While communications technology was used in the electrical grid long before we started labeling it as “smart,” integration of these communications networks into a common fabric is an essential characteristic of the smart grid.  This integration requires adapting existing standards or creating new ones to meet the specific needs of the grid applications.  That process is well underway – as documented in Pike Research’s new report, Smart Grid Networking and Communications.

There are two particular areas of progress to note: the evolution of a standards-based radio frequency (RF) mesh network for field area networks, and broader mainstream adoption of cellular communications.

The RF mesh network used for AMI networks and some distribution automation applications has historically been one of the most proprietary domains of grid communications.  Silver Spring Networks carved out a leadership position in the wave of AMI deployments starting in 2008-2009 by offering an IPv6-based system.  However, due to a lack of available standards, the radio and mesh protocols underneath the IP-layers remained proprietary.  The IEEE and IETF, with the participation of many of AMI vendors, embarked on development of the appropriate standards embodied in IEEE 802.15.4g , 6loWPAN , and RPL specifications.  Even as these were jelling, Cisco and Itron partnered (leveraging the Arch Rock technology acquired by Cisco) to develop a fully standard AMI network implementation, which was finally unveiled at the beginning of this year.  Virtually every other AMI vendor has released IP-based roadmaps and meters promising the flexibility to be “IEEE 802.15.4g ready.”

Dynamic pricing for electricity has long been the holy grail of the smart grid, particularly for smart metering.  The rationale is that if the retail price of electricity actually reflected the true time-based costs instead of a blurred monthly average, then consumers would become more efficient buyers, benefiting themselves, suppliers, the environment, and society.  If we can choose to buy less during demand peaks when generation costs are highest, and buy more when the grid is underutilized, then overall electricity bills will go down, peak demand is reduced, and the associated environmental impacts are lessened.  Everyone wins – so who’s to complain?

Well, quite a few consumer interest groups are complaining, ranging from the AARP to utility watchdog groups.  While some complaints fit within the ongoing smart metering paranoia, there are legitimate concerns as well, including:

• Low-income, elderly, and other disadvantaged groups may not be able to shift to off-peak use, and hence may face higher bills. Images of grandma turning off her oxygen, shivering in the cold or sweating out a heat wave because of smart meters are persuasive.
• There is a general assumption that consumers will happily make “comfort vs. cost” tradeoffs in energy use.  This is counter to the trend toward flat rate pricing elsewhere, including the telecom industry, heretofore the master of time-of-use pricing.
• While there is little argument against “opt-in” dynamic pricing programs, most agree that dynamic pricing must be mandatory or implemented as an “opt-out” program to achieve the desired benefits. This muddles the message of enabling “consumer choice” via smart metering.

Underlying all these concerns is an assumption that for someone to win with dynamic pricing, someone else has to lose.  The goal may be to reduce demand peaks and fill underutilized valleys, effectively lowering the average, but it is true that some will likely pay more with dynamic rates.  The question is who?

Interestingly, opposition to dynamic pricing can be found on both ends of our politically polarized spectrum. Those toward the right fear Big Brother taking control of their thermostats and appliances (here, utilities = government). Those bent leftward see the social good of universal electricity being corrupted, leaving the vulnerable unprotected (here, utilities = big business).  I am sure smart grid advocates would love to unite Tea Party and Occupy Wall Street folks, but not this way!

These complexities abounded last week when I attended the New England Restructuring Roundtable, a group that since 1995 has been meeting several times a year to discuss “revolutionary changes in the electric power industry in Massachusetts and throughout New England.”  This meeting included a terrific panel of leading utilities, regulators, and consultants on the topic of smart grid and dynamic pricing. Among these were Oklahoma Gas and Electric (OG&E), which has an impressive smart grid program underway, and Ahmad Faruqui of The Brattle Group, presenting evidence from a multitude of dynamic pricing pilots.  The data show that not only does dynamic pricing work, but there are clear guidelines for how “dynamic” the pricing should be, and how consumer technology enhances the benefits.

Much of the Q&A centered on the “Who wins, who loses?” question.  What I think has been missing from the broader debate, is the question, Who wins/loses in the status quo of average rates?  Clearly heavy peak users are effectively being subsidized by everyone else.  Efficient users are subsidizing inefficient users. Using class-bias stereotypes, McMansion-owning consumers running heavy-duty HVAC systems, pool filters, and hot tubs regardless of peak periods are being subsidized by other, less power-hungry ratepayers, including grandma just trying to stay warm (or cool).

In this context, consumer advocates should be clamoring for the “peakers” to “pay their fair share.”  And more capitalistic types should welcome systems that make energy a free market with more consumer choice and effective pricing mechanisms.  Of course, programs are likely needed for disadvantaged groups, but this is nothing new.  And there is evidence that even low-income consumers are often able to respond to dynamic pricing incentives and share in the benefits.

