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Cisco Adding Brains to the Power System's Brawn

May 18, 2009

Cisco Systems is boosting the IQ of the world's electricity distribution systems.

Having played a key role in the Internet and digital voice revolutions, the networking giant sees the global power system as the next mega networking opportunity. A "smart grid," company executives say, will help utility companies and their customers manage power supply and energy consumption more efficiently, while also reducing their impact on the environment.

Cisco has already taken steps into the smart grid arena. The company recently announced a partnership with General Electric and Florida Power & Light to build the nation's most comprehensive smart grid deployment in Miami, Fla., and it's engaged in a smart grid pilot with the City of Austin, Texas, among other projects in Europe and the United States. Today, the company outlined its plans to build out smart grid on a global scale.

For more insight into Cisco's smart grid vision, why Cisco is uniquely suited to the challenge of building intelligence into electrical systems, and how a brainier power system can benefit utilities, businesses and consumers, News@Cisco spoke with Marie Hattar, Cisco's vice president of network systems and security.

What is Cisco's smart grid vision?

Marie Hattar: It's to provide a two-way, end-to-end communications fabric for the electricity system based on Internet Protocol (IP) standards, all the way from power generation plant to the commercial, home or industrial customer. Today, if you think about it, most of the communication that occurs in the electrical system is one way, with very limited feedback on energy consumption. In the case of residential customers, for example, the meter reader comes to your home once a month or once a year. It's not real time, it's not two-way – it's one-way communication of historical data, which means no feedback or learning is occurring in the system and therefore no increased efficiency. When we build out this communication fabric, what we will enable is better two-way communication, intelligence, resiliency, and end-to-end management of power supply and demand. It will help utilities plan better and improve the reliability of energy transmission and better control operational costs.

What are some of the challenges facing the current electricity system, and how will a smart grid address them?

Marie Hattar: If Thomas Edison were to come back today, he would see very little has changed in the electrical system. There simply has not been a lot of investment into modernizing it, so it's aging and inefficient. Furthermore, it was built to meet peak demand. A lot of capacity on the power-generation side and the grid side is used only marginally, which causes a lot of inefficiencies in the system.

At the same time, demand for electricity outpaces planned generation capacity, so the system is very heavily taxed and prone to outages, which cost U.S industry about $50 billion each year. And this is likely to get worse as consumers use more energy-hungry devices. Imagine an electric vehicle in every garage that gets plugged in to recharge at 7 p.m. every night! A smart grid will give the system a facelift, so to speak. It will enable utilities to better balance their equipment utilization without having to significantly invest in generation and grid capacity extension because they will be able to better manage and distribute power.

Another challenge is that there is currently no effective way to store electricity on a large scale once you generate it. If the electricity isn't used, it's gone. And in the meantime, you've created pollution and carbon footprints. One area of interest is electric vehicles – specifically, using their batteries to store electricity and feed it back into the grid at times of peak demand. Electric vehicle batteries could even be used to store excess capacity from renewable energy sources such as wind and sun, then feed it back when renewable sources don't produce and when capacity is tight. In other words, electric cars could become the first industrial-scale energy-storage devices, enabling us to substitute carbon dioxide emissions. This kind of activity would also need to be orchestrated by the communication mechanism and end-to-end management of a smart grid.

Another challenge with the existing grid is that it cannot integrate a significant proportion of energy from wind, solar and other renewable sources. These sources generate energy when the sun shines and the wind blows, not necessarily when it's needed. To integrate more of this energy into the grid would require a bi-directional flow of electricity, which in turn requires communication and connectivity between transformers as well as a certain degree of intelligence, all of which a smart grid would provide.

What are the benefits of a smart grid to consumers, utilities and others?

Marie Hattar: A smart grid would include a home energy management system as well as smart meters and sensors in people's homes. This would allow consumers to have a better understanding of their electricity usage. With that knowledge comes power, so they can act on that information to better control their electrical bill, potentially reducing it by as much as 15 percent. One of the most important aspects is that consumers can have energy efficiency without losing comfort. Home energy management systems manage the power consumption of major appliances in the background automatically, based on consumers' pre-defined preferences. So the washing machine, dishwasher or circulation pump would start automatically when the electricity tariff is low. It will also give consumers choice as to the source of energy they want to use – electrical, solar or wind, and so on.

"We see smart grid as the next big network that's out there. It will be 10 to 100 times bigger than the Internet because potentially every device in every home and business will participate in it."

