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The Smart Grid can be 50% cheaper, and boost our economy 2-3 years sooner than currently planned! How?

I was recently having some conversations with partners who build smart grid devices about why so many Utilities are building their own wireless or powerline networks, vs. using public cellular networks (full disclosure – I work for a company that provides integration and management services based on CDMA and GSM cell networks to OEM’s building smart grid devices). It’s always been a fascinating topic to me- why a power utility would be spending millions to tens of millions of dollars to build a communications network in 2008, heading into 2009. Given that the economy is heading down, consumers are pinched, and electric prices are probably only going to go up, it just doesn’t seem logical to go build a network when there are numerous options in place to use TODAY. Now, I know that some of these projects are historical, started before cell networks were data capable and coverage was ubiquitous, but that doesn’t mean a Utility cannot shift directions and finish out the rest of their smart grid deployments using what is now available and affordable.

Now this topic has been out there for some time, but what caused me to write about it now was that I tripped across three pieces of news and information in the last week or two. One was the Google announcement about using TV Whitespaces to transmit data. It makes me wonder if this is the next Broadband over Powerline (BPL), or private RF radio solutions that are proprietary and don’t scale coverage or throughput wise. The second piece of news was Andy Seybold’s blog about BPL (see http://www.andrewseybold.com/blog.asp?ID=214). It’s the same story as Municipal Wi-Fi networks; the network build costs are too high and the payback is too long (or not viable) to make the overall project a success. The last piece of information I saw was truly amazing to me. I pulled a presentation off the FERC web site, dated Feb 5, 2008 by FERC Commissioner Jon Wellinghoff, entitled Energy Efficient Services, Road to the Smart Electric Grid. On slide 24, it shows a cost/benefits analysis. On the costs side is the capital outlay for smart meters for both residential and C&I. The total 10 year capital needed is estimated at $20 - $30 Billion dollars. Then comes the interesting part. It has a cost line item of $25 - $30 Billion to build out the “Network Infrastructure”. That means that building out a proprietary network infrastructure over the next 10 years to support the smart grid is half to over half of the entire investment. In addition, think about the time delay while these networks are being built out vs. sticking a cellular radio in each meter and getting them installed quickly. If you then look at the payback on these technology investments, the payback per year by 2015 is $14 - $21 Billion/ per year. Just think of the economic boom this would give the US economy, if we could cut $20-$30 Billion of cost out of the investment, and accelerate those payback benefits to start sooner than 2015. So, why wouldn’t we do this?

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member photo Chris,

The utility industry loves their own closed proprietary systems, and are loathe to become beholden to outside communications companies to becpme any of their infrastructure. It's partly due to the fear of uncontrolled costs and partly due to security concerns, especially when it comes to their metering systems because meters being their only billing mechanism are traditionally highly protected. Many utility companies cringe at the mere thought of more customer interaction with AMI or Smart Grid services, partly because they are not set up business wise to handle consumers' problems on an individual basis beyond simple billing.
# Posted By Bob Amorosi | 12/2/08 5:41 PM | Report This Comment as Foul/Inappropriate
member photo Bob,
Thanks for your comments. I agree that those sentiments from the Utilities exist, though they aren't uniform across the industry. It's most prevalent with the IOU's for sure, as they are uniquely capitalized to be able to afford to build a network (whether a smart use of capital or not). Some of the Muni's have their own fiber rings, etc...so there are some options there. Where I'm mostly coming from is that the US Economy is in a capital crises. To me, an Electric Utility building a proprietary communications network to the nationwide tune of $20B-$30B is much worse than the CEO's of the Auto Companies flying to DC to beg in their private planes. The overall benefits to the Utilities own profits, the economy at large, and the environmental impact (positive) are the most important goals. If that can happen years faster and at half the cost, all the other stuff should fall by the wayside. If there are control requirements, SLA's around disaster recovery, security requirements for CIP compliance, etc...then let's have those conversation with the wireless industry. My company provides those today to our customers. What gets me is the RFP's continue to fly out blindly with proprietary communications spec'd in that only are provided by a single vendor. Crazy.
# Posted By Chris Purpura | 12/4/08 1:08 PM | Report This Comment as Foul/Inappropriate
member photo Chris,

I agree with what you're saying but I'm not overly surprised that RFPs continue to flow out of the utility industry looking for proprietary solutions from single sources. Many of these "single sources" include existing smart meter AMI manufacturers. They are salivating at the chance to land huge projects that if won effectively shut out their competition, largely due to incompatible proprietary systems. It's akin to winning lotteries where the utility RFP game is virtually winner take all, with competing suppliers facing feast or famine. Winning suppliers will profit immensely, and ultimately it will be us rate payers that foot the massive bills.

Save your pennies, we're all going to need them as I predict a looming electricity rate crisis for consumers in most parts of North America. The days of electricity being a consumer bargain are numbered.
# Posted By Bob Amorosi | 12/4/08 1:21 PM | Report This Comment as Foul/Inappropriate
member photo I agree with your overall thesis. What I envisioned when I proposed IMEUC was that the entity managing the meters for a given geographic region should simply identify and specify their data communications requirements, icluding security, and write a public tender including penalties for failure, for supply of those requirements.

Seems simple and logical to me.
# Posted By Len Gould | 12/8/08 1:45 PM | Report This Comment as Foul/Inappropriate
member photo Ah, I see by your further comment that tenders are being written, but written tailored to exclude all but a selected provider. Isn't that the point where public auditors (eg. from regulators) should get a look in?
# Posted By Len Gould | 12/8/08 1:50 PM | Report This Comment as Foul/Inappropriate

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