If you lived in a smart house, you wouldn't have to turn down the thermostat to save energy -- the house would do it for you.

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Direct Response Technology

One of the most exciting models of demand response is the smart grid and its connection to smart buildings.

A smart grid is the 21st century version of the current grid. Today's grid is one-way only: You turn on the television, and it brings the power. A smart grid would be a two-way communication system between provider and consumer. The structure of the grid is often described as similar to the Internet. In the same way every computer that accesses the Internet has an Internet address, the smart grid would have a web of access points that could be identified and contacted. Through these contact points, the grid would automate the flow of electricity as needed, identify and isolate load problems; it would also be able to handle uneven supplies of energy from renewable sources such as wind and solar power.

A smart grid talking to dumb terminals and appliances in a house can only accomplish so much. The grid may identify a load problem but without a smart building partner, it can do nothing but raise a red flag. Consumers are then told to reduce or turn off their energy usage.

When smart buildings are hooked up to a smart grid, the buildings respond to information received from the grid. Are electricity prices getting higher? The self-monitoring house automatically reacts by reducing the power usage -- maybe by turning down the thermostat or turning off the dishwasher. Consumers ultimately have the power to turn the heat back up a few degrees if they prefer a warmer house.

In a yearlong, small-scale study in homes on the Olympic Peninsula in Washington, the Department of Energy (DOE) found that when consumers were equipped with smart electric meters, thermostats, water heaters and dryers, they reduced their energy usage and associated costs -- on average, participants saved 10 percent on their electricity bills, and there was a 15 percent reduction in peak load usage [source: Grist].