A week after superstorm Sandy left a huge swath of the East coast without electricity, New York Gov. Andrew Cuomo unleashed a blistering critique of his state’s utilities, calling their restoration efforts inadequate and deriding the electric system as “archaic and obsolete.”

The vast and lengthy power outage isn’t the first disaster to expose weaknesses in the nation’s aging electric grid. But Sandy—and the prospect of climate change fueling more storms like her—has added a sense of urgency to fixing the power system and has drawn politicians and the public into the debate over how to do it.

“We need to seriously overhaul the energy regulatory and power distribution in this state,” Gov. Cuomo said last month as he announced an investigation into utilities’ storm preparations. “Let’s make the changes we need to make, and let’s do it while we are still in the moment.”

Cuomo’s post-Sandy wish list is sure to include transforming the state’s antiquated power network to a smart grid that’s capable of sensing, reporting and automatically adapting to problems anywhere in the electrical system. Such upgrades are a complex and costly undertaking. But the need for them—in New York and across the country—is becoming hard to ignore.

Experts say a modern grid wouldn’t have fared much better against the physically destructive powers of Sandy’s fierce winds and surging floodwaters, but a smart power system could have preserved electricity for hundreds of thousands of customers by preventing storm-induced outages from spreading to adjacent areas. In addition, a smart grid could have cut economic losses by speeding up reconnections for homes and businesses.  

There are major benefits in normal weather, too. Adding equipment to monitor grid conditions, relay the information to grid operators and automatically make adjustments could help maintain day-to-day reliability, prevent cascading blackouts, pave the way for the widespread use of rooftop solar and accommodate fleets of electric cars.

A transition to a smart grid has been under discussion among regulators and power utilities for years, but progress has been slow and spotty. The primary hurdle is the enormity of the project—and the price tag that goes with it. There are also thorny regulatory and policy complications and cybersecurity and privacy issues.

Here’s a primer on the nation’s move toward a smart grid.

Today’s Grid

The nation’s grids are a patchwork of interdependent, separately managed networks that are wasteful, overloaded and increasingly fragile. They’re heavily dependent on 40-year-old equipment that’s operating beyond life expectancy. Compared to advances in telecommunications networks, they’re only marginally more sophisticated than the grids first energized 100 years ago.

In most cases, today’s power network depends on large distant power plants to generate electricity. High-voltage transmission lines carry the power to cities, where it passes through a network of lower-voltage, neighborhood distribution lines and then into individual homes and businesses. The distribution lines, which run along local streets and are often surrounded by trees, are especially vulnerable in storm situations. A tree limb hitting a power line in the wrong place can send entire neighborhoods into darkness.

Smart Grid

A smart grid includes a mix of digital equipment, sensors, two-way data communications and software programs that are deployed in grid control centers, on the power network and in people’s homes to give utilities a real-time picture of grid conditions and an early warning of problems that can lead to blackouts.

A variety of digital smart grid sensors can constantly measure and react to heat, light, magnetism, ambient temperature, voltage, current, moisture and other physical characteristics in the network. Newly installed phasor measurement units provide readings on grid conditions 30 times per second, compared to once every few seconds on the old grid. The devices can constantly tune the grid to an optimal state, and when there’s a disturbance, automation technologies in substations and control centers react faster than a worker could.

Smart meters, meanwhile, are installed in homes, transmitting energy use data back to utilities in 15-minute intervals. Web programs let customers see how much energy their homes are gobbling and where they could use energy efficiently. About 36 million smart meters—one in every three U.S. households—have been installed, according to IEE (formerly the Institute for Electric Efficiency). The number could jump to 65 million meters by 2015.

Smart Grid and Superstorm Sandy

Utilities and smart grid experts were quick to point out that an already upgraded power network would not have prevented the massive power outage that came with Sandy and left millions of East Coast residents without electricity for weeks.

Chris Olert, a spokesman for New York’s Consolidated Edison Company, put it bluntly: “No piece of the smart grid is waterproof or storm proof … the smart grid would not have stopped 12-foot walls of water.” The utility has received nearly $200 million from the Department of Energy to implement smart grid projects, which are still being deployed. As part of a related pilot program, Con Edison has deployed 1,500 smart meters.

