Why Meter Giants Cried Foul at the Stimulus Bill's Smart Grid Standards

Smart grid standards proposed in the House stimulus bill could snatch business away from some of the largest incumbent meter providers — perhaps even put them out of business — while virtually guaranteeing utility contracts for newer smart grid companies that support the computing standard Internet Protocol. At least that’s the claim made by metering heavyweights Itron (s ITRI), Landis+Gyr, Elster and Aclara (part of ESCO Technologies (s ESE)) in a letter sent to U.S. senators this week as the Senate considers open-protocol requirements for utilities receiving stimulus funds, USA Today reports.

At issue is a phrase included in the House version of the stimulus bill (but so far not in the Senate version) requiring utilities that tap stimulus funds to use “Internet-based or other open protocols and standards if available and appropriate.” An earlier draft took a harder line, mandating Internet Protocol across the board.

Eric Dresselhuys, the co-founder and V-P of marketing at Silver Spring Networks, which is building smart grid network technology based on IP, told us that “open standards throughout the system is the most important thing,” and that the current language offers considerable flexibility. Utilities can adopt workable open standards for not only the network itself (Silver Spring’s domain), but also devices and software, and “allows utilities to choose what’s best for them.”

In USA Today’s article it seems to say that Itron and its cohort are anti-open standards. But most of the industry by now generally agrees that the smart grid will live or die on interoperability — open standards are what put the “smart” in smart grid. So what gives? I turned to Itron’s director of regulatory affairs, Dan Pfeiffer, for insight. He said the companies are actually concerned that lawmakers will highlight one open standard, Internet Protocol, even if other standards are allowed.

We might be biased over here in Silicon Valley, but we don’t think nudging the market toward IP is necessarily a bad thing. The infotech industry has already worked out many of the security, reliability and interoperability challenges, and the rise in residential broadband penetration means IP could give utilities a way to safely and consistently transmit energy data to a large portion of homes.

But Pfeiffer said he’s worried an exodus to IP will pull the rug out from beneath an emerging industry. “You’re cutting out 85 percent of the marketplace,” Pfeiffer said, by putting companies using alternative standards such as HomePlug, HAN and ZigBee — a standard backed by many utilities — at a disadvantage. As USA Today reports, the four companies argue that utilities would interpret anything other than IP technology as something that might compromise their eligibility for federal funds.

Dresselhuys tells us that he thinks that’s not the case. He spoke with us from the DistribuTECH utility conference in San Diego. “Utilities have not expressed these kinds of concerns,” he said. “They are shovel-ready.”

The bigger picture here is that legacy metering companies are staring a game-changer in the face, and they’re reasonably nervous about competing in Power Grid 2.0 against newer startups with a background in infotech. Many of the old firms use proprietary technology, which utilities have traditionally seen as more reliable and secure for energy networks. But if we learned anything from the Internet revolution, it’s that in order to spur innovation, standards need to be open.