Smart Grid Evolution: IoT, V2G, and Energy Democratization

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By Mouser Technical Content Staff, based on an interview with Chris Irwin, US Department of Energy

Published October 17, 2025

For decades, the electric grid has been the unsung hero of modern civilization—a silent, always-on force that powers our homes, businesses, and lives. Its reliability is so ingrained in our daily routines that we often notice it only when it fails. But this passive, monolithic system is facing its most significant transformation yet, driven by two immense and interconnected forces: decarbonization and electrification. As many countries move away from fossil fuels and adopt electric vehicles, heat pumps, and other greener technologies, electricity demand is growing exponentially, with our lives becoming increasingly dependent on its continuous flow. The solution may be the smart grid, a system that leverages data and connectivity to create a more resilient, sustainable way to distribute electricity.

Foundational Shift: From Analog to Digital

The traditional grid was designed for a one-way flow of power from large, centralized power plants to passive consumers. This architecture is fundamentally unsuited to the demands of a modern society that is integrating distributed renewable energy and creating a surge in electric demand. The transition to a digital, two-way network represents a fundamental architectural shift that incorporates digital sensors, controls, and advanced communication capabilities into the existing infrastructure. This smart grid transforms the system into a dynamic, intelligent network inspired by the decentralized structure of the internet. The new architecture enables enhanced control and improved forecasting through the real-time monitoring of energy flow, as well as the application of artificial intelligence (AI) and machine learning (ML) to large datasets. Incorporating AI and ML enables the seamless integration of distributed assets that a traditional system would be unable to manage.

This transformation also enables operators to reevaluate the definition of grid health, particularly in relation to reliability and resilience. While reliability is the capacity to avoid power disruptions under normal conditions, resilience is the system’s ability to withstand and quickly recover from power outages during severe weather or other catastrophic events. The 2021 Texas power crisis provides a definitive case study of a profound lack of resilience. The failure, which left more than 4.5 million homes without power and resulted in an estimated US$195 billion in damage, was primarily due to a lack of winterization and regulatory frameworks that prioritized short-term cost savings over long-term stability.^[1] This sobering event highlighted that a resilient grid is not a luxury but a necessity.

Grids As a Nationwide IoT System

The modern electric grid contains an unprecedented volume of data, evolving into a nationwide, gigantic Internet of Things (IoT) system. Projections indicate that the data generated by the grid could increase a thousandfold by 2040, with half of that growth originating from customer-owned assets, such as inverters and electric vehicles.^[2] This profound strategic shift is the core of the democratization of the electricity-delivery system. Rather than utilities having to place a sensor on every piece of their infrastructure, they can now acquire valuable data and services directly from customer-owned devices.

A complex web of connectivity, from modern wireless spectrum and fiber to legacy telephone systems, enables this new digital system. Because devices like smart meters and electric vehicles come with connectivity embedded in their purchase price, the grid can leverage existing consumer telecommunications infrastructure. This strategic shift moves the grid’s business model from a utility-owned one to a platform-based ecosystem.

“Uber-ization” of Energy: A New Market Paradigm

The traditional command-and-control model, where utilities dictate the operations of large generators, is no longer sustainable as customer-owned assets become a significant part of the energy mix. A utility cannot compel a customer to behave in a certain way, which creates a fundamental inversion of the power dynamic. The solution lies in a fundamental pivot from a sole provider to a market orchestrator. This new paradigm transforms the utility into a platform that manages an ecosystem of energy resources, market participants, and services—much like how ride-hailing services like Uber coordinate the actions of millions of independent drivers without owning any vehicles themselves. The utility can apply this same model to the grid, using technology and economic incentives to coordinate the actions of independent asset owners.

This new economic model is predicated on the idea that customer-owned assets are becoming “gig worker sensors” for the grid. This idea embodies the essence of the electric system’s democratization, where a utility can acquire data and capabilities from a homeowner’s solar inverter or electric vehicle, turning personal investments into vital sources of information and power. While utilities cannot compel customer behavior, regulators are actively shaping and enabling this model by creating new frameworks to incentivize customer participation.

Technical and Commercial Reality of Vehicle-to-Grid Technology

Vehicle-to-grid (V2G) technology is a critical component of the new market model. It allows owners of plug-in electric vehicles to sell demand-response services to the electrical grid by either back-feeding power or reducing their charging rate at different times of the day.^[3] While V2G is a vital blueprint for the future grid, the technology is still in the process of being fully developed and made ready for widespread use. A major technical hurdle is the finalization and standardization of communication, which is crucial for enabling secure, bidirectional communication between vehicles and charging infrastructure. A critical issue for consumers is the potential for reduced battery longevity, as repeated charge and discharge cycles can reduce battery lifespan and may have warranty implications.

Despite the challenges, V2G is advancing through a series of focused pilot programs, with commercial deployments primarily centered on high-utilization fleets. Electric school buses, with their large batteries and predictable schedules, are proving to be ideal “batteries on wheels” that can provide flexible, dispatchable power to the grid when they are parked.^[4] These real-world examples demonstrate the current nascent state of V2G deployment.

Policy and Regulatory Landscape

The most significant challenges to grid modernization lie not in technology but in policy and economics. Regulators face a fundamental paradox: They must balance the need for massive investments in grid modernization with rising costs of electricity for consumers. This dilemma is compounded by surging electricity demand from new loads, particularly data centers. The traditional cost-of-service model may not adequately value or incentivize the necessary modernization investments, raising regulators’ concerns that approving spending is a gamble with customers’ money.

To overcome these challenges, new approaches are emerging, including the use of new metrics and multi-objective prioritization that align investments with specific, measurable outcomes. The guidance for utilities to present investment information is designed to strengthen the case for innovative, value-added investments. US federal agencies, through initiatives like the Bipartisan Infrastructure Law, are also playing a critical role in providing funding and technical assistance to accelerate this transition, recognizing that grid modernization is a multi-agency effort.

Conclusion

The transformation of the US power grid is a complex but necessary journey from an analog, one-way system to a digital, two-way, and data-rich network. The concepts of a new economic model, the “Uber-ization” of energy, and the critical role of V2G are all validated by current research. However, the path to this future is complex, navigating significant hurdles that are deeply rooted in policy, economics, and governance. The 2021 Texas power crisis serves as a sobering reminder that a lack of resilience can have catastrophic human and economic consequences. The new US grid is being built not by a single entity but by a complex ecosystem of public and private stakeholders.

This article was generated with assistance from Copilot for Microsoft 365.

Sources

[1]https://energy.utexas.edu/research/ercot-blackout-2021
[2]https://resources.mouser.com/eit-smart-grid-en/eit2024-sg-podcast-2-en
[3]https://resources.mouser.com/eit-smart-grid-en/vehicle-to-grid-technology-engineered-to-enable-the-smart-grid
[4]https://www.wri.org/update/electric-school-bus-v2g-lessons-examples