Cisco makes opening play in major smart grid push

Fittingly, Cisco this week launched a ruggedized, industry-specific router and switch as the first products in its new portfolio of smart grid products for energy utilities, leveraging its market strength in IP network hardware and software.

Perhaps just as interesting is what comes next in its smart grid product road map: home-based user interfaces to help customers manage their energy consumption, yet another move by Cisco into the consumer/home market.

Cisco launched its smart grid strategy almost exactly a year ago, quickly following that up with the formation of a smart grid ecosystem and security play and an investment in smart grid platform provider GridNet. The vendor has said it believes smart grid opportunities could be as big a market for it as its existing enterprise or service provider markets.

Overall, Cisco sees an IP-powered smart grid opportunity focused around six different network segments, in all of which it believes it can play a significant role, including: utility operations center; traditional IT data center; utility and regional long-haul networks; transmission and substation networks (similar to an enterprise LAN); field network, or the local mesh, broadband and Wi-Fi smart meter-driven network near the home; and the premises area network within tomorrow’s connected home, enabling energy management user interfaces, said Sanket Amberkar, senior director of smart grid strategy for Cisco.

Cisco has been advocating, and is now delivering, an IP-based approach to the smart grid. And while smart grid networks are primarily data networks – particularly initially – energy utilities have the same opportunity, and challenge, in consolidating other types of internal traffic onto the IP infrastructure, including internal voice communications and video traffic from customers (driven by things such as video surveillance applications) onto a single, converged IP network, Amberkar said.

“If you look at the utility substation network today, they are essentially buying and running a different leased line for every type of traffic they are carrying; that’s a very high opex expense,” he said. “With IP they’ll be able to run all different types of traffic over different virtual network segments. The actual prioritization of traffic will be different than traditional telecom service provider networks – for instance, control and diagnostics traffic will take highest precedence. And dealing with so many [likely IPv6-based] end-point nodes will be unique. But the idea of taking advantage of IP in the network is the same.”

To address that opportunity, Cisco introduced its first formal Connected Grid products this week, the Cisco 2010 Connected Grid Router and Cisco 2520 Connected Grid Switch. Both products are specifically designed for deployment in energy substation environments, which are much harsher and more exposed to the elements than traditional service provider or enterprise network centers. To meet those requirements, the products meet or exceed IEEE 1613 and IEC61850-3 standards for utility substation environments, including the ability to withstand temperatures down to -40 degrees Celsius, plus provide protection against electrical surges and interference. Other unique aspects of the product: no on-system fans, to reduce “breakable” moving parts, and hot-swappable power supplies to help keep the systems up and running. To counter concerns about cyber-terrorism, the products include advanced security capabilities, including support for North American Electric Reliability Corp. / Critical Infrastructure Protection (NERC/CIP) standards.

From a backplane and software perspective, the CGR 2010 and CGS 2520 aren’t too different from traditional Cisco routers and switches, for instance running on standard Cisco IOS software. Energy utilities use the substation-deployed routers and switches to form a secure communications infrastructure to capture and analyze energy distribution information collected by intelligent monitoring devices on the energy grid. Utility operators use that data to manage and maintain power transmission and distribution equipment and identify, isolate and automate repairs, among other capabilities.

The billion-dollar question – both for vendors like Cisco and for telecom and utility operators – is exactly who will run tomorrow’s smart grid networks. While telecom service providers have the network expertise, regulatory and financial considerations make it more likely that many energy companies will opt to buy, build and run their own smart grid networks, Amberkar said. The reason is that most utilities set rates on a “return-on-asset” basis. “Only if they have capital expenditures that have made it into what they call their 'rate case' can they charge against that investment,” he said. “Anything an energy utility might do with a telecom service provider on a service basis would fall into opex,” and thus wouldn’t be able to be recovered via rate changes.

Given that regulatory framework and the massive opportunity in front of them, energy and telecom companies here in the U.S. are still trying to figure out their partner/compete models. Elsewhere in the world, however, smart grid regulations differ significantly, Amberkar said. In Europe, for instance, energy companies are much more likely to work with telecom providers, while in markets like Japan, energy and communications are entirely vertically integrated by government mandate, he said.

Cisco announced several energy companies already using its new routers and switches, including San Diego Gas & Electric, Southern California Edison, Italy’s Enel Group and Germany’s E.ON Westfalen Weser.

Up next from Cisco in its Connected Grid product line: home user interface products to let customers better manage their energy demand and consumption, Amberkar said. While he declined to go into detail, he did say Cisco “has no intention of doing smart meters; we’ll partner on those. But we can and will be on both sides of the smart meter,” including in the substation and local wireless network with existing products and in the home with new energy management products, building on existing Cisco home network products like its new Valet home Wi-Fi router and other planned products like in-home telepresence systems and more.