Over at Green Inc., Erik Olsen has a nice post on "smart meters." At the moment, paying for electricity is a fairly Neanderthalish process. You use electricity, you pay by the kilowatt-hour, and you get a bill at the end of the month. If you want to save money, well, sure you might vaguely think to yourself, "Hmm… I should turn off the lights when I leave or lower the thermostat or maybe unplug the TV when it's not being used," but it's hard to know exactly how much you're saving. Meanwhile, the utility charges the same rate whether you're using electricity at "peak" hours or not. Smart meters could help change that:

The units provide real-time, two-way communication between customer and power company—on the theory that consumers might be more likely to, say, tolerate a bit of balminess if they are able to monitor their air conditioner’s energy consumption in real time. With a Web-browser interface, a customer can access colorful graphs and charts that display exactly how much the appliance costs—and at what time of day it costs the most.

That last point is also a boon to utilities, as they can use smart metering to more closely link customer pricing with market principles of supply and demand. Energy, after all, is typically more scarce, and therefore more expensive, when households are humming with activity—in the mornings and evenings, say. In the middle of the night, when demand for power is low, it is comparatively cheaper.

Smart meters are becoming all the rage in Europe, which is on track to have about 80 million installed across the continent by 2013, but haven't been quite as popular in the United States—yet. A pilot program in Oklahoma and western Arkansas is getting underway, where California-based Greenbox is developing software to let you monitor energy use on the Web; in a pilot project, 24 households lowered their monthly bills 15 to 20 percent.Not bad at all! Next step, of course, would be a regionwide smart grid.

--Bradford Plumer