The US Department of Energy has announced a projected investment of €2.7billion ($3.8billion USD) in a national smart grid to more efficiently create and distribute electrical power. Existing electrical power grids are aging and inefficient compared to current technology.

The existing power grids take electricity produced mainly by fossil-fuel burning facilities and send it to distribution terminals, then to consumers. The amounts of electricity required to service the grid is estimated and enough additional power is kept on constant stand-by for peak power needs. Any unused electricity is basically lost.

The smart grid will be designed to eliminate the generation and loss of excess power while enabling private home and commercial properties to produce alternative power (solar, wind, etc.) to provide for their needs and send excess power to the grid. The excess power supplied by the growing number of private sources will reduce the amount of fossil-fuel-generated electricity required to maintain a constant and reliable power supply.

The USDOE also cites national security as an important factor making the smart grid necessary at this time. The existing power grid is segmented into national and local generation facilities and distribution units. The sharing of power from one system to another is not automatic. In many cases, the sharing of power is not possible under the existing systems.

In a possible terrorism scenario, electrical power could be interrupted in large metropolitan areas, creating unstable and dangerous circumstances. The smart grid would not allow any individual area to be without power, even in a national emergency.

In addition to the added national security, consumers will have the opportunity to reduce electrical costs by using demand-related notices to adjust personal power usage. Each home or business could install a grid sensor or individual readout unit to monitor electrical grid supply and demand. During times of increased demand, homeowners would be notified of the option to turn-off unnecessary electrical devices in return for a reduced electrical rate.

In an ideal setting, each home would have some source of alternative energy that could provide at least half of their needs, while working toward technology to create all of the power needed for an individual home. At that point, any excess power created would be sent directly to the national grid, for which the power company would send the homeowner a check for the power created.