With the development of the smart grid, we can expect many new developments in the electricity market. The smart grid will allow unprecedented levels of communication between electricity suppliers and consumers, as well as giving utilities much greater real-time information about the state of their transmission and distribution systems. We will briefly examine a few implications of the coming of the smart grid.

One important development will be real-time pricing of electricity. Until now, electricity rates have typically been fixed, where an electricity meter simply counts the amount of electricity used over a month, and the consumer is charged a constant rate multiplied by the amount of electricity used. However, with smart meters able to communicate real-time electricity prices and record real-time electricity use, utilities will be able to charge their customers prices that vary by time of day and season, and perhaps even adjust their prices to take into account real-time fluctuations in the wholesale electricity market. Consumers will be able to respond to these changes in price, programming their appliances to turn on when cheap electricity is available, and to wait when electricity is expensive. With this additional flow of information, electricity markets will become more efficient, and allow electricity suppliers to meet demand with less need for additional generation capacity.

Behind the scenes, the smart grid will also allow utilities to be more proactive in maintaining their transmission and distribution systems. Today, most utilities only find out about problems with their systems when customers call in with complaints. As the smart grid rolls out, utilities will be able to monitor the health of the grid in real time, with communications coming in from various components of the grid. With this information, they will be able to send crews out to take care of problems before any customers lose power, and they will be able to send them to the actual source of the problem, rather than having to drive around looking for it. The end result for consumers is that they are likely to see the reliability of their electricity service increase, with fewer outages and electricity quality problems.

The smart grid represents a needed upgrade to our aging electricity infrastructure. It will take time for devices to be developed that will allow consumers and their appliances to fully interact with the smart grid, but, even before that occurs, the smart grid is likely to benefit both electricity suppliers and consumers by improving the reliability of the electrical grid. The smart grid may require a large investment now, but it will surely pay off over the long run in smoother grid operation and more efficient use of electricity generation, transmission, and distribution resources.