— Marie Hattar, vice president, Cisco network systems and security

As for utilities, a smart grid will help them significantly reduce outages and smooth out costly peak loads by helping them better manage demand. They will also be able to monitor the maintenance of their equipment more readily and therefore be proactive in identifying potential weaknesses in the system. This will often allow them to react before an outage occurs, or, in case of an outage, to immediately locate the fault and remotely "heal" the grid. This will significantly increase efficiency and reduce grid losses. Utilities will also be able to offer more resilient power because if there's a failure in one area, they can very easily leverage other sources of electrical energy to redirect it using this communication mechanism. Today, if extra capacity is required to stabilize the system, the so-called "balancing power" is provided by flexible but expensive power stations. But a smart grid could adjust demand so that those expensive power stations need not come online, thus significantly reducing operating costs and the investment required to have such reserve capacity in place.

The benefits of a smart grid extend to others, too. For example, a large-scale integration of renewable energy sources will significantly reduce dependency on oil and gas imports, thus increasing security of supply for economies that cannot cover their energy demand with own primary energy resources. And if you're generating less, or if home consumers are using less energy, there's less of a carbon footprint, which is good for business, good for the consumer and good for everybody.

What is the strategy for a build out on this scale?

Marie Hattar: From the Cisco perspective, the smart grid is a combination of products, technologies, services and eco-system partners. Our goal is to participate in smart grid end to end, providing utility-specific ruggedized routers and switches, our data center offerings, and technologies such as Cisco EnergyWise, which helps businesses monitor and control the energy consumption of their networking devices.

Our products and services will address critical points within the energy infrastructure. There's transmission and distribution automation – that's one critical point. There's also smart metering communication, as well as home and business energy management. In addition, there will also be tremendous build out of data centers for the utilities to handle the data from the sensors in the smart grid. Those are the logical groupings that we plan to build out. Each of them is owned by different entities, and together they make up the smart grid communication infrastructure. We're working with multiple different jurisdictions at the same time – cities, counties and regions.

Who is Cisco partnering with in this effort?

Marie Hattar: We are partnering with a number of governments and leading utilities around the world and we are exploring partnerships throughout the energy and technology sector with system integrators, smart meter vendors, power utility integrators and automation vendors, among others. We will have more to announce on those partnerships later this year.

What makes Cisco a good fit in this industry?

Marie Hattar: We participated in building the Internet, and we see this as the next big network that's out there. If you think about what smart grid will offer, it will be 10 to 100 times bigger than the Internet because every home and business has electricity, and potentially every device in every home and business will participate in this network. Looking to the future, you can imagine that your fridge will be smart, your washing machine will be smart – every device that you have could potentially be a point or a node on the smart grid. You can think of it as the next evolution of the Internet – a machine-to-machine communication network, rather than human-to-human, with a lot of intelligent nodes and sensors in the system. That requires a very robust communication infrastructure that is standards based, so that all the different devices in the smart grid network will be able to plug right in. We at Cisco have been the leader in driving IP as the standard and have done this transition time and time again. So we believe we are the ideal partner and that we are best suited to do this for the utilities.

Will Cisco use the Internet to provide the communications infrastructure for the smart grid, and if not, why not?

Marie Hattar: Over the past 20 years, we have witnessed a transition of key infrastructures to IP, such as financial, communications, defense and industry. However, an IP-based smart grid should not be confused with opening smart grid to the Internet. This is not an open platform, but rather a communications fabric that we think should be based on IP standards. Best practices developed from securing other critical infrastructures will be applied to the smart grid to segment business functions and provide the necessary security in the form of authentication, authorization, integrity, confidentiality and threat prevention.

What are the main challenges Cisco faces in this endeavor?

Marie Hattar: An undertaking of this scale naturally faces some challenges. For example, the way power grids are operated varies greatly around the globe, so the products and services for North America are very different from what they need to be for Europe. Getting agreement on the standards is also a challenge, as is working with all the different manufacturers of sensors and smart meters to get that interoperability and bring it onto a common network. I would liken it very much to the early days of cellular, where you had a lot of different standards and a lot of different devices that needed to be brought onto a common platform.

What is the scale of this initiative and what market opportunity does it represent for Cisco?

Marie Hattar: The Obama Administration has made build out of the smart grid a priority in the United States, and the economic stimulus package passed by Congress provides a total of $30 billion for smart grid or advanced energy initiatives. Cisco Smart Grid is a global initiative, and we expect it to be a $20 billion per year market in communications infrastructure by 2013. That's why Cisco, which expects to have a multi-billion dollar share of that market, has made smart grid one of its top company priorities for 2009 and beyond.

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