Ultimately, regulators and legislators, armed with increasingly better data from pilots and carefully considered consumer protections, will need the courage to drive dynamic pricing implementation.  With smart meter deployments now reaching critical mass, technology will no longer be an obstacle.  And perhaps fairness and markets will converge toward the same goal.

During Hurricane Irene I found myself outrunning the storm as I drove from Washington, DC to my home north of Boston after delivering my son to college. With more family in New Jersey and New York, including another son living in a NYC evacuation zone, I listened to the news throughout the 10-hour drive home.

A standard feature of the storm coverage was local utilities describing their storm preparation plans. Headed up the coast, we heard comments from PEPCO, BG&E, PECO, PSE&G, ConEdison, Northeast Utilities, NStar, and National Grid. Not surprisingly, none of these touted their smart grid among storm preparation plans. I wondered how these would fare against a very angry Mother Nature.

One promise of the smart grid is reducing the number of “truck rolls” to perform certain tasks, which would presumably translate into fewer trucks and fewer people needed to populate those trucks. This follows a similar trend in the telecom industry, where wireless and broadband advances mean fewer traditional phone lines as well as a lower headcount required to maintain those lines. This is the underlying tension behind the strike by 45,000 Verizon workers, another recent East Coast phenomenon. I saw plenty of “truck rolls” during my race home, in the form of dozens of utility-truck caravans traveling from distant Midwest utilities, getting positioned to help in the looming restoration marathon. It occurred to me that no amount of smart-grid technology was going to replace all those downed poles, reconnect broken transmission lines, or drain flooded substations. People – working long shifts – would be doing that.

So is the smart grid useless during natural disasters? Not at all. Post-Irene discussions with a number of industry contacts indicate that many smart-meter deployments were key to restoration management, specifically individual restoration confirmations, allowing more efficient repair crew dispatch. Even partially commissioned systems were useful. Benefits may be tough to formally quantify, but most seemed pleased with how their systems performed under fire. However, the most common complaint of those who experienced long-term outages–including a couple of my Pike Research colleagues–was a lack of decent estimates as to when their power would be restored. Smart-grid technologies should help with this.

Fortunately, when I arrived home, our power and broadband service was on and stayed on without a glitch. Unfortunately, many family members and industry colleagues did not fare as well, landing among the 7 million or more than lost power during the storm. Interestingly, my unscientific friends-and-family survey indicates most had their electricity restored long before their phone or broadband services–in fact, some are still waiting.

So here’s a nod to the bucket truck brigades and those that support you – may the smart grid make your jobs faster and easier, but may it never be lost that in these times, it’s your head that counts.

As mentioned in an earlier post by my colleague Eric Bloom, last week Cisco began to clarify how its corporate restructuring – “refocusing on core businesses” – would impact its initiatives in energy management and smart grid. Eric discussed the commercial building energy management impact. Let’s take a brief look at home energy management and smart grid.

Laura Ipsen, Cisco’s Senior Vice President & General Manager for Smart Grid explained in a blog post, “…we will transition our focus from creating premise energy management devices to using the network as the platform for supporting innovative applications and architectures.” Translation: Cisco is backing away from the energy-specific Home Area Network (HAN), at least in terms of specific devices and associated management software. This follows a number of field trials, a significant partnership with Control4 announced just five months ago, and some ambitious utility-focused management software. All this effectively goes away.

Why back away now? Cisco could be seen as just the latest big-name tech company jumping off the home energy bandwagon, following Google (PowerMeter) and Microsoft (Hohm). Certainly, the factors driving Cisco’s biggest headcount reduction in its history is not a recipe for patience in the uncertain home energy market. The bottom line however, which may be of small comfort to Cisco’s HAN competitors, is a profitable business case in home energy management, and the industry policies needed to enable such a case, just are not clear enough.

Note this is not the smart grid capitulation that some in the industry have been whispering since Cisco announced its refocusing plans. Cisco remains active in the grid and, specifically with its impressive work with Itron, remains on track. Certainly, its initial grandiose pronouncements are now further humbled, but assuming Cisco stays in the home via Linksys and former Scientific Atlanta devices, they can still do what I always thought they would do: add home energy management as “just another feature” in these devices as the market develops.

This move by Cisco further proves one of my favorite business observations: bigger is not always better. Many buyers, especially utilities, tend to think that working with established vendors is always a safer choice compared to smaller companies. The fact is larger companies often have less resources and patience for emerging technologies than smaller companies that have bet the farm on a given application. The difference is not unlike the old adage about the contributions of chickens and pigs to an eggs and bacon breakfast: the chicken is involved, but the pig is committed.

Vendors focused on home energy management, such as Control4, Ecofactor, Energate, EnergyHub, and Tendril, may feel they’ve been called pigs now that Cisco has joined fellow market-makers Google and Microsoft in declaring their market not worth making. But utilities – especially those now under pressure to prove their smart meter investments will pay dividends for consumers – need to recognize the pigs are the ones truly committed to what is hoped to be a HAN feast.