Smart Grids and the Supreme Court
The adoption of smart technologies in cities will depend not only on innovation but on the legal framework that innovators and policy makers are bound by. On January 25, 2016, the Supreme Court reshaped that framework for the energy sector in a 6–2 decision upholding a controversial rule from the Federal Energy Regulatory Commission (FERC).
The rule concerns demand response, a practice where homes and businesses are paid to conserve energy during peak demand. In the traditional model, energy grid operators plan for a baseline level of energy demand. When demand exceeds that baseline, as it does, for example, on hot summer days when everyone runs their air conditioners at once, grid operators purchase energy from backup generators. These generators tend to pollute more, and the energy they provide is more expensive, but the model saves cities the maintenance costs of running a much larger grid during times of low demand.
Today, demand response technology is disrupting this model. Rather than purchasing extra energy during peak demand, grid operators can incentivize consumers to reduce their energy use temporarily, lowering the peak. The FERC rule in question allows homes and businesses to be paid for this strategic conservation. By upholding the rule, the Supreme Court has opened the door for a leaner, more innovative energy supply model — and the new technology that enables it.
A smart grid focused on demand response will need to provide real-time information to consumers about their energy use and the overall demand in their service area. Smart appliances can bypass this step by powering down automatically during peak demand. Demand response may also encourage alternative energy production, as homes and businesses can rely on on-site solar or wind power during these peak periods and even sell their extra power back to the grid. The Supreme Court decision has removed a major obstacle to these innovative approaches to energy management.
