Jon Arnold (pictured left): We are coming to Smart Grid from an IT and telecom point of view rather than a utilities point of view because a lot of what Smart Grid is about revolves around communications technologies. Currently, most investment is targeted at upgrading the infrastructure of the grid itself – the plumbing – as was the case in the telecom industry which started to upgrade ten years ago to accommodate IP communications technologies. There are, in fact, a lot of parallels between the situation that the telecoms faced and the utilities’ current challenge: telecoms used to be just as regulated as the utilities are now before they went through a process of privatization and deregulation.

Smart Grid is very much about upgrading the infrastructure, but it is also about enabling communication with the users of energy services, whether it is in the home or in commercial or industrial applications. That’s where for us the Smart Grid space gets a little more interesting. The idea of having two-way, real-time communication is valuable because it helps the utility become more efficient, but also because it presents new ways to engage with consumers: through better understanding of how energy is used and managed, opportunities to create new services and new ways of using energy will appear, particularly in the smart home arena where the consumer is all of a sudden becomes an active player.

This development is very similar to what happened in telecom. In the days of rotary phones, the telcos had complete control and consumers didn’t have much to do with it other than pay the bill. Today, our expectations and our involvement are much greater. As consumers, we have a lot more input into the price we pay, the services we use and the choices that are available to us. While the price may have dropped for traditional telco services, these companies have had a huge number of new opportunities opened up for them. We believe that the same thing will happen with the utilities market. Once the subscriber is in the picture, it will drive demand for new types of services and new ways of communicating. These in turn will help the utilities to invent new forms of value, and to become more innovative.

 

IT in Canada: You talked about evolution towards the “Energy/Utility” network on the Smart Grid portal – how close is this, and which providers do you see at the forefront of this kind of effort? How does WiMAX (News - Alert) play here?

JA: The kind of innovation that we are talking about is not what the utilities are used to doing - this is not in their culture right now, and this is where some of the tension arises. Utilities continue to be highly regulated; however, if they can become aware of some of the parallels between the future of their own industry and the telco experience, the learning curve may be shortened. Smart Grid is going to bring together two worlds that normally are very separate – the telecoms and utilities - because at the end of the day they are both selling services to the same customer. Just as telecom has merged with video and wireless has merged with wireline, the telecoms and utilities may cooperate to jointly offer new services, or perhaps may compete for business.

So while Smart Grid opens up a new frontier of opportunity, it also contains threats. In my view, there is more at risk for telcos because it is easier for utilities to move into the voice services business than it is for telcos to enter the energy business. Utilities have some inherent advantages over the telcos from that perspective. Though the IP and energy networks are separate and have different capabilities, who’s to say that the utilities would even need to build their own? It may be possible for them to just piggyback over the telecom networks…. There are different ways for the networks to merge.

IT in Canada: Could you consider the Toronto Hydro (now Cogeco) One Zone offering to be a good example of this merging – of a utility’s involvement in the communications business?

JA: Yes, for the utilities, it is not expensive to build out the infrastructure because they already own the rights of way. For wireless in particular, it simply requires putting the transmitters on the hydro poles. It is very easy for them to set up a wireless mesh network in a controlled environment – in the downtown core where they have all the means to do it. The problem is, no one really needs a service like that – unless of course it is free – and that is why this type of service hasn’t really gone anywhere.

IT in Canada: I notice that you invited two Canadian speakers to the Summit – can you describe some of the important players in the Canadian Smart Grid market, and their near and longer term objectives? Ontario is often cited, along with California, as a jurisdiction that is at the forefront of Smart Grid developments. What has Ontario done to deserve that accolade?

JA: In terms of Canada, I would say is that Hydro One has been ahead of the game with its adoption of AMI (Advanced Metering Infrastructure). Metering is really the heart and soul of a lot of the Smart Grid activity as this is where the money and the energy are managed. The Toronto Hydro program is a good example of advanced metering where through intelligent monitoring the provider is able to take information from your location and feed it back into its systems. While the provider gets the information needed to exercise more control over the grid, the customer gets a rebate. BC Hydro and Hydro Quebec have also been very progressive about using these types of metering systems. We do have our share of success stories, which are driven in part by our climate. The utilities have a lot to worry about: we are not building any more nuclear power plants, and the hydro projects aren’t growing so the utilities have to be on the ball about efficiency.

IT in Canada: Are any Canadian utilities currently offering support for co-generation activities, i.e. opportunities for consumers to feed energy generated from alternative sources back into the grid in return for some kind of discount?

