In This Issue
Engineering, Energy, and the Future
June 1, 2003 Volume 33 Issue 2
The next industrial revolution will transform energy production and consumption

Powering the Digital Age

Sunday, June 1, 2003

Author: Kurt E. Yeager

The U.S. electricity-supply system is in urgent need of modernization.

Three years ago, the National Academy of Engineering voted "widespread networks of electrification" the number one engineering achievement of the twentieth century (NAE, 2000). A key issue today is whether these networks will be the critical infrastructure that powers the twenty-first century or will be left behind as industrial relics. The modern technological world enabled by access to electricity--from electronics and computers to information technology--is rapidly moving away from its supporting infrastructure. As a result, the U.S. electricity-supply system is in urgent need of modernization (EPRI, 1999).

The supporting electricity infrastructure must keep pace with the digital transformation of the economy. Global competition, which impacts virtually every business in the United States, is a major driver in the move to digitally controlled electricity use. It is hard to imagine a major industrial process, manufacturing facility, or commercial business in 2020 that will not use digital control and interactive links to its consumers. These links will be most effective if they are managed by an "energy web" that integrates power generation and power flow with information and communication. The energy web will become a national system in which "every node in the power network is awake, responsive, adaptive, price-smart, eco-sensitive, real-time, flexible, and interconnected with everything else" (Silberman, 2001).

We use the term "smart grid" to describe the backbone of this energy web--an intelligent, electronically controlled power system that will supercede today's electromechanically controlled system. And the sooner the better. The greatest benefit of the smart grid will be the opportunities it opens for society as a whole. A transformed electricity system would, for example, enable a substantial increase in productivity, improve energy efficiency and resource utilization, and generate substantial additional wealth to meet the growing societal and environmental needs of the twenty-first century. By 2020, a transformed electricity/information infrastructure could conceivably enable as much as $2 trillion a year in additional GDP for the U.S. economy. The aging U.S. population will be increasingly dependent on a smaller but more productive workforce, and a smart infrastructure will ensure that today's high levels of productivity can be sustained and expanded (EPRI, 1999).

Engine of Growth
The primary engine of U.S. productivity growth is the constantly shrinking digital computer, which has evolved from mainframes to PCs to microprocessors in just a few decades. The pattern of computing power has been one of distributing intelligence, first to institutions and industrial processes, then to individuals, and now to appliances, machines, and tools of all types. An estimated 15 billion microprocessors are operating in the United States today embedded in devices of all sorts--from automobiles to thermostats. A principal force for productivity enhancement in the next 20 years will be the proliferation of cheaper, more powerful microprocessors, coupled with the networking of these devices via the Internet or its successor.
Once microprocessors are connected, they can be optimized for productivity gain and, through the advantages of "networked intelligence," they can link and govern multiple processes at the same time. As networks become larger, the components--the constantly shrinking microprocessor--become smaller. Today there are tens of billions of microprocessors; tomorrow there are likely to be trillions. Simple microprocessors have become so cheap and so plentiful they are referred to in the trade as "jelly beans." They are expected to continue shrinking to the level of "dust," which will enable the distribution of sensors and intelligence in ways that are almost unimaginable today. Microprocessors and their derivative "nanoprocessors" might, for example, be used to coat the surface of a machine to create the equivalent of a nervous system fully attuned to its environment. With the digital technology "platform," in time the electricity and information networks--both running on electrons--will converge into a new "mega-infrastructure." Some say this is already happening.

Infrastructure Implications
Despite its promise, digital technology remains a "thoroughbred technology" because of its speed and fragility. Digital technology is highly sensitive to even slight disruptions in power (an outage of less than a fraction of a single cycle can cause a crash), as well as to variations in power quality caused by transients, harmonics, and voltage sags (EPRI, 2001). The demand for "digital-quality power," reliable, high-quality power to serve digital applications, now represents less than 10 percent of total electrical load in the United States. It could reach 30 percent by 2020 under business-as-usual conditions and as much as 50 percent under optimum conditions (i.e., a power system revitalized with new all-electronic switches and controls).

