President Obama announced in October that the federal government would distribute $3.4 billion in grants to modernize the electrical grid and fund the expansion of so-called smart grid projects. The money comes from the American Reinvestment and Recovery Act, previously known as the stimulus bill. The government says private industry will add $4.7 billion to the grants, bringing the total investment to $8 billion.

The funding has two major goals: to upgrade the nation's aging electrical grid to be more efficient and reliable, and to promote the development of renewable energy sources, especially wind and solar.

Grid modernization includes the installation of devices to improve electricity management and reduce the loss of electricity as it travels from the generation source to the consumer. For example, the government plans to fund the installation of 850 phasor measurement units, which are sensors that improve grid monitoring so that operators can detect and respond to minor problems before they accelerate to an outage or blackout. Other devices to be funded include more than 200,000 new transformers and nearly 700 automated substations.

Smart meters will play a major role in grid modernization, in part because utilities can provide real-time usage and pricing information to customers, who can choose to run appliances when rates are lowest. A shift in consumption patterns will reduce peak demands on energy providers, which means they don't have to build additional power plants. One billion dollars is allocated to expand deployment of smart meters at homes and businesses across the country. For instance, Florida Power & Light has received $200 million to install 2.5 million smart meters.

The government estimates that a smart grid infrastructure will reduce electricity consumption 4% over the next 20 years, producing a savings of $20.4 billion.

The government also is developing protocols and standards to promote interoperability among smart grid devices and services. That task falls to the National Institute of Standards and Technology.

NIST released a draft of its standards framework in September. It provides a high-level reference model of a smart grid, identifies existing standards that will support the development of such a grid, and calls out critical areas where new standards must be developed. Efforts covered include wide area situational awareness (monitoring the grid across large geographic areas); demand response (giving users incentives to reduce consumption during peak demand); electric storage (developing new storage capabilities); and cybersecurity (protecting grid communications systems).

The draft is available for public comment. A final version is expected by the end of this year.

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