The Smart Grid Is Getting an F

First-quarter grades are in, and the "smart" grid has some ground to make up before getting a passing grade. The initial waves of smart meters were supposed to encourage us to not only be more efficient but also use energy when it is least expensive. Unfortunately, it looks like new "smart" meters are causing confusion combined with higher energy bills.

It's a great idea on the surface. Utilities like Southern California Edison, a subsidiary of Edison International (NYSE: EIX  ) , can charge rates based on demand, while consumers can see how their energy is being used and adjust accordingly. It's such a good idea it is being rolled out quickly throughout the country. Southern California Edison has already installed 1.5 million smart meters and is adding 5 million more smart meters in the next three years.

But the rosy picture of the future has turned into a nightmare in the short term. Many consumers are being charged more than they were under the old system even though their consumption has gone down. This has led to complaints, class action lawsuits, and now regulators slowing the smart meter rollout before issues get out of hand.

As of now it doesn't appear that it's the fault of Landis+Gyr, General Electric (NYSE: GE  ) or Siemens (NYSE: SI  ) whose meters are being installed around the country. It appears to be a lack of planning, communication and faulty "dumb" meters that were giving out free energy. So more planning will have to go into the residential rollout while commercial customers appear to be on a better track.

In large offices and manufacturing facilities, customers can work directly with utilities or intermediaries like Comverge (Nasdaq: COMV  ) and EnerNOC (Nasdaq: ENOC  ) who are demand response providers. There, not only are the meters getting smarter, but so are users who adjust lighting and air conditioning to save energy.

The smart grid certainly isn't getting a passing grade right now, and investors have to be smarter than the current grid when making investments. GE and Siemens will continue supplying meters and related infrastructure upgrades, while new technology like grid storage opens up more possibilities. A123 Systems (Nasdaq: AONE  ) and Ener1 (Nasdaq: HEV  ) are both putting resources behind unlocking grid storage and see it as a significant driver for growth in coming years.

These wrinkles will get ironed out eventually and the grid will get smarter. The only question is how long will it take?

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (3) | Recommend This Article (5)

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  • Report this Comment On November 15, 2010, at 3:57 PM, tsvieps wrote:

    My new smart meter in Portland OR is not so smart. It only by-passes the need for a meter reader to walk the neighborhood. PGE here is not offering time of day metering...at least not yet. No capability for the utility to communicate with appliances to selectively turn some off to adjust their load...for example a future EV battery charger (Portland is one of the roll out cities for the Nissan Leaf). Why go to the expense of installing new meters that are not up to future needs? Maybe because the decisions makers are spending someone else's money...namely their customers? They run a cost-plus business that insulates them from poor capital expenditures. Or maybe the payback from labor savings is good enough and really smart meters are still too costly.

  • Report this Comment On November 15, 2010, at 7:13 PM, TMFFlushDraw wrote:

    You're right and that's why I think regulators are finally wising up. The lawsuits around the country are starting to get some real press and decision makers are feeling the heat.

    The impression I get is that stimulus dollars were available so utilities got as much as they could but weren't really prepared for the rollout.

    Travis Hoium (TMFFlushDraw)

  • Report this Comment On November 16, 2010, at 12:00 PM, pedorrero wrote:

    I tried to get "time of use" billing here in FL. In an all electric home, I could have saved about 25% or around $400/year ... however, Progress Energy had discontinued this option for residential users. In addition to the reasons given in the article, apparently there is very little consumer demand for the option.

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