The EU's ambitious goals of a 20 percent increase in energy efficiency, a 20 percent increase in renewables and a 20 percent reduction of carbon dioxide emissions - all by the year 2020 - are a huge undertaking.
Experts agree that none of the "20:20:20" goals are achievable without a functional smart grid that ultimately optimizes energy generation.
That's because simply building more wind plants and solar collectors won't be enough, as renewable energy is hampered by the fact that it's not constantly available – after all, if the wind doesn't blow or the sun doesn't shine, wind turbines or solar cells don't generate energy.
'Smart grids' on the other hand can manage and distribute intermittent energy supply from small power plants, wind mills or solar systems without a hitch, leading to a steady supply of electricity.
If there's too much electricity in the grid, it can be stored in batteries, for example when an electric car rolls up to a recharging point.
Smart energy draws big players
Smart grids provide utilities with the information and flexibility required to manage intermittent electricity supply from renewable and micro-generation sources, allowing them to balance this with more traditional, consistent supply.
Large companies such as Switzerland's ABB, a rival of Germany's engineering giant Siemens, say smart grids are a huge trend in the energy sector.
"There are lots of solutions that are already available. We could begin with them right away," Peter Smits, the head of ABB Europe said. But Smits says incentives, like feed in tariffs, are still needed to encourage the switch to a bigger pool of renewable energy sources.
"The more renewable energy we have to feed in the network, the more the utilities and electricity distributors are going to need this solution," Smits said.
The International Energy Agency estimates that by 2030, worldwide investments worth several trillion dollars will be needed for modern energy generation and new electricity networks.
Indeed, the booming market, which promises lucrative returns, has attracted new players to the utilities sector, including IT giants such as Google, IBM, Cisco, Microsoft or telecommunications firms such as Deutsche Telekom.
Various smart approaches
From the use of smart meters in households in Italy or France, to government-backed pilot-projects in the US, there's a growing momentum for groundbreaking smart energy schemes.
In Germany, too, the government is trialing smart grids in a few hand-picked regions.
The impression that Germany is lagging behind on smart energy projects is not true, says Hartmut Schmeck from the Institute for Technology in Karlsruhe.
He says selected regions in Germany are testing the entire supply chain - from electricity generation, and distribution to supplying the end consumer.
"Other countries are trying out projects where individual processes are monitored. But comprehensive, holistic approaches like the ones in Germany - they don't exist elsewhere."
It's expected that in two years, Germany's model regions will have developed their smart energy concepts to the point where they'll be ready for the market and everyday use.
This summer, project organizers set up a model house complete with washing machine, refrigerator and an electric car. The latter plays a key role in the project - both to store electricity as well as consume it.
Still missing are the thousands of electricity consumers needed to test the whole thing.
"The most important thing is that the customers play along because you can't have a smart grid without customers," said Joern Kroeplin from the energy utility firm EnBW, which is involved in the project.
Kroeplin says it is important to find tariffs and models that will create the necessary incentives.
"We also need the necessary appliances that customers accept and use. Without all that, it won't work," he said.
Not all smooth sailing
A first intelligent washing machine manufactured by German company Miele was on display at this year's consumer electronics fair IFA in Berlin. It switches on when the electricity price falls below a certain level. But it also needs a smart plug which recognizes what the electricity currently costs.
For smart grids to work, a number of players will need to come together, including industrial and private consumers, to help share the introductory costs.
Another obstacle remains. Aside from their upfront costs, smart meters also use a lot of energy to maintain, due to all the data flows operating in real time.
The required internet connection alone, which runs 24/7, uses over 100 kilowatt hours of electricity in a year – almost exactly as much as a modern refrigerator.
Author: Henrik Boehme (sp)
Editor: Nathan Witkop