JA: We had a panel at the Summit on a topic called ‘demand response’, which is a similar concept. A lot of demand response initiatives help create refund opportunities, and since this allows us to put money back into the consumer’s pocket, this area is viewed as a big pay off for Smart Grid technology. There are a number of large companies with this type of solution, such as the US-based Trilliant (News - Alert), which does have operations in Toronto and is a strategic partner for Ontario Hydro. These companies are well established and have been doing this kind of thing on a commercial basis for years. But once Smart Grid moves to the home, there will be a huge opportunity to do things like translate micro savings of energy into consumer rebates due to the large number of homes involved. So if this is what you mean by co-generation, we do have the technology available to move ahead in this direction. We can’t put up windmills on our roofs, but I am sure that within five years there will be government-sponsored programs that will advertise “install a solar panel on your roof and get a rebate.”

IT in Canada: So even though the fundamental technologies needed to make Smart Grid a reality have been in place for some time, the application of this to the home market is very new. What are some of the new consumer applications and where is ‘smart home’ going?

JA: This is the exciting part - this is where the Googles and the Microsofts and the IBMs of the world become very interested. When you start tying energy management and energy consumption to smart home appliances, there are multiple possibilities for companies such as Samsung (News - Alert), Maytag or GE who have products in the home which are connected to the grid. Think about the car - in the world of SIP, a smart-grid-enabled car simply becomes another end point that plugs into the grid to get charged. This is a much longer term view, but PHEV vehicles currently exist and there is a company called Couloumb that is now pioneering the development of a charging station for electric cars. When the grid becomes more ubiquitous, there will be smart homes, but also smart streets and smart cities and it will grow to the point where the grid becomes one interworked mesh of power networks. Of course, the danger is that when the grid becomes that centralized and that efficient, it will be a huge target for terrorists.

IT in Canada: Yes, I sat in on a presentation by SAP (News - Alert) and London Hydro last year to discuss a Smart Grid module that London Hydro had developed using SAP software and �arko Sumic, VP and utilities specialist at Gartner (News - Alert) (News - Alert) made some interesting points on security. In his view, a centralized grid is a target, but security becomes a much bigger issue in the grid because two-way communication and all these new opportunities for plug in by consumers creates many more access points to the system – each of which introduces new potential risk.

JA: We had a panel on security issues because energy services are so vital. Security was also a huge concern in telecom when VoIP and SIP were introduced as these technologies would be very vulnerable if the network was compromised. And it would be no different with smart grid.

There is another element to the security issue though that has a “big brother” feel about it. Some people look at the potential for a highly centralized grid with some trepidation as this would give the utilities an awful lot of market power. So in addition to concern over the potential for hacking and terrorism, there is the potential for abuse of market power. On the other hand, it is still a regulated space and we are hoping that the good guys will win.

IT in Canada: What about cross border issues? Right now we share energy across the Canada/US border: the biggest energy market for Quebec, for example, is New York State. When we have Smart Grid, will it be easier or harder for us to sell energy? Are there going to be cross border issues in terms of regulation or protocols?

JA: That’s an important question. I don’t know how much Smart Grid is going to help extend the utilities’ ability to trade energy or ship it further out. I don’t think Smart Grid is going to change that very much, but there may ultimately be some impact on the market. We may, for example, see an ‘Enron-style’ futures trading organization for cross border energy. That does create a whole different set of issues for sure.

At the end of the day, a lot of Smart Grid activity is being driven by federal government subsidies – stimulus funding, government regulation and policy are now inspiring momentum in this space. As long as government will is there, smart grid will happen. But if that pipe dries up, and no one is able to recognize quick or real returns, things could change in a hurry. Smart Grid won’t happen on its own as there are too many entrenched interests (i.e. the utilities) that are already making good profits.

IT in Canada: Yes, and it seems that there is more push south of the border than there is north of the border.

JA: That is because energy is such a huge issue in the United States, which is much more dependent on fossil fuel than we are in Canada. Half of our energy is hydro generated, whereas in the United States, only 20 percent is. They are much more reliant on coal and nuclear energy generation sources and their system is not as reliable as ours is – they are more prone to blackouts. But we are spoiled in Canada and will not be immune to these problems forever. We simply can’t generate enough power to keep pace with our growing demand. Supply and demand of energy is way out of whack, and Smart Grid will not help us generate more energy.

IT in Canada: No, just better management of what we do have.