Two recent wins for General Electric’s Grid IQ offering signal not just where GE is headed. They also suggest two important trends for 2012. First, the move to “cloud-based” hosted services is under way in earnest. Second, many of the sector’s biggest players are targeting coops and municipals for their next round of deals.
Hosted services are here (and to stay)
Although we often talk about cloud-based services as a future trend, in reality most of the major suppliers have already made a firm commitment to this strategy.
The concept is simple. A supplier sets up a central set of smart grid applications. Then it lets utilities order them à la carte for a monthly fee. The applications and the data reside at the supplier site and the utilities tap into those apps over the Internet. The approach has at least four key advantages:
- Fewer personnel costs and issues. Only the largest utilities have the budget and know-how to recruit, train and manage the kind of top-notch IT personnel needed to support state-of-the-art applications.
- Improved security. Suppliers have far more resources and experience to guarantee that applications meet the most stringent security requirements
- Expandability. The utility can start small and add new applications whenever it is ready
- Lower capital costs. The supplier takes on the expense of buying the servers, hiring the personnel and installing the software. The utility simply pays a monthly fee
Suppliers hope that dozens or even hundreds of small utilities will eventually sign up, giving them great economies of scale along with recurring revenue.
Munis and coops at the forefront
As the “smart grid as a service category” continues to gain steam, it looks like munis and coops may be the early leaders. That certainly makes sense, since small utilities have far fewer IT resources to assign to install and run new programs in-house. What’s more, munis and coops are more interested in minimizing capital costs. IOUs are less likely to be interested in that aspect, since they can hope to recover their capital costs by adding them to their rate base.
GE pushes forward
GE Digital Energy intends to be a major player in this burgeoning sub-sector. The company is building a host of applications – AMI, GIS, MDMS, distribution management, volt/VAR optimization, outage management, asset management and more – under the banner Grid IQ: Solutions as a Service. It offers them in three flavors. They can 1) host the data and the applications, 2) host the data only or 3) implement the apps on the utility’s own computers.
Which applications are most popular? AMI is the “door opener” says Mike Carlson, GE’s GM of smart grid solutions. “It’s the hot button. They see the value proposition. And they want to help customers get energy management tools. Outage management is the #2 request. In the future, Carlson expects distribution management systems (DMS) and asset management to grow in popularity.
Carlson also expects munis and coops to be primary targets for the service, as illustrated by two recent wins in the Southeast: Norcross, Georgia and Leesburg, Florida.
In November, the city of Norcross announced it would be getting advanced metering, prepayment and an online customer portal via GE’sGrid IQ service. The services will cost Norcross’s 25,000 utility customers an extra $1 per month. For this fee, they will get the benefits of AMI, DMS, home energy management and outage management. The deal was brokered by Electric Cities of Georgia, which monitors and evaluates solutions for its member utilities.
Norcross has a reputation as a regional pioneer in urban redevelopment and economic development, but ECG hopes “mainstream” Georgia cities will sign on as well.
In Leesburg, GE’s offering will include advanced metering, meter data management and demand response. As in Norcross, GE is responsible for managing and maintaining the applications at its data center. Leesburg will continue to own the data and manage its operations.
The city will begin deploying smart meters to all of its 24,000 customers in March. Residents will begin to receive new services in the second half of 2012, including home energy monitoring and the prepayment options. In addition, 4,000 customers will get energy management systems that let them preprogram the operation of air conditioners and water heaters during peak events.
One of Leesburg’s primary goals is to reduce usage during peak hours. Thus, AMI, MDMS, DR and a customer portal are at the heart of the effort. But the Leesburg project will also include prepayment options plus volt/VAR optimization. The project is partially funded by a $10 million DOE grant.
Our take: All the major vendors will be placing increased emphasis on hosted service going forward. They will initially target small to mid-size municipals and cooperatives. As they prove the case, they will begin to promote the idea more heavily with large munis and investor-owned utilities. They will also expand the menu of services available under their hosted programs.
One possible result: Utilities could wake up in a year or two to find themselves with a wide variety of “apps” in the “apps store.” Ideally, the growing competition amongst suppliers and the growing economies of scale will drive up choice and drive down prices.
What is your thinking on hosted services and cloud computing for electric utilities? Use the Talk Back form below to comment or jump to our discussion forum where we got some good responses when we recently asked should we move the smart grid to the cloud?
Jesse Berst is the founder and chief analyst of Smart Grid News.com. He consults to smart grid companies seeking market entry advice and M&A advisory. A frequent keynoter at industry events in the US and abroad, he also serves on the Advisory Council of Pacific Northwest National Laboratory’s Energy & Environment directorate.
This article originally appeared on SmartGridNews.com. SmartGridNews.com is the Internet’s oldest, largest and highest-ranked smart grid site. Visit for up-to-the-minute analysis of smart grid trends, smart grid technology and smart grid companies. Sign up for the free email newsletter or follow SGN on Twitter.