In contrast to the rapidly growing need for high-quality power, the electricity-supply infrastructure has actually changed very little, and the rate of investment in infrastructure upgrades is at an all-time low. Capital expenditures for electricity infrastructure were only about 12 percent of electricity revenues during the 1990s, less than one-half of historic minimum levels and below the level reached only briefly during the Depression. In short, the electricity-delivery system is not keeping up with the demands of the digital economy. The transmission and distribution systems were designed for the industrial era of the 1950s and 1960s, when mechanical switching and radial-network design were adequate. Annual investment in the transmission system alone has been cut in half since 1975. Despite increased demands on the system, plans for capital expenditures and the current lack of investment confidence and incentives suggest that underfunding will continue.

Thus the gap is widening between the economy and the critical infrastructure that supports it. Without substantial investment, the electricity-supply system will almost certainly become an increasing drag on future U.S. economic growth.

Signs of Trouble
There are already signs of trouble. Because of the obsolete mechanical control of the electricity-supply system today, it is unnecessarily vulnerable in its capacity, reliability, and security, as well as its capability to meet consumer expectations in the twenty-first century. These limitations could lead to an economic decline that cascades through the system, leading to large losses of revenue to consumers and power suppliers.

A survey of economic losses in key industries sponsored by the Electric Power Research Institute (EPRI) showed that the aggregate economic loss from power disturbances of all types represents more than 1 percent of U.S. GDP (EPRI, 2001). These costs are parasitic in nature and are largely unnoticed, but roughly $400 per person in economic loss from power disturbances is being passed along to consumers every year in the form of higher prices for goods and services. Moreover, for businesses that are highly dependent on the digital economy, power-conditioning equipment and backup power systems account for as much as 60 percent of the cost of construction of new facilities. This figure is dramatically higher than estimates of just a decade ago, and economic losses are almost certain to increase in the years ahead unless steps are taken now to improve power reliability.

The survey sampled a cross-section of 985 firms in three sectors of the economy that are particularly sensitive to power reliability: "digital economy" (e.g., data storage, financial services, online services, etc.); fabrication and essential services; and continuous-process manufacturing. These three sectors account for 40 percent of GDP. The study revealed that the greatest losses from power outages were in the continuous-process industries, which suffered the loss of raw materials, as well as down time and equipment damage. The greatest loss from problems with power quality (e.g., sags in voltage, etc.) was in the fabrication industries, often as a result of equipment damage. The total for all three sectors was more than $50 billion. If we extrapolate these losses to the full economy, a conservative estimate of total losses would be at least $120 billion per year, which means an additional cost of about 50 cents for every dollar of electricity purchased.

There are other troubling signs of problems with the current power infrastructure. Serious incidents reflecting constrained capacity, often accompanied by price spiking and questionable financial dealings, have occurred in six of the last seven years. These problems have affected the Northeast, the Midwest, and California. Most observers have concluded that these problems would have been even worse if it had not been for the economic downturn and the resulting temporary impact on electricity demand.

Development of the Twenty-First Century Power System
Advanced technology now under development, and in many cases ready for deployment, holds open the promise of fully meeting the electricity needs of a robust digital economy. In broad strokes, the envisioned system-architectural framework encompasses an integrated, self-healing, electronically controlled electricity-supply system of extreme resiliency and responsiveness that is fully capable of responding in real time to the billions of decisions made by consumers and their increasingly sophisticated microprocessor agents. In short, the potential exists to create an electricity system that is as efficient, precise, and interconnected as the billions--ultimately trillions--of microprocessors it will power.

