Smart grid developments

From the Economist Wiser wires:

A global movement is afoot to make grids “smart”. This means adding all kinds of information technology, such as sensors, digital meters and a communications network akin to the internet, to the dumb wires.

Governments have earmarked parts of their stimulus packages for smart grids. Utilities have started to spend serious money. In recent years American venture capitalists have put more than $1 billion into smart-grid start-ups, even if investment this year has not matched the heights of 2008. Two of these start-ups, GridPoint and Silver Spring Networks, raised $220m and $170m respectively.

Outages cost the American economy $150 billion a year.

A more resilient grid, however, is the less important half of the story. Just as the original grid facilitated the industrial innovations of the 20th century, the smart grid should support the green advances of the 21st.

More intelligence in the grid would also help integrate renewable sources of electricity, such as solar panels or wind turbines. As things stand, the trouble is that their output, being hostage to the weather, is highly variable. A standard grid becomes hard to manage if too many of them are connected to it; supply and demand on electricity-transmission systems must always be in balance. A smart grid could turn on appliances should, for instance, the wind blow more strongly.

Within the smart-grid market, there are three different strata of technologies, known as “stacks”.

The first stack is called “advanced metering infrastructure”, or AMI. It is at the heart of every smart grid and is the most vibrant part of the market so far, which is good news for makers of smart meters, such as General Electric, Itron, based in Washington state, and Landis+Gyr, from Switzerland. Their products are rather like smart-phones: they have a powerful chip and a display, and are connected to a communications network. More than 76m will have been installed worldwide by the end of this year, forecasts ABI Research, a market-research firm. By 2013 the number will rise to 155m.

The main task of a metering system is to get information reliably into and out of meters—for example, how much power is being used, when and at what price. The best approach is to use wireless mesh networks, in which data are handed from one meter to the next.

Such networks, which automatically reconfigure themselves when new meters are added, are at the core of the wares sold by Silver Spring Networks and Trilliant Networks, both based in Silicon Valley. Yet as well as providing the communications infrastructure of a smart grid, they also want to offer its software foundation. So far Silver Spring is the more successful of the two, having several American utilities on its customer list, PG&E among them. But Cisco is likely to enter this market, probably through acquisition.

The other two technology stacks of a smart grid are more straightforward, but no less promising. One is all the technology a utility needs to manage the usage data, combine it with other information and set rates depending on demand. The leading start-up in this area is eMeter, from Silicon Valley, but Oracle, a database giant, offers similar software. IBM helps utilities connect their disparate systems, build applications for smart grids and analyse the huge amount of data they produce.

The third stack is the “home area network” (HAN)—industry-speak for all the smart-grid technology in the home, behind the meter. There is general agreement that it will include things such as wireless displays that show the household’s power consumption at that instant, thermostats that are connected to the meter and smart appliances that can be switched on and off remotely. The big question is how all these devices will be connected and controlled. Will the HAN be dedicated to regulating electricity consumptions, for instance, or will it also control home security or stream music through the rooms?

Given the infantry of start-ups and the artillery of corporate giants, you might think it cannot be long before smart grids are widely deployed, at least in the rich world. Alas, things are more complicated, for three main reasons. The first of these is that the technology is not ready yet. Granted, most of it exists in some form (with the notable exception of ways to store energy efficiently when demand is low). But many products are not widely available or still need honing. Smart grids are also said to be vulnerable to cyber criminals. At a recent conference, a security consultant showed how a large number of meters could be hacked and shut down.

What is more, many standards have yet to emerge and the technology is still in flux. Understandably, utilities are hesitant to make big bets on products that could soon be obsolete.

That does not mean that smart grids will never be widespread. But just like other new technologies, they will first go through what Gartner, a market-research firm, calls the “hype cycle”. After a peak of inflated expectations, there comes a “trough of disillusionment” before the technology reaches the “slope of enlightenment”. And perhaps more than with other technologies, how steep this slope turns out to be will largely depend on what people, from politicians to business leaders to consumers, make of it.