgrades often depends on a range of factors such as community sentiment, shifting regulations, and industry dynamics. Defining a good business case carries a measure of uncertainty when it evaluates technologies that haven't yet been proven at scale.?

Complex governmental frameworks involving multiple institutions hinder implementation timelines and access to funding. A comprehensive review of regulatory constraints and incentives can help justify investment decisions, but care must be taken to avoid regulatory blind spots for emerging technologies. Further, smart grid projects are also often subject to land-use restrictions, environmental protections, and noise regulations. Any interruption to existing services during the transition can anger communities and run afoul of authorities.?

From a workforce perspective, the energy sector not only competes with other industries to attract scarce tech-fluent talent, but it is also characterized by an aging workforce nearing retirement. To meet evolving technical skills requirements, utility providers must compete for specialized talent or find ways to source from within.

Industry participants – utility providers, T&D operators, technology vendors – must plan and time investments, mitigate execution risks, and engage effectively with the broader energy community to efficiently transition to the smart grid 2.0. Our new report, Making the switch: Navigating the smart grid transition, provides practical guidance for overcoming these challenges as energy system players set a course to the future.??