Six Myths About the Smart Grid

If “green” was the buzzword of 2008, you can bet that “smart grid” will be the buzzword for 2009 and probably even 2010.  There is a lot of confusion surrounding the smart grid and for good reason.  Most people didn’t really pay much attention to the regular grid – unless there was a blackout, of course.  But now you can’t pick up a newspaper or read a blog without hearing about it, whether its plans for development under the stimulus package or GE’s captivating ecomagination commercials – smart energy messages abound.

But with any trend comes hype, myths and gossip – and smart grid news is no different.  GreenTech Grid’s Michael Kanellos posted an excellent resource on understanding 6 myths in smart grid technology and it’s full of insight and truths into the newest buzzword in North America.

1. Consumers Want Control

This is probably the biggest red herring out there. The conventional wisdom is that consumers won’t allow utilities to crank down their air conditioners or other appliances. It smacks of big brotherism and impinges on their freedom, critics say. Even if you offer them a discount and tell them letting the utility have control will avoid brown outs, they still will want autonomy.

Pure bunk. A good percentage of Americans would go to work with bee beards if you offered them a 10 percent discount. We are the cheapest people on the planet. Besides, the vast majority of people don’t even know how to program their thermostats, so most will conclude they are giving up nothing for something.

Customers don’t want control – they want to abdicate control.

2. It Won’t Save Money or Reduce Power

Another complaint is that the gains and cost savings will be incremental. On an individual level, the gains are small. In Italy, consumers participating in the Ener1 program save about €1.5 a month on their utility bill, barely enough for two Mars bars.

Nonetheless, it adds up. That’s €18 a year, or close to $25 in U.S. dollars. And Enel has 30 million customers signed up. The total comes to over a half billion Euros.

3. ZigBee Has Won

One radio standard will rule them all. Won’t happen. You will see different standards for different parts of the world. In Sweden and some other European countries, however, concrete construction is somewhat common, which creates potential problems with maintaining a signal via ZigBee from inside the house to an external transmitter, said Meera Balakrishnan, Freescale’s Global Segment Leader for Building Control in a recent interview. Partly as a result, power-line networking has been adopted in many areas in Europe.

And in China, the issue is cost. “They are looking at sub-1GHz,” she said. “We are talking cents” for radios for meters, she added.

Probably the only trend everyone agrees on is that proprietary standards, although handy for security, will fade away.

4. Smart Grid Is the Computer Industry, Part II

The analogy to the computer industry is as follows. Computers are based around digital software and hardware. By deploying these and open standards, a massive ecosystem emerged that turned humble engineers into multibillionares. Smart grid is dependent on the same thing, power is more pervasive than PCs, and thus we are all going to be rich.

There is one problem with that analogy. The market for computer equipment and services consists of billions of independent consumers – everyone from DuPont to Barry’s Bail Bonds. The sheer variety means that brands like Zenith can live on in markets like India after fading away elsewhere selling computers.

The market for smart grid equipment, for the most part, will be dominated by utilities. There are only a few thousand in the U.S. and most of them will be content to follow the advice of the 20 to 50 big wigs willing to conduct early in-depth technical trials.

In about two years, much of the field will already be winnowed down.

If there is an analogy here, it is to Project Runway: You’re in or you’re out.

5. We Will Get a Moore’s Law to Drive it

Back to PC world analogies. The idea here is that Moore’s Law will help drive down the cost of equipment, thereby leading to an explosion in demand. In part, that’s true – the cheaper this stuff gets the more popular it will be. But Moore’s Law and semiconductors also ushered in new capabilities to consumers. It let them calculate numbers, shop online, obtain information and play shoot-em-up games with teens in Seoul at 3 a.m. It brought fire to the cave!

While Moore’s Law will make equipment cheaper, it won’t make it less utilitarian: it will flip the lights off. Landis+Gyr will not cultivate fanboys. (But just imagine how great a world like that would be: CNBC would provide breathless coverage about CEO Cameron O’Reilly getting a liver transplant and 24-year-old single males would camp outside fashionable SmartSynch store for the latest DCX peak shavers.) The janitor will be the one who understands the majesty of it most. Without consumer lust, margins will remail tight. Editor’s Note: O’Reilly isn’t going to the hospital. This is a take on a Steve Jobs issue.

6. Google, Microsoft, Oracle Will Dominate

In the past year, nearly all of the big names from the IT market have come into the smart grid space and the growing suspicion is that they will buy or decimate the cast of startups. In many ways, it makes sense. Silver Spring Networks, after all, makes an intelligent networking card: There is no reason Cisco can’t make and sell more of them for less money.

Nonetheless, IT companies – for all of their virtues – have had difficulty in shifting into new markets. Remember when Intel tried web hosting? Or got into cameras? Or when Microsoft tried software for wristwatches? Whether it is consumer backlash or corporate inertia, these companies find it difficult to colonize things that run too far from their normal course of business.

Will Google really put a lot of effort into its smart meter effort? Imagine the company meetings. The search group will claim that it brings unprecedented levels of knowledge and enlightenment to the corners of the earth. Its motto: “Do No Evil.”

Then the energy group presents: “We Make Thermostats.”

Many companies will do well – Cisco, Intel and SAP could do better than most – but energy may ultimately and always remain a sideshow.

Posted by: Ashley / Follow me on Twitter

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