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For all the gee-whiz coolness of modern-day electronic devices — flat-screen high-def TVs, 2-lb. laptop computers, the iPhone — the national power grid we plug them into is almost as old and unchanged as Edison's lightbulb. We rely on the grid to juice everything from vacuum cleaners to dialysis machines, but it is a dinosaur, a leaky, money-wasting, carbon-dioxide-spewing system that remains shockingly vulnerable to accidents and terrorist attacks.

That's the good news. It means that we can make enormous advances in national energy efficiency — and controlling carbon emissions — simply by improving the grid, before we even begin to clean up our energy sources. The key is to add 21st century speed and intelligence (i.e., the Internet) to the 20th century infrastructure of the power grid — voilà, a "smart grid." The result would be a system that allows power utilities to remotely detect and respond to outages; that lets consumers program their appliances to use electricity when it's most abundant, allowing power companies to reduce waste; and through which new sources of alternative power could be channeled into the towns and cities that need it. (Read "Solar Power: Eco-Friendly or Environmental Blight?")

"We need an upgraded electrical grid to take full advantage of the vast renewable resources in this country," Vice President Joe Biden said last week in Jefferson City, Mo., outlining a $3.3 billion Department of Energy plan to develop smart-grid technology.

Utilities have been experimenting with small smart-grid initiatives on their own — for example, wiring 50,000 homes in Boulder, Colo., and installing 100,000 smart meters in Ft. Lauderdale, Fla. But creating a truly nationwide smart grid — a goal for the Obama White House — won't be cheap and it won't be easy. That's why the news on April 20 that the city of Miami was launching a $200 million smart-grid initiative that would connect virtually every home and business in Miami-Dade County by 2011 was so important. Led by the greenish utility giant Florida Power & Light (FPL) — with corporate behemoths like General Electric and Cisco and the bright startup Silver Spring Networks — the Miami smart-grid program will be by far the largest in the U.S. If it succeeds, FPL plans to invest another $500 million to roll out the service to all of its 4.5 million customers. "This is not a science-fair project," says Jeffrey Immelt, CEO of GE, which will be providing smart meters for the initiative. "This is commercial technology that shows the smart grid is real." (Read "How Vulnerable Is the Power Grid?")

GE's smart meters will be the cornerstone of the program, which is called Energy Smart Miami. While conventional meters do little more than count up the kilowatts sent to a building — they're one-way devices, which means that if a home loses power, the utility doesn't know about it until they receive a phone call — smart meters will communicate two ways, like a computer, allowing utilities to keep precise tabs on their power flow and customers to go online and monitor exactly how much electricity they're using at any given time, by the month, day or hour. Better information means better consumption. Smart customers will be able to adjust their electricity use to reduce waste and lower their bills an estimated 10% to 20%. "The immediate impact is that this will make service more reliable and more efficient," says Scott Lang, CEO of Silver Spring.

Silver Spring is by far the smallest player in the Energy Smart Miami initiative, but its contributions are key. The Silicon Valley startup will supply the software that will make the smart grid smart, using the open technology platform Internet Protocol to send data through the system. Although using an open platform has made some experts concerned about the security of a smart grid, Lang points out that his company's software will make it easier to adapt the grid to new technologies — smart appliances, plug-in cars — that might arise down the road. "This is going to be a sophisticated network," says Lang. "It will be able to add and adapt."

About 1,000 homes will be enrolled in an advanced trial that will turn them into smart buildings, with smart control panels and thermostats that will help manage electrical loads and reduce energy use during peak periods. (One of the biggest potential benefits of the smart grid is the ability to manage the electrical load; today utilities need to have enough capacity to meet rare days of peak demand, but if a smart grid could smooth out those peaks, it might reduce the need for new power plants.) "We invested a lot in this technology," says Lewis Hay, CEO of FPL. "We're going to make it happen first."

In fact, the initiative might never have gotten off the ground without a lot of help from Washington. Half the $200 million price tag of the first phase of the project will come from federal stimulus spending, and there's more to come. Along with the $3.3 billion in grant money set aside by the Department of Energy for smart-grid tech, another $615 million is set to be spent on projects for energy storage and monitoring. To Washington, building the smart grid is about more than energy — it's about creating jobs, an investment that will stimulate the economy today and pay off later. "This [industry] is going to be the biggest investment for the first half of this century," says Immelt. "We have to create jobs, and this is going to do it. We can't afford not to."

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See pictures of Miami: "Paradise Lost."

• Bryan Walsh
• Miami's $200 million smart grid, which aims to connect every home and business in Miami-Dade County by 2011, may serve as a blueprint for a nationwide system