Success in developing a smart grid is important for reasons central to our well-being: the aging electrical grid poses increasing reliability risks, energy demand continues to rise, and the push to integrate renewable power sources is intensifying. But the smart grid is not going to fulfill its promise as thoroughly and rapidly as we need it to if industrial users don’t see the benefits.

The industrial sector accounts for the largest single slice of potential energy savings through end-user efficiency: 40 percent, according to a 2009 McKinsey & Company report. (The residential sector accounts for 35 percent and the commercial sector 25 percent.) The industrial sector will consume 51 percent of baseline end-use energy in the United States in 2020, according to the American Council for an Energy-Efficient Economy, which estimates that capturing the sector’s energy efficiency potential would save $47 billion per year in energy costs.

Yet barriers to smart grid advancement are seen mostly as issues of residential consumer acceptance and that is where the smart grid spin machine is focused. That’s unfortunate because industrial businesses -- particularly at the operational level where energy decisions are made -- are at least as skeptical about the benefits of the smart grid as consumers. Many see the smart grid as designed mainly to benefit utilities (probably at their business’ expense). The consensus at a recent controls experts meeting at Lawrence Berkeley National Laboratory was that only a tiny fraction of eligible businesses are participating in demand response programs, for example.

To capture the hearts and minds of the industrial sector -- and the massive energy savings it could produce -- smart grid proponents need to show these businesses how they will benefit. There is a strong case to be made.

Smart grid as innovation driver

The smart grid is driving technological innovation -- and that innovation can play a significant role in improving industrial facilities’ operational performance.

In the cleantech world, demand response may be the “killer app,” but for industrial businesses the biggest benefits come from employing a full suite of energy management strategies, many of them enabled or enhanced by the smart grid: dynamic pricing optimization, energy efficiency, demand control, and demand response.

Realizing these benefits typically requires an investment in advanced energy management technology. For example, before industrial businesses can implement substantial changes in energy use, they may need to install or improve monitoring systems that collect and compare information on energy consumption, equipment run status, operating hours, operating levels, temperature, humidity, occupancy, and other factors. Using this data to drive sizeable energy savings may in turn require a deeper and more effective level of automated load control than most industrial businesses have.

The return on smart grid technology investments

So why should industrial businesses invest in advanced energy management? For two reasons:

First, because it enables them to meaningfully reduce energy costs and carbon emissions without reducing production capacity.

Second, an advanced energy management system produces benefits on multiple operational levels.

·         Increased visibility into operations via improved monitoring can serve as an early warning system. For example, an increase in energy use is often a precursor to equipment failure. 

·         To maximize savings, an energy management system necessarily monitors the entire facility and controls not only core production equipment (which is probably already automated) but also many ancillary or support loads that were not previously automated, such as waste handling, by-product processing, and cleaning. These loads can hamper production if they fail or operate improperly; automated control and monitoring can lower that risk.

·         Many plants have automated systems with varying levels of age and capability. This can create islands of automation where processes happen in isolation, with little interaction between neighboring or related equipment. An energy management system unites these islands to leverage coincidental operation and minimize energy use. 

·         Implementing an advanced energy management system helps industrial businesses meet customer demands for and corporate commitment to sustainability measures.

It’s important to note that this investment need not be costly. For some businesses -- particularly in regions where utilities and government programs offer incentive payments for advanced energy management systems -- complete project ROI can occur within a few months.   

A smarter grid must be a more secure grid

One note of caution: as smart grid opportunities increase, particularly with the next generation of demand response programs, so will IT security concerns. These concerns will have to be addressed, and that’s a good thing for industrial plant operators.

With automated demand response (Auto-DR), for example, the power system operator or utility may need to connect to key equipment or processes in a customer’s facility. That makes businesses nervous. As a result, smart grid technology providers are making major investments in developing and applying reliable and secure connections to industrial sites and systems, as well as to energy generation and distribution assets -- where security concerns take on a whole new level.

If these investments pan out as expected, advances in remote connection security driven by smart grid implementation could benefit industrial businesses broadly in the same way energy management systems do. Increased IT security protects a site from many kinds of unwanted access, and it could make feasible remote operator access to plant systems, which is typically not allowed because of security concerns. That would enable industrial plant operators to respond more rapidly to alarms and to take control actions from remote locations. 

Hitting the sweet spot

It’s not enough to tell industrial businesses that the smart grid makes for a better, greener, and more advanced power delivery system. It will be key for all stakeholders, from power producers to power consumers, from factories to shopping malls, to focus on those sweet spots where smart grid innovation and operational value meet.


Bob Zak is general manager and president of Powerit Solutions North America, a Seattle-based international cleantech company whose Spara energy management system allows energy-intensive businesses to take full advantage of the smart grid. He is a member of the controls experts group working with Lawrence Berkeley National Laboratory to advance Auto-DR and other smart grid initiatives. Early in the development of OpenADR, Powerit worked closely with the Laboratory to put the new standard into practical use at commercial and industrial sites.