Even so, experts say the smart grid did help in tangible ways—though the utilities haven’t yet quantified the benefit.

“The utilities that had started down the path of grid modernization fared much better in terms of being able to avoid outages at the edges where the storm didn’t cause complete devastation but was disruptive,” said Miriam Horn, who directs the smart grid initiative at the Environmental Defense Fund.  

Pepco, which provides power to nearly 800,000 customers in Maryland and the District of Columbia, was one of the utilities that cited smart meters as a benefit in Sandy’s aftermath. More than 130,000 of Pepco’s customers lost power after the superstorm’s winds sent trees and limbs crashing on power lines. By Oct. 31, two days after the storm, the vast majority of customers had their lights back on. 

Pepco spokesman Marcus Beal said the utility had activated more than 400,000 smart meters when Sandy hit (about half of its customer base). The ones knocked off line sent the utility a last-gasp message just before they went dead. Those alerts allowed Pepco to automatically add those sites to the repair order queue.

Beal said “power-is-back” alerts allowed the utility to immediately close out 60,000 repair orders without having to verify the restoration with a call or by dispatching a crew.

Smart Grid and Renewable Energy

Most experts agree that smart grids will pave the way for more renewable power and distributed generation like small-scale rooftop solar arrays.

Unlike fossil fuel plants, which provide a steady flow of electricity to the grid, solar and wind energy systems deliver power to the grid intermittently, when the sun shines or the wind blows. The swings in power production (when a cloud temporarily shades a solar system, for example) are hard to manage on today’s grid. And without proper controls, a region with a lot of solar production can overwhelm the system on a sunny day.    

Because most of today’s power grids don’t have smart controls, regulators severely limit the amount of renewable power that can be connected to the grid. Current grids also automatically shut down renewables when the grid is under duress to protect workers from being injured by uncontrollable inflows of power. That engineering safeguard rendered thousands of solar panels useless in New Jersey—the nation’s No. 2 solar state—after Sandy ravaged the region.

Smart grid technologies, by contrast, tip off operators to any potential disturbances so they can keep the flow of electricity balanced by adjusting and rerouting power or by changing the location where power is being added to the grid.

Cost of a Smart Grid

Massoud Amin, a leading smart grid expert and an electrical and computer engineering professor at the University of Minnesota, estimates the United States will have to invest $30 billion a year for the next 20 years to get a smarter grid, according to his own calculations.

About one-quarter of those dollars would be spent just to keep the old grid from collapsing, including power line repairs, substation upgrades and regular maintenance work. The rest of the money would go to replacing clunky, decades-old analog equipment with digital sensors, devices, meters and other smart grid components.

Separate estimates by the Electric Power Research Institute put the cost of modernizing the grid between $338 billion and $476 billion over the next 20 years. The institute has said that while the bulk of those costs will be passed on to consumers, those customers could reap up to $2 trillion in benefits over the same period through greater grid reliability, energy-efficiency improvements and improved integration of renewables and plug-in electric vehicles into the grid.

Cost of Doing Nothing

The price tag of a smart grid is high, but the costs of maintaining the status quo are even higher. That’s in part because more frequent storms and an aging, overloaded and unprotected grid will cause increasingly costly outages.  

According to Amin, outages and power disruptions cost the U.S. economy between $80 billion and $188 billion a year as businesses and public transportation are forced to close down and grocery stores and other shops have their inventories melt and spoil. That doesn’t include the cost of fixing damages to the grid infrastructure.

Sandy alone may have caused $30 billion to $50 billion in economic losses along the East Coast, according to Eqecat, which tracks hurricanes and analyzes their impact.

It’s not the first time the region has suffered power outages in part because of the grid’s shortcomings. In 2003, an estimated 55 million people lost power in the Northeast and in Canada after overgrown trees brushed a high-voltage power line in Ohio, causing it to shut down. “Because there was no ability for grid operators to see what was happening, that [outage] cascaded across the United States,” said Horn of the Environmental Defense Fund.

