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September 10, 2010

Cisco, Pulse Energy and Vancouver - Smart Grid Vision and Wake-Up Call for Utilities



Pretty interesting announcement yesterday from Cisco (News - Alert) – not just for what was said, but also what was missing. Cisco hosted a media/analyst briefing session and I’m pretty sure I was the only analyst on the call. I’m not here to report the news, but will recap the gist of the story and then move on to what’s really on my mind. There’s no shortage of detail from the news sites and the players involved, and to go down that road, you might as well start with Cisco’s press release.

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Briefly, three parties have come together to announce an initiative that I think is great news for smart grid, and needs to be recognized as such. Leading the effort of course, is Cisco, and this type of thing is becoming the norm for how they are seizing opportunities and creating momentum – not just for Cisco, but smart grid overall. For this initiative, the supporting cast is Vancouver-based Pulse (News - Alert) Energy, and the city of Vancouver itself. Pulse Energy is not a household name in my circles, but they have a thriving energy management software business, mostly out of Western Canada. They sure got to play on a big stage for this call, and I have no doubt this will be a major boost for their growth prospects.

Rounding out the players is the city of Vancouver, which is still basking in the world stage glow of the Winter Olympics. We all know how green Vancouver is in an environmental sense, and they’re trying very hard here to stretch that halo to green energy and smart grid. It doesn’t fully work for me, but for a lot of reasons, Vancouver fits the bill for this announcement quite nicely.

Cisco is very much the driver of all this, so let’s start there. Those of us in telecom know how network-centric Cisco is, and they have this magical ability to frame all the world’s problems in this model. They see the “Internet of things” concept being very real here and 100% applicable to how we build and run cities. In Cisco’s world, cities are just giant networks that run much better when everything is connected.

I happen to share that view, and believe that Cisco brings a lot to the table here. They did a great job talking about how urbanized the planet is becoming – we keep adding more cities, and existing cities only get bigger and bigger. The Internet is central to creating the networks that cities will need to sustain themselves, and by 2020, Cisco contends that 3 billion people will be connected on the Web. I also share the underlying implication from these mega-trends – we all need to think differently to manage what’s coming, and technology has a huge role to play here.

So, why Vancouver? Cisco is a very global company, and they love a big challenge. On the world stage, Vancouver is hardly a big city – barely a million people, and that’s a minor neighborhood in places like Shanghai or Mexico City. I’m sure there are lots of reasons – Vancouver has a sexy cachet, it’s relatively close to San Jose, it’s Pacific Rim – which is where most of the cities Cisco is really interested in are nearby. All true, but I suspect it has more to do with Vancouver’s willingness to be a test case for these programs, as well as being a small city where deployment can be done fairly easily, quickly and cost effectively. The Canadian in me says ‘who cares?’ – it’s all good, and Canada gets fantastic global exposure all the way through.

The intended outcome of this joint effort is to make Vancouver the greenest city in the world, and on a human level, to reduce our consumption and help producers better manage their energy output. These are all desirable goals, and if the partnership works, they will have a “template” for other cities to follow, and for that, Cisco should be applauded. This is the kind of vision and execution that smart grid really needs, but it also raises some difficult questions for me.

First off, there was a lot of talk on the call about working collaboratively with key stakeholders to identify goals and scope out a roadmap. This included the need to develop standards, which is a very familiar theme in telecom, as this lays the foundation for faster adoption and lower cost deployments. Fair enough, but it’s not clear whether those standards will be industry-wide or defined around what’s best for Cisco’s networks. This is always the contention with vendor-led initiatives, especially by one that’s so dominant. What about Pulse? Will these standards extend to their competitors? Do they have a role in this process?

Then there’s Vancouver. At face value, this program sounds like a done deal. I’m not familiar with the local politics, but don’t public sector programs of this scale usually involve public consultation and a competitive bid process? This is a great deal for Pulse, but I can’t imagine their competitors are very happy about this. As we learned during the Q&A, the cost of deploying these programs is not known, nor is the magnitude of potential savings for home owners and businesses. Without any sense of ROI, there’s really no way to tell if this is fiscally sound. Mind you, the same could be said about the costs to mount the Olympics, but somehow I don’t think the anticipated energy benefits will come anywhere near the sense of pride the Olympics instilled not just in Vancouver, but Canada as a whole.

Finally, there’s the elephant in the room, BC Hydro. They were mentioned in passing a couple of times on the call, but in my mind were conspicuous by their absence. Again, I’m not familiar with the local politics, but there must be a back story here. For all the talk about collaboration with stakeholders, it doesn’t add up for me to have these grand scale smart grid ambitions without utilities in the mix. Ultimately, they stand to benefit more than anyone here, but that was hardly mentioned. I’m not in a position to speculate further on this angle, especially since BC Hydro is run by the province, and this initiative is municipally-based.

As such, there is a lot of latitude here to be both praiseworthy and critical. I’m going to wrap up here with one foot in each camp. For the former, I’m impressed and excited about the vision Cisco is bringing here, along with their willingness to partner with a relatively small player in Pulse Energy. On the critical side, however I can only conclude that this story would have sounded more comprehensive if BC Hydro was on the same stage.

If this program moves ahead as advertised – and in fact succeeds – I think this will be a huge wakeup call for utilities. They are the most important players in this equation, and if they’re not an active stakeholder, I can see the disintermedation scenario from telecom taking root here. Cisco and Pulse can add a lot of value to the business of generating, distributing and managing energy, and if that’s where the innovation is coming from, utilities will lose leverage. Sure, they’re protected by regulation, but that’s no excuse to allow the road ahead to be charted by others.

What do you think?


Jon Arnold is co-founder of Intelligent Communications Partners (News - Alert) (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 Erin Monda
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