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

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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.

15 Responses to “Why Meter Giants Cried Foul at the Stimulus Bill's Smart Grid Standards”

  1. Who says you need any kind of network SPN wants you to buy, there is plenty of comm network already out there… I fail to see the business case to buy their comm network. I would rather use what is already out there.

    Plus it seems to me the business case for AMI remains rather weak, see here
    on a 2Bn investment the return in 20 years is a meager 9MM

    I do agree with one thing, IP is the way to go, and Chu knows it it will happen

  2. The utility meters do not need to be IP enabled to make the grid smart. It drives up cost and adds minor value. The issue of interoperability has less to do with IP and more to do with stadards over what is communicated (15 min interval data, power factor, etc). This is the big issue being worked with HAN. It is worriesome that the bill includes the requirement and suspect that Gore’s fingers are all over this – effecting the legislation and beneifiting thorugh his stock in Silversprings via Kleiner. The Green equivelant of Cheney and KBR.

  3. Stephen Paul.. Please point me to the download site for the Advanced Metering Infrastructure open source reference implementation. Oh wait, there isn’t one.

    Can you at least point me to documentation so I could at least have the computer I’m writing this on talk to my smart meter?

    It took me less than a week to set up and write the code for it, and now my server responds to 5-minute LMP pricing.

  4. Couple of things.

    First, don’t believe for a second that there’s a member of congress, or anyone in the White House above a mid-level staffer, who has the slightest idea what IP is.

    Second, you’re not going to be able to produce reasonable analysis unless you stop buying your own propaganda about how big, old, non-innovative companies have been surviving strictly on the largess of congenial politicians for years and it’s time to give the smaller innovators a shot.

    Just as the vast majority of alternative energy research has historically been done by big energy companies, including big oil, it is also the case that most of the smart-grid research has been done by the stalwarts, which have put many billions of dollars into R&D of technology that in many cases relies on open but not IP standards that they developed for the particular task at hand.

    Now it may or may not be the case that IP is a better way to go. Whatever benefits are to be had by using a standard optimized for transmission over power lines may or may not trump the maturity and industry support of IP. But that’s not the point. The point is that it is not for the government to decide whether IP or some other technology is the way to go, particularly when the decision was made by someone who doesn’t know what IP is, or how it works, and only stuck it into the bill because some lobbyist whispered the term in their ear.

    The completely understandable objection of the smart-grid industry is that the government is trying, in the stroke of a pen, to render many years, and billions of dollars, worth of R&D investment worthless, and almost certainly without meaning to do so. This would be akin to the FHA passing a rule, in 2011 or 2012 as the Chevy Volt is about to hit the road, saying that the only electrically propelled vehicles are prohibited on US roadways are those employing Hybrid Synergy Drive; or the IRS declaring that taxes may only be filed online by people using a GMail address.

    Suppose the government passed a law saying that the product or service that it is your job to provide is illegal except when it’s provided by your biggest competitor. You’re employer wouldn’t be very happy, and I bet neither would you.

  5. Stephen Paul

    Paul, your comment (or tirade) seems to be directed at electric utilities. Perhaps you are unaware that those utilities began innovating with Automated Metering Reading (AMR) nearly two decades ago, and began innovating with Advanced Metering Infrastructure (AMI) almost a decade ago. It is the rest of the nation, indeed the world, that is only now catching up with innovative, forward thinking utilities.

  6. This Washington lobbying by lazy industry is tiring! It’s 2009, the Internet has been in full swing for 2 decades yet there are still humans walking streets with “meter reader” on their backs.
    It’s as bad as Detroit… lazy industry who haven’t innovated in 50 years only start bitching when the market finally forces them to DO SOMETHING NEW.
    The sad part is their cronies in DC often side with them resulting in the entire nation stagnating in the dark ages.
    Get with the program guys, reality is knocking on your door.