The blackout killed 11 people and caused more than $6 billion in economic losses. If a smart grid had been in place, “you keep hundreds of millions of people, literally, on the grid who got knocked off,” Horn said.

Who Will Pay for It?

Who pays the smart grid bill remains an open question, though some spending is already underway.

The Obama administration’s 2008 economic stimulus package gave the smart grid industry its first and biggest boost with $4.5 billion in grants and incentives for projects in nearly every state.

Of that amount, $3.5 billion went to 100 smart grid projects across the country. That funding is expected to help deploy 18 million smart meters as well as other devices. The rest of the money went to help cities and utilities study the technical and economic performance of their smart grid technologies.

Private firms and investors poured $4.4 billion into those efforts during that same time, said Amin, the smart grid expert, adding that partnerships are key. “The government cannot do it alone. And industry cannot do it alone.”

One way to do that is to create a national infrastructure bank, he suggested, an idea that’s already received a lot of buzz in Washington, D.C. The bank would target smart grid initiatives—along with other energy, water and transportation projects—providing private investors with loan guarantees or cheap, long-term loans.

The Senate last year floated a bipartisan bill, called the BUILD Act, to create a general infrastructure bank. Policymakers called for an initial federal investment of $10 billion, which they said would help stimulate up to $600 million in private investments to upgrade the nation’s infrastructure systems. The effort remains stalled for now.

Other Hurdles

Beyond figuring out how to pay for the smart grid, utilities, regulators and lawmakers will also have to grapple with a host of ancillary issues ranging from new billing schemes and the cost to low-income customers. And they will have to address rising concerns about privacy violations and cyber security issues.

Some privacy advocates worry that smart meters reveal too much personal data to utility companies, and that customers would be unable to prevent the information from being shared with other companies. Others are concerned that hackers or so-called cyber-terrorists could break into utility servers and manipulate all those remotely controlled sensors, causing widespread blackouts or explosions of grid equipment in populated areas.

Such concerns are being addressed, albeit slowly and only in certain areas.

Last year, the California Public Utility Commission passed rules requiring the state’s largest utilities to regularly conduct independent security audits of their millions of wireless meters and to restrict the access of third parties to customers’ personal details.

Meanwhile, the North American Electric Reliability Council, which sets reliability standards for the Canadian and U.S. transmission  systems, requires all bulk power system owners, operators and users to follow a series of cyber security rules for monitoring, assessing and managing the nation’s critical infrastructure.

Plenty of money is expected to go into bolstering the smart grid’s defenses. Pike Research forecasts public, private and utility investments in cyber-security technologies will total nearly $14 billion by the end of 2018.

Cooperation, the Biggest Hurdle of All

The smart grid transformation needs the cooperation of state and federal agencies, policymakers and utilities—as well as the acquiescence from ratepayers—to make sound decisions about which projects should get priority and how to get them done.  

That’s not happening yet.

The lack of “coordinated decision-making is a major obstacle,” Amin said.

High-voltage transmission lines and systems, for instance, fall under federal jurisdiction, while the distribution grid and metering are regulated by individual states, often through public utility commissions. So far, there’s no concensus among state commissions about which smart projects, if any, are worth the cost. And many have balked at the price tags.

“National oversight may be needed” to get everyone on the same page, he said.

Some steps are being taken in that direction.

The National Institute of Standards and Technology, part of the U.S. Commerce Department, was charged under the 2007 Energy Independence and Security Act with developing protocols and model standards for how to implement smart grid technologies across the country. Its Smart Grid Advisory Committee, a group of utility executives and electricity experts, has met five times in the past two years to advise the institute on what should be made a priority and where deployment efforts fall short.

While those and other issues get worked out, climate scientists warn that the warming planet will force people around the world to contend with increasingly fierce severe weather.

“We are seeing more storms, and they are coming more frequently,” said Clark Gellings, a fellow at the Electric Power Research Institute. “Every time we have an outage, more people are affected.”

No matter how quickly key decisions and investments are made in the grid, a truly smart U.S. power infrastructure will take decades to build, said Stephen Connors, an electric power researcher at the MIT Energy Initiative.

“This is still very early,” he said. “The smart grid is long term, it’s not near term.”