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The basic concept of an electrical power grid has matured from the early stand-alone distribution systems that serviced a limited geographic area to a more expansive and far-reaching regional network that incorporates multiple areas. In practice, the uninterrupted access to sources of electric power became a key ingredient of the economic development advances that were made possible during the Industrial Age.

In the distant past, all energy production occurred near the consumer of that energy — including all initial residential or business needs for electricity. Back in the early 19th century, electricity competed with other sources of energy — such as steam and gas. During that period, gas became the first popular centralized power source in the energy industry.

Modeled after the gas lighting industry, it’s reported that Thomas Edison invented the first electric utility system which was designed to supply electricity within a municipality. During the evolutionary periods that followed, electric utilities applied the economies of scale that were derived from centralized power generation and distribution.

How Electric Utilities are Getting Smarter

In the 20th century, electric utilities evolved once again — during a period of regional power company consolidation. In the 1920s, it was common for utilities to join together, thereby  establishing a broader utility grid as combined operations gained the benefits of sharing peak load coverage and back-up power sources.

That being said, much of today’s underlying electricity production and distribution outside plant is considered to be antiquated. It’s highly inefficient, and cannot reliably manage the forward-looking anticipated demand loads — without significant upgrades to essential infrastructure.

Due to climate change-related regulation and the utilities apparent need to increase operational efficiencies, there’s been an emerging requirement around the world for a complete overhaul of the electrical grid systems — in order to make it all “smarter.”  The notion of a smart grid metamorphosis will become a reality, starting with large-scale smart metering deployments, which are an example of the next phase of evolutionary progress.

Solutions for the Next-Generation Energy Network

In essence, a smart grid is a digitally enabled electrical grid that gathers, distributes, and acts on information about the behavior of all participants (suppliers and consumers) in order to improve the efficiency, importance, reliability, economics, and sustainability of electricity services.

What’s the driving force behind the move to smart grid technology? Necessity, pure and simple. Most nation’s electricity systems were built when their primary energy source was relatively inexpensive. Moreover, grid reliability was assured by having excess capacity in the system, with unidirectional electricity flow to consumers from centrally dispatched, coal-fired power plants.

New investment in the legacy systems were made to accommodate the increasing demand for electricity — not to fundamentally transform the old approach. It was the prolonged absence of innovation, along with some revolutionary “green” sustainable energy initiatives, that created the current environment for much-needed technology modernization.

Given the trend of rising energy consumption and significantly higher costs, utilities must now be able to anticipate changing patterns to manage supply and demand. They also need to explore alternate forms of energy generation — such as wind and solar power — and integrate these sources into their framework.

Finally, they must make sure that their infrastructure is reliable, resilient, and secure – to further reduce the risk of costly blackouts and dramatic power outages.

The Cisco strategy for enabling the transformation is to provide an end-to-end, secure communications fabric to help utility companies optimize power supply and demand. To effectively deliver this vision, the Cisco Smart Grid solution is built on a framework that covers the different aspects of the energy system.

Market Outlook: According to the latest market study by ABI Research, annual global spending on smart grid technologies, including smart meter implementations, as well as upgrades to transmission and distribution infrastructure, is expected to reach $65 billion by 2017.

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