The reshaping of our national power grid will provide profound benefits to consumers, but it will also bring enormous liabilities that could equal—or even outweigh—the very problems we hope to solve.

Without question, something has to change in the electrical grid. While decreased economic activity has leveled off the rise in demand in the short term, long-term forecasts still show significant growth. According to the North American Electric Reliability Corp. (NERC), an organization of U.S. electrical grid operators, transmission capacity continues to lag behind demand and will need to increase by more than 10 percent over the next 10 years.

A power network utilizing the latest in computing technologies will eliminate blackouts and brownouts due to undercapacity and will enable better overall reliability through advanced monitoring and management. Customers will become savvier in how they use electricity by gaining real-time insight into their energy costs.

The smart grid will also help prevent terrorist attacks by building in redundancies and self-healing capabilities. And like the Internet, it will become the platform upon which new types of products and services can be built, such as using hybrid and electric cars to store energy and then sell it back to the network.

With such profound benefits, how could anyone oppose a smart grid? Well, for one thing, estimates say that rebuilding the grid will cost far more than the $4.5 billion in federal funds allocated and instead will top off somewhere between $13 billion and $50 billion.

What’s more, real-time pricing could adversely impact more vulnerable segments of society who may not be able to easily change their power consumption habits to accommodate continually changing prices of energy. There’s also the increasing risk of privacy and security breaches, given the creation of an intelligent, distributed computing network. In addition, the standards being developed for managing and running the power grid may perpetuate the same insular thinking that has traditionally categorized the utility industry.

Is that a reason to do nothing? Hardly. But organizations should limit their expectations and plan to open their checkbooks. The electrical grid needs to evolve, as do policies and processes, but we’re not done paying for it—not by a long shot.

The Scale of the Problem

According to a report by the Department of Energy, over the past 40 years there have been five massive blackouts—three of them in the past nine years. The lack of real-time analytics and, to a lesser extent, the slow response times of mechanical switches have been significant factors in these occurrences. The power grids have been so antiquated that, in most cases, utilities only know about an outage when customers report the problem.

The risks posed by a failing grid are enormous—much more than just the inconvenience of consumers losing a few cartons of milk and some frozen food. Billions of dollars could be lost. The Northeast blackout of 2003, for example, resulted in a $56 billion loss.

If a blackout lasted long enough, the lack of electricity would have dire consequences for the survivability of the country. Without electricity for a year, nine out of 10 people would die from disease, exposure or starvation, according to Dr. William Grahamth, Ronald Reagan’s former science adviser.

Though the grid can fail as a result of over-consumption, its centralized structure also leaves it vulnerable to terrorist attacks. And an attack on one region could have national consequences because the interconnectedness between regions could lead to a cascading effect that could disrupt the country’s ability to function.

However, the electrical grid doesn’t need to halt to have a severe impact on the economy and the environment. Today’s distribution network was never designed for transporting large quantities of power over long distances. As such, renewable energy that’s prominent in one part of the country—such as wind power in the Midwest—remains unavailable to other segments of the nation, such as the Northeast.

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