This smart power system is conceived as an electricity/information infrastructure that will enable the next wave of technological advances in the economy to flourish. The electricity grid will be always on and "alive," interconnected, interactive, and merged with communications in a complex network of real-time information and power exchange. It will be self-healing in the sense that it will constantly monitor and correct itself to keep high-quality, reliable power flowing. The system will sense disturbances and counteract them, or instantaneously reconfigure the flow of power to cordon off damage before it can propagate. It will be able to integrate traditional central power generation seamlessly with an array of locally installed, distributed power sources (e.g., fuel cells and renewables) into a more robust regional network. This transformed power system would become a superhighway network for electronic commerce, the electrical equivalent of transforming the unpaved roads of the nineteenth century in
to the highway system of the twentieth century.

To complete the picture, new digital technology will also open the consumer gateway, which is now constrained by the meter, allowing price signals, decisions, communications, and network intelligence to flow back and forth through the two-way "energy/information portal." This will be the linchpin technology that leads to a fully functioning marketplace with consumers responding in real time (through their microprocessor agents) to price signals. This tool would enable consumers and providers to move beyond the commodity paradigm of twentieth-century electricity service, quite possibly ushering in a new array of energy/information services as diverse as today's telecommunications services.

The energy/information portal would have the following specific capabilities:

  • advanced pricing and billing processes that would support real-time pricing
  • consumer services, such as billing inquiries, service calls, outage and emergency services, power quality, and diagnostics
  • information for developing improved building and appliance standards
  • consumer-load management through sophisticated, on-site, energy-management systems
  • easy "plug-and-play" interconnection of distributed-generation sources
  • system operations, including dispatch, demand response, and loss identification
  • load forecasting
  • long-term planning
  • green-power marketing and sales
These capabilities have the potential to improve dramatically the reliability and productivity of the electricity-supply and delivery functions. In addition, they will lead to cost savings and increased productivity for end-use consumers.

Building Blocks
The basic building blocks of the power system of the future include advanced sensors, data-processing and pattern-recognition software, and solid-state power-flow controllers, such as the flexible AC transmission system (FACTS) to reduce congestion, react in real time to disturbances, and redirect the flow of power as needed. There are three primary objectives: to optimize the overall performance and robustness of the system; to react quickly to disturbances to minimize their impact; and to restore the system after a disturbance.

An array of real-time sensors will monitor the electrical characteristics of the system (e.g., voltage, current, frequency, harmonics, etc.), as well as the condition of critical components (e.g., transformers, feeders, circuit breakers, etc.). The system will constantly "fine tune" itself to achieve an optimal state, constantly monitoring itself for small problems that could lead to larger disturbances. When a potential problem is detected and identified, its severity and consequences will be assessed. Various corrective actions can then be identified, and computer simulations used to determine the effectiveness of each action. When the most effective response has been identified, a situational analysis will be presented to the operator, who can then implement the corrective action very efficiently by taking advantage of the grid's automated control features, such as dispatch control of distributed resources and parameter tuning of solid-state power-flow controllers.

When there is an unanticipated disturbance, it can be quickly detected and identified. An intelligent islanding or sectionalizing scheme, for example, can be activated instantaneously to separate the system into self-sustaining parts to maintain electricity supply for consumers according to specified priorities and to prevent blackouts from propagating.

Following system reaction to a major disturbance, steps will be taken to return the system to a stable, operating regime. To do so, the state and topology of the system must be monitored and assessed in real time so alternative corrective actions can be identified and the effectiveness of each determined by look-ahead computer simulations. The most effective actions would then be implemented automatically. Once a stable operating state has been reestablished, the system will again start to self-optimize.

Meeting these objectives will be an iterative process, with system optimization as the primary goal during normal operation. When a disturbance occurs, the operating objectives will shift from reaction to restoration, and finally, back to optimization. In this sense, the smart power-delivery system can be called self-healing.

Technology Requirements
One of the key technologies for a smart power-delivery system is a real-time, wide-area monitoring system. Elements of such a system are already in operation on both the transmission and distribution system. For example, the wide-area measurement system (WAMS), originally developed by Bonneville Power Administration, is a system based on high-speed monitoring of a set of measurement points by means of phasor measurement units, "concentration" of these measurements by means of phasor data concentrators, and generation of displays based on these measurements. WAMS provides a strong foundation on which to build a real-time, wide-area monitoring system for a self-healing grid. The system architecture will define the data, communications, and control requirements.

