By Joshua D. Rhodes [1] and Charles R. Upshaw

The smart grid is here in some places, and coming in others. But, the smart grid by itself is not enough to solve all the energy problems in the built environment.

The smart grid monitors, collects, and stores information on how and when resources [2] are generated, moved, consumed, and converted. The smart grid touches every aspect of the grid itself, from generation to transmission and conversion to end-use, and each is important, nuanced, complicated, and ripe for potential, and should be examined. But, the smart grid by itself will not solve all of our energy problems. Rather, it can help us to identify where problems exist, so that we can address them and minimize their impact.

In the U.S., buildings account for 40% of our total annual energy consumption [1], which is roughly evenly split between residential and commercial buildings. We generally use energy for three basic things in buildings: 1) moving heat in or out of the conditioned space (HVAC), 2) making it so we can see (lighting), and 3) providing services that we desire (appliances, computers, etc.). Inside buildings, the focus of current smart grid technologies has mostly been to turn each of these types of things on or off depending on external conditions.

However, if your building leaks air like a sieve, the most sophisticated controls system in the world won’t make it run efficiently. Energy use data won’t help unless we know how a building can and should perform, giving us an energy use baseline to work from.

To determine this baseline, you first need an energy audit. Energy audits focus on the primary and secondary energy considerations of buildings. Primary energy considerations include HVAC systems, lighting systems – things that use energy directly and can possibly be upgraded to provide the same services (hot/cold air and lighting) for less energy input. Secondary energy considerations include things like building faades and duct systems – things that are meant to keep from moving or move hot/cold air/water between spaces, but often leak. Both equipment and construction aspects also feedback on each other, as a leaky faade requires that HVAC equipment operate longer and poorly installed HVAC systems that create large pressure differences in buildings can cause facades to leak more – this type of cyclical waste is not uncommon.

While one-off retrofits, such as increased insulation or a more efficient HVAC system, can reduce overall energy usage, they are not as good as a holistic approach to improving efficiency. Holistic approaches require knowing a variety of important house construction and system performance metrics, precisely the information that good energy audits give. For example, if you were to invest in very good windows you could get increased day-lighting which might reduce lighting energy, but the reduced heat gain might allow for a smaller HVAC system to meet the load, thus further reducing energy use. The cycle can work for you, or against you.

So why doesn't every building get an audit and perform the recommended retrofits?

One of the main reasons is up-front costs. Even in places like Austin, TX (the 6th most efficient city in the US [2]) where the audit is mandatory [3], the retrofit uptake from those audits is a pretty low 15%. Austin’s audit program applies at the time of sale. This means that, whenever a building over 10 years old is sold, it must receive an energy audit and the results of this audit are given to the prospective buyers.

For some properties, the new owner might not care because future tenants might be paying the utility bills [4]. Or, the new homeowner might be more concerned with the down payment and the mortgage payment for their new property, and the utility bills could be a distant 4th or 5th (if even) concern.

But, there is a way to possibly bring the audits and necessary retrofits front and center through energy efficient mortgages (these do exist today!).

Banks currently give out mortgages based on what they think that you can afford to realistically pay per month over the life of the loan. These calculations take into account income and expenses and determine what your maximum monthly payment could be, thus the amount you are allowed to borrow. An energy efficient mortgage also takes into account reduced utility bills from retrofits (or a more efficient house). This inclusion lets the mortgage seeker borrow more money if it is for a more efficient house (or one that could be made more efficient). And, in an interesting twist, the piece de resistance is that since real estate agents typically work on commission from home sales, they would have an incentive to push for more efficient homes and you let the people who sell for a living sell the retrofits.

The smart grid is great and will change how the electric grid works and responds to stimuli. It has/will have the ability to save energy and increase grid reliability. But inside the walls of buildings, it is best as a fine-tuning mechanism. Unglamorous energy audits followed by retrofits (when possible) should always come before smart grid solutions.

About the authors:

Joshua Rhodes is a PhD student in Civil, Architectural, and Environmental Engineering at the University of Texas at Austin. His current research is in the area of building smart grid applications, including system-level applications of energy efficiency and distributed generation. He is also interested in policy and the impacts that good policy can have on the efficiency of the local economy. He is one of the founding partners of IdeaSmiths LLC, a recently formed consulting company that performs energy systems analysis and technical due diligence for interested companies and individuals.

Charles Upshaw is a PhD student in Mechanical Engineering at the University of Texas at Austin. His research interests span a wide range of topics, from renewable energy systems analysis, to residential smart grid and home resource management. He is one of the founding partners of IdeaSmiths LLC, a recently formed consulting company that performs energy systems analysis and technical due diligence for interested companies and individuals.


[1] Energy Perspectives 1949–2010. Technical report, U.S. Energy Information Administration, October 2010.


[3] About the Energy Conservation Audit and Disclosure (ECAD) Ordinance, 2013. us/environmental initiatives/ordinance/index.htm

[4] Phillips, Yvonne, “Landlords versus tenants: Information asymmetry and mismatched preferences for home energy efficiency” Energy Policy, Volume 45, June 2012, Pages 112–121


[1] Joshua Rhodes has a similar piece in the September 2013 edition of the UN Global Energy Initiative:

[2] The smart grid will eventually (and in some places does) include resources such as natural gas, water, CO2, etc. as well.