Despite all of the rhetoric around, and government support for, a U.S. standards-based smart grid, proprietary communications technology will reign supreme for years to come, according to a report out from Pike Research. Pike found that for the portion of the network that will connect a home’s smart meter to the neighborhood network (in jargon terms that’s called the AMI-NAN) proprietary wireless mesh technology will be the leading communication technology until at least 2016. That piece of the network will generate 90 percent of the market for smart grid communication nodes by 2012, so the proprietary technology will dominate a big chunk of the available revenues, too.
Pike estimates that there will be over 17.5 million proprietary wireless mesh nodes, like the kind sold by Silver Spring Networks, Itron, Elster, and Landis+Gyr, shipped per year in both 2012 and 2013, before those numbers will start to decline slightly in 2014, 2015 and 2016. But even by 2016, proprietary wireless nodes will still be the dominant communications technology for connecting individual smart meters to the neighborhood network (which is usually connected back to the utility office by another network). “Very few general networking standards are in wide use in the industry outside of the normal enterprise networking applications,” says the report.
Other standards-based communications technologies, like metro Wi-Fi, and WiMAX are starting to be used at various aspects of the network, but will remain a much smaller portion compared to proprietary tech. Overall Pike found that annual shipments of smart grid communication nodes would grow from 15 million nodes shipped annual in 2009 to 55 million nodes shipped per year by 2016.
The Pike report does emphasize that in the U.S. “private wireless networking technologies that can support emerging standards are forecast to win out,” and that the smart grid won’t depend on any one communications technology. And with the National Institute of Standards & Technology (NIST) working on smart grid standards for the U.S., I think eventually there will be a fundamental shift away from proprietary technology.
It’s also important to remember that some of the proprietary wireless mesh vendors offer both standards-based and proprietary technologies at different aspects of their networks. For example Silver Spring Networks has proprietary access and mesh protocols, but uses Internet Protocol for the network layer, while Landis + Gyr, Elster and Itron use proprietary tech all the way. Pike says that “the future of the smart grid clearly lies with IP.”
Ultimately there’s an economic benefit for utilities to build out non-proprietary-based networks. The idea is that non-proprietary technology will be able to come down in cost more than proprietary tech due to the benefits of economies of scale and partnerships. That’s the notion behind the wireless standard WiMAX, but the cost reductions seem to be happening very slowly, given WiMAX is only in very early stages of smart grid deployments. Pike also found that “An open, standards-based platform will accelerate deployments and facilitate smoother integration and assimilation of various legacy systems.”
Underlying the use of proprietary tech is a fundamental mindset. Currently most utilities are looking at smart grid technology as a way to provide a specific objective or application, in much the same way that the original transition for the telecom networks did (upgrading voice, adding in a data layer, etc). But Pike Research points out that the lessons learned from the telecom buildout is that a more sophisticated and cost effective approach is to build out an entire network architecture that can run multiple applications simultaneously.
Pike Research is a GigaOM Pro partner.
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