One of the central themes for this portal – and the next Smart Grid Summit – is exploring where and how telecom operators can be of most value to utilities. Verizon (News - Alert) is one of several telcos with Smart Grid initiatives, and last week I spoke with Bob Heffron, market manager for the utilities vertical at Verizon Communications.
Before looking at what Verizon is offering, this conversation was a good opportunity to hear about where a telco fits in the Smart Grid equation from a carrier’s point of view. I’ll be doing similar explorations with other telcos in due time, but also plan to get the flip side perspective in future conversations with utilities.
Verizon’s view in simple terms is that a “smart grid” is an electricity grid that employs an overlay communications and information network to better manage the grid’s electricity payload from the point of generation to consumption. They also believe that the nation’s communications sector is well positioned to support policy makers and utilities in the modernization of the U.S. electricity grid, a view that we share here on the portal.
Networking and security of the magnitude required for Smart Grids are both new territory for utilities, but not for telcos, which have been through several transformational cycles – such as shifting from analog to digital, circuit to packet, dial-up to broadband, and in the wireless world, the ongoing evolution from 2G to 3G to 4G, LTE (News - Alert) and so on. Aside from the learning that comes along the way here, what telcos have really achieved is the adoption of standards-based, open technologies.
These virtues are important for utilities as they need every advantage possible to benefit from Smart Grid. Regardless of who builds them, their communications networks have to make the grid more efficient and be able to support innovation in terms of new services. Efficiency is important because today’s grid is leaky – power is lost at many points along the T&D path – and deploying smart sensors across the full grid can go a long way to preventing these losses. This is even more important in the broader context where energy demand will continue to outpace supply; forcing utilities to draw from more expensive power sources at peak periods.
Add to this the regulated nature of energy, meaning that utilities may not be able to pass on price increases needed to offset expensive network modernization investments. Given all the learning amassed by telcos throughout these network transformations, it is hard to envision how utilities can do these things in less time and with less cost on their first go-round. If nothing else, utilities, with their typically long depreciation schedules for assets, would do well to spread the risk of rapid IT obsolescence by working with an industry in which keeping pace with state-of-the-art technology is a critical factor for success.
Many utilities have reservations about deploying Internet-based communications networks, especially in terms of security, and are inclined to want to develop new networks for Smart Grid purposes. Verizon recognizes that both the electric grid is at the foundation of our economy and that utilities need better than 5-nines’ reliability. However, being one of the nation’s 17 critical infrastructures, telcos are also heavily involved in planning and preparing for disasters and emergencies of all forms.
Conversely, utilities must recognize that operators like Verizon have successfully adopted IP network technology and learned how to scale it reliably and securely. This is the value proposition Verizon brings to utilities, and it is the focus of their vertical unit that serves the utility market. Taking a step back from this, utilities should also consider that wireline carriers can reach almost every U.S. household today with broadband connectivity. By partnering with carriers, utilities have a ready-made overlay network to manage rich, two-way communications that can be the basis for a new generation of Smart Grid services and revenue streams.
Perhaps more important is the ubiquitous reach that wireless operators have today. As mobile broadband becomes increasingly mainstream, Smart Grid applications become more attractive for utilities. This is equally true for investor-owned and municipal utilities, and supports the broader federal visions of having a national Smart Grid network. Aside from enabling telephony for subscribers, mobile broadband is well suited for machine-to-machine communication, which will help drive Demand Response programs and enable intelligent meter reading. Verizon also sees M2M opportunity for sensors and remote monitoring across the entire grid network.
Verizon is currently in pilot projects with over 20 utilities, focused mainly on smart meter reading and wireless M2M applications. They are also providing various forms of wireline and wireless communications services to over 100 utilities, and are actively involved in the standards-setting process with NIST. Their Smart Grid solutions cover the full spectrum of touch points across the grid, starting with the data center, moving across the access network for backhaul, and finally entering the home to support home automation, energy management and meter reading.
There is no doubt that service providers and utilities can learn from each other, but greater understanding is needed on both sides, and Verizon is a good example of what carriers can bring to the Smart Grid. Carriers need to be just as cognizant of security as utilities, and they have already gone through the painful process of understanding and now harnessing the potential of the Internet in their business. Utilities and telcos have a common need to build large, complex networks, and it only makes sense to us that utilities take best practices like these. We know this is easier said than done, and as we continue exploring this space on the portal, our intention is to bridge the telco/utility divide one step at a time.
Jon Arnold (News - Alert) is co-founder of Intelligent Communications Partners (ICP), a strategic advisory consultancy focused on the emerging Smart Grid opportunity. To read more of his Smart Grid articles, please visit his columnist page.
Edited by Michael Dinan