Substantial work has been done by EPRI and others to determine the root causes of failures in critical components, such as transformers, cables, surge arresters, and other devices, to develop monitoring and diagnostic systems for these components. The next step is to develop fault-anticipation technology that will provide early warnings and forecast failures. Work on fault anticipation for overhead distribution systems is currently under way.

Following a terrorist attack or a major disruption of the grid from natural causes, the initial reaction will focus on creating self-sufficient islands in the power grid; those islands will make the best use of the network resources still available. Adaptive islanding will require new methods of intelligent screening and pattern extraction that can rapidly identify the consequences of various island reconnections. Adaptive load forecasting will also be used to dispatch distributed resources and other resources in anticipation of section reconnection and to help stabilize the overall transmission-distribution system.

Once predictions have been made about the effectiveness of potential control actions, the identified actions must be carried out quickly and effectively, which will require automating many operations to make human intervention in both transmission and distribution systems more efficient. The challenge is to develop new equipment with the required intelligence and to develop strategies for retrofitting existing equipment.

By acting quickly enough to provide real-time control, solid-state power-flow controllers, such as FACTS and custom-power devices, can increase or decrease power flow on particular lines, thus alleviating system congestion. These controllers can also improve system reliability by counteracting transient disturbances instantaneously, which will make it possible to operate the system closer to its thermal limits. After nearly 25 years of research, FACTS and custom-power controllers based on silicon power electronics are now entering utility service. The major developmental challenge now is to reduce the cost of these systems so they can be widely used.

Electricity has had a long history of stimulating and sustaining economic growth and improving the efficiencies of all aspects of production, especially the productivity of labor and energy. The combination of a smart power-delivery system, the energy/information portal, and the use of microprocessors could enable a new wave of economic growth. At the same time, this new, integrated energy/information infrastructure will introduce greater efficiencies into the uses of energy, labor, and capital.

Improving worker productivity is particularly important as we look toward the demographic challenges of the new century. The growing social needs of an aging population will ultimately affect all countries, both in the developed and the developing worlds, and worker productivity will have to increase substantially to meet the social costs of the retired population. The technology of electricity production, delivery, and end use, combined with advances in information technology, will be critical to boosting productivity (Jorgensen et al., 2002; McGuckin and van Ark, 2001). Our estimates suggest that productivity may grow by as much as 25 percent over business as usual; this will translate into trillions of dollars of additional revenue. Infrastructure transformation will be essential to achieving society's needs and aspirations in the twenty-first century.


EPRI (Electric Power Research Institute). 1999. Electricity Technology Roadmap: 1999 Summary and Synthesis. August. Palo Alto, Calif.: EPRI.
EPRI. 2001. The Cost of Power Disturbances to Industrial and Digital Economy Companies. June. Palo Alto, Calif.: EPRI.
Jorgensen, D.W., M.S. Ho, and K.J. Stiroh. 2002. Projecting productivity growth: lessons from the U.S. growth resurgence. Economic Review Q3: 1-13.
McGuckin, R.H., and B. van Ark. 2001. Making the Most of the Information Age: Productivity and Structural Reform in the New Economy. 2001. New York: The Conference Board.
NAE (National Academy of Engineering). 2000. Greatest Engineering Achievements of the 20th Century. Available online at:
NERC (North American Electric Reliability Council). 2001. Transmission and Reliability. Presentation at NERC meeting, Princeton, New Jersey.
NERC. 2002. The Reliability of Bulk Electric Systems in North America. Princeton, N.J.: NERC.
Silberman, S. 2001. The energy web. Wired Magazine 9.07. Available online at:
About the Author:Kurt E. Yeager is president and CEO of Electric Power Research Institute.