Telcos Tap Wireless Opportunities In the Smart Grid

1Executive Summary

A buildout of a smarter power grid in the U.S. could be one of the largest creators of wealth in the decade. According to the Edison Electric Institute, it’ll take at least $50 billion for all the investor-owned utilities (which make up 70 percent of the U.S. utilities) to roll out smart grid networks. That opportunity is starting to look pretty attractive to both startups developing new wireless technologies that can monitor and manage electricity demands and telcos, which have spent billions building out their own nearly ubiquitous wireless networks.

As the wireless industry has matured over the last decade, wireless radios and network technology have gotten sophisticated and cheap enough that the emergence of a smart grid will rest heavily on those years of innovation.

The four big telcos in the U.S. are certainly seeing the opportunities. While phone companies have sold space on their networks to utilities for years (particularly in Europe), they are more aggressively starting to court utilities and their smart grid rollouts. AT&T is working with smart meter technology maker SmartSynch, which will leverage AT&T’s wireless network to connect its smart meters with utility control stations. This week, AT&T and SmartSynch signed up their first utility customer, Texas-New Mexico Power (TNMP).

While AT&T seems to be the most aggressive U.S. phone company on the smart meter front, Verizon is clearly interested, too. The largest wireless company in the U.S. is working with both meter maker Itron and smart-grid firm Ambient to use its wireless network as backhaul, which connects an aggregation point on the utility network to the utility central office (not directly from the meter).

Cell phone companies have invested heavily in constructing and upgrading wireless broadband across the U.S., and they all have networks that have more than enough extra bandwidth to be able to provide the relatively low data requirements for smart meter wireless connections. The move to incorporate more smart grid services is part of a growing trend of the phone companies adding on automated, or machine-to-machine (M2M), type applications, which are less volatile and require less maintenance than consumer cell phone services. M2M services can also diversify a phone company’s offering, particularly for a cellular provider like Sprint that has fallen behind in the consumer acquisition race.

But why would a utility want to use a cellular network to either manage its smart meters or monitor electricity flows on the power grid? SmartSynch claims that it’s much cheaper for utilities to use an existing network like cellular, instead of constructing their own. SmartSynch’s CEO Stephen Johnston tells us that the cellular companies are now providing cellular network rates that “are getting a tremendous response from utilities,” though he declined to give the actual pricing information.

Cellular networks are also pretty ubiquitous at this point, offering reliable coverage in most areas, and because cellular networks are licensed spectrum and closely guarded networks, they can give some utilities reassurance about security or privacy concerns. Perhaps the biggest incentive is that in a world of rapidly changing technology, cell phone companies will be upgrading their own networks as part of their massive yearly capital expenses, and a utility doesn’t have to be locked into owning a network that could need more advanced technology just years after being rolled out.

But there are a lot of wireless connection options for utilities, and some companies contend that using a cellular network isn’t always the most cost effective. A utility could build out its own network, using a variety of wireless standards like unlicensed radio frequency, or even Wi-Fi, and avoid recurring fees from the network owner. Hopping onto a cellular network may have a lower upfront capital expense, but it could be more costly in the long run than building a private network that takes hardware, labor and technology upgrades. That’s the conclusion that Pacific Gas & Electric came to in 2007, when it chose a radio frequency mesh network as opposed to a cellular carrier contract, PG&E spokesperson Paul Moreno recently told the Wall Street Journal.

MuniFi gear maker Tropos says a utility can build out a Wi-Fi network that can undercut cellular prices considerably for the smart grid connection. Tropos tells us that its smart grid networks will cost about $2,000 to $5,000 per router (a smart-grid network needs 1 to 2 routers per square mile) and have a return on investment of three and a half years for a utility. The company says over a 5-10 year period it’s a cheaper option than a cellular network. Tropos is working with utility Burbank Water & Power on a smart grid pilot program.

But Tropos’ bet on city-owned Wi-Fi networks didn’t exactly pan out, and the company, founded in 2000, actually competed with the likes of AT&T in this market, too. SmartSynch says it has a network using WiFi-based smart meters up and running but that Wi-Fi didn’t give adequate coverage, so it has focused heavily on cellular. SmartSynch’s Johnston also says that the company’s research has found that, when utilities opt to build out their own networks, it typically takes a decade for them to see a return on investment.

Other startups and service providers are looking to newer, even more unproven wide-area wireless networks (WAN) than Wi-Fi, like WiMAX for possible smart-meter wireless connections. GE has developed a smart meter with an embedded WiMAX chip from Intel and is rolling out these meters in a project with Texas utility CenterPoint Energy. The startup Grid Net, which creates software for WiMAX-based smart-meter systems, is also backed by Intel and GE. Ontario’s Hydro One is working with WiMAX gear maker Redline Communications Group on a WiMAX-based smart grid project.

Whatever wireless technology utilities deploy to connect and monitor smart meters, the past decade of innovation in the wireless industry is enabling the emergence of the smart grid. Drops in the price of wireless chips, routers and radios for mobile computing mean utilities can afford to make the power grid smart enough to monitor and manage networks in real time. If that ends up being provided by the same company that manages your cell phone service, don’t be surprised.

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