Only one thing is worse than the lights not coming on when the switch is flicked—and that's the lights going out right afterward. The fact that the problem is most often a burned-out lightbulb is testimony to the reliability of what's sometimes called the world's largest machine—the U.S. transmission and distribution grid for electricity.

But that reliability is tenuous at best and perhaps temporary: the machine needs an update to meet increasing demands for more electricity and to deliver it reliably and safely, according to the Obama administration and others. "If Alexander Graham Bell returned to Earth today, the progress in telecommunications over the last 125 years would be mystifying," said Robert Catell, chairman of the New York State Smart Grid Consortium, at a smart grid event in New York City at New York University (NYU) in February. "If Thomas Edison came back today, not only would he recognize our electricity system, he could probably fix it" when problems arise.

That's no surprise: Today's grid was largely finished by the 1970s and contains mostly the same system of devices in use since the 1920s. And, after the wholesale power market was deregulated in 1992, many utility companies stopped investing in the grid—leaving it in a perilous state of disrepair today. An update could cost, according to some estimates, as much as $1 trillion over the next several decades—the stimulus plan alone provided $11 billion for a smart grid, including 32 demonstration projects in 21 states administered by the U.S. Department of Energy.

What exactly a smart grid is depends on who you ask. "What really makes a grid smart?" asked electrical engineer Farshad Khorrami of Polytechnic Institute of New York University at the February event. His answer: "the control system in that grid." In essence, it's the telecommunications and information technology industries applying their innovations to the infrastructure that made computers possible, in large part, or overlaying the utility infrastructure with communications and control systems that will allow energy technology to be more productive.

Grid full of detectors
According to Khorrami, that means a wide array of new two-way sensors throughout all parts of the grid, detecting voltage, current, power, temperature, pressure, wind, sunlight, anomalies, stress, failures, hacking and more. "We want to be as comfortable with the grid running itself as we are with pilots walking out of the cabin and knowing the plane is flying itself," Khorrami said. The smart grid also needs to be "like the Internet in that adding another computer doesn't stress the rest of the system, for when people add a new generator," such as solar panels on their roof, he noted.

In fact, the most important part of the smart grid will likely be in the home. "The electric meter hasn't changed a lot since it was invented," said Thomas Kuhn, president of industry group Edison Electric Institute (EEI), based in Washington, D.C., at an EEI event last October. In fact, the 130 million or so electromechanical meters in homes, businesses and industries across the country "are born obsolete," says electrical engineer Reza Ghafurian, a technical leader at the utility company Consolidated Edison in New York City. That's because they are largely the same technology that Elihu Thomson invented in 1888, and they passively record the electricity used by a given household in kilowatt-hours.

Of course, customers aren't buying kilowatt-hours or even electricity per se. Rather, "it's the comforts they're buying," Kuhn said. "The residential consumer is really only interested in making sure the lights are on, the TV's working and the beer is cold," Catell noted. "An educated and informed consumer is the best weapon in the war against energy demand, and the smart grid is the best way to educate the consumer."

Better displays, smarter consumers
More specifically, the best teachers are smart meters and energy-use displays that reveal everything from how your electricity consumption compares with your neighbors' to the best time of day to run your dishwasher on cheap electricity. The initial prognosis from smart grid pilots, such as the Olympic Peninsula Project led by the Pacific Northwest National Laboratory, based in Richland, Wash., is that such information can save consumers 10 percent on electricity bills on average; that program is now being expanded from 112 homes to 60,000 throughout the northwestern U.S. over the next five years. "The technology is here to do this today," said IBM's Jane Snowdon, senior manager for smarter building research, who participated in the pilot program.

The smart grid is particularly good for utilities: the Olympic Peninsula Project dropped the peak power usage by 15 percent, and a similar project from Constellation Energy in Baltimore, Md., cut peak power demand by at least 22 percent—and as much as 37 percent—just by alerting customers to the price of power (and hence demand for it) through an orb that changes color, according to Constellation CEO Mayo Shattuck. Hence, it can eliminate the need for some of the redundancy in the system, such as extra distribution cables or substations, which are built-in to deal with a peak in electricity demand that lasts for two to four hours once a year—a major expense for utility companies. "It helps you not to have to build back-up infrastructure," says Con Ed's Ghafurian.

The smart grid may also forestall some of the growth in electricity consumption—forecast to rise by at least 1 percent per year between now and 2035, according to the U.S. Department of Energy: usage will jump from 3,873 billion kilowatt-hours in 2008 to 5,021 billion kilowatt-hours in 2035. Globally, electricity growth will nearly double from 17.3 trillion kilowatt-hours to more than 33 trillion kilowatt-hours. That demand may jump even faster if electric cars begin charging from the grid in the near future. "They're coming," said Andrew Tang, senior director for the smart grid at Pacific Gas & Electric, a utility in northern California, at the October EEI event, noting that car companies have unveiled at least 35 models of plug-in hybrid or electric vehicles.

Bumps in the grid
But the smart grid has already run into resistance. Class-action lawsuits have been filed in California, alleging inaccuracy in the 5.5 million smart meters installed by PG&E, resulting in electricity bills as much as 300 percent higher. The company contends that such increases are a result of already approved rate hikes as well as a hotter than average summer in 2008—but also admits that thousands of meters were improperly installed and have manifested various problems, including communication malfunctions. Such growing pains can literally turn off customers: a smart homes pilot program in Westchester County, N.Y., lowered bills for almost all participants, but still 30 percent quit the program entirely.

Ultimately, the customer pays for all the fixes through rate increases. Whether a consumer with the smart grid saves money or, at least, breaks even "remains to be proven," admitted Aubrey Braz, Con Ed's corporate vice president in charge of smart grid technology.

Balance of power
Another key challenge for a smart grid is the fact that electricity is an instantaneous commodity—it is consumed at the exact same moment that it is produced. Running an electric grid is "harder than rocket science," says Stephen Wright, president of the Bonneville Power Authority based in Portland, Ore., simply because supply and demand must be so closely matched and both vary throughout the day.

Utility companies generally cope by keeping some electricity generation in standby mode—so-called spinning reserve—to meet spikes in demand. By more closely monitoring changes in supply, demand or both, a smart grid could help reduce the burning of fossil fuels, for example, for nothing. "We run about 16 percent spinning reserve. I can't use it, I can't store it, it's just there as a safety net," says Mike Carlson, former chief information officer at Xcel Energy in Minneapolis, Minn., which is running a smart grid city in Boulder, Colo. The smart grid "can take half of those out" by matching "supply and demand instead of being always on."

Installing sensors, smart meters and other smart devices throughout the hundreds of thousands of miles that constitute the nation's electric grid will be the work of decades. "If you do all the smart grid, what is the efficiency improvement we'll gain?" asked Stephen Hammer, executive director of the energy smart cities initiative at the Joint U.S.-China Collaboration on Clean Energy at the NYU event. "How much will it cost, and is that the best way to spend our money rather than building or vehicle efficiency?"

For example, the smart grid city initiative in Boulder alone has cost Xcel and its partners $100 million, or $2,000 per customer. "It's unsustainable and nondeployable at that cost," says Carlson, noting that cost would have to drop to $500 per customer to be viable. "We know these things will be effective in delivering something. The question is: will they justify their cost?"

And, ultimately, it comes down to this equation: one watt of light generally requires burning 400 watts' worth of coal, according to mechanical engineer Saul Griffith of Other Lab in San Francisco, Calif. That equation will need to get smarter, whether it be through the smart grid enabling cleaner, more variable resources like wind generation to be more widely deployed or the smart grid reducing the amount of that essential inefficiency that must be tolerated.