The smart grid opportunity

The smart grid may just become the next big opportunity for providers of both telecom services and equipment — the questions are when and how much. According to Cisco Systems, when it announced its plans to offer smart grid solutions, the smart grid communications infrastructure market is expected to generate as much as $20 billion per year by 2013 — a sizeable sum that could benefit many providers of telecom solutions.

Why? Because a high-speed, highly-secure, two-way, IP-based, fully integrated communications architecture that addresses the backbone, metro and last mile (also referred to as spur) segments of the network is key to the smart grid. It is this network that enables real-time information and control, to allow every part of the grid to both “talk” and “listen” from the substation to — and into — the customer premises.

Utilities have long deployed communications infrastructure for both their operational and corporate functions. Although these two major function areas typically make use of the same facilities, their needs are quite different in terms of bandwidth, latency, traffic type, availability, performance, security and communications protocols. Additionally, these networks typically support a variety of technologies, with many systems built on proprietary protocols. This results in a fragmented communications infrastructure, which often leads to higher operational costs, as data is not available when needed, bandwidth is often insufficient, and most systems are not two-way or don't support the delivery of information in real time.

As such, IP becomes the unifying technology for the smart grid to enable multiple equipment types to seamlessly work over multiple media (copper, fiber, wireless, microwave, etc.) and end-to-end. Although there is still much standards work to be completed — such as mapping smart grid applications against the IP suite and developing a set of profiles specific to the smart grid — telecom equipment vendors will be well-positioned to offer their knowledge (and hopefully their equipment) to this effort. In addition, their expertise in design, deployment and management of large-scale communications infrastructures will prove invaluable to utilities.

Beyond the basic communication infrastructure, the smart grid will also offer new opportunities to software application developers, broadband equipment providers, broadband service providers, consumer electronics manufacturers, storage and data management providers, and systems integrators, just to name a few. As such, there is potential for significant and sustainable job creation as well as partnerships. This is evidenced by the recent announcements from AT&T, Qwest Communications, Rogers Communications, T-Mobile and Verizon regarding the use of their high-speed infrastructures for smart metering applications.

Although utilities have had a long history with communications networks, they will likely need significant consultative assistance in order to understand current and future implications of their technology choices, thus leading to a potential managed services opportunity for those vendors with this capability.

Despite challenges associated with regulatory/policy issues, standards, interoperability and cyber security, smart grid activity is accelerating thanks to $4.5 billion in stimulus funding. If you want to be a part of it, the time to get involved is now.

Teresa Mastrangelo is principal analyst with broadbandtrends and the soon-to-launch smartgridtrends research service.