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Smart Grid Strategies for a Global Marketplace

A smart grid infrastructure based on open standards and Internet protocols can take the global electric grid from the 19th to the 21st century.

September 24, 2009

By Jenny Carless

Today's electric utility companies have their hands full with myriad dilemmas: the grid is old and increasingly insecure, the traditional one-way broadcast model is outmoded, supply and demand patterns are changing, and utilities are under pressure to address increasing energy demand much more efficiently.

Further, consumers are calling for lower energy bills, more reliable service, better visibility into their usage patterns and more choice about where their energy comes from.

The current state of the electric grid varies widely around the world. In the United States, the market is fragmented, with almost 3,000 utilities serving individual coverage areas. In contrast, many European countries have few provider options. In Asia and many emerging markets, we often find something in between.

Regardless of location, the strategy utility companies are rapidly turning to is the "smart grid" – an intelligent network infrastructure that can integrate all supply and demand elements connected to the electric grid.

"Utilities are recognizing the impossibility of continuing to operate successfully and meeting their many commitments without giving the grid a substantial overhaul," notes Guido Jouret, chief technology officer for Emerging Technologies at Cisco. "They realize the need for a smart grid."

A Familiar Model

Together with an ecosystem of partners, Cisco is building intelligent networks to meet evolving energy generation, distribution, storage and consumption demands. The strength of Cisco's smart grid strategy derives from a combination of technologies, services and partnerships that optimize communications, improve resiliency, and reduce the operational cost and complexity of the energy grid.

"We believe in a smart grid infrastructure that is developed around interoperability and open standards and is based on Internet protocols," says Jouret. "It's what we have done successfully in the data networking, voice and video worlds, and we think it's important to bring the same control protocols to the grid."

Needed: A Nervous System

"The electric grid today is like muscle and bone without a nervous system – and we need to implement that nervous system," explains Jouret. "We need to drive bi-directional information flow, to enable dynamic and effective communication among all grid components."

The Smart Grid is Helping to Change Consumers' Behavior

Cisco, IBM and Dutch utility Nuon have teamed up on a pilot to help the City of Amsterdam make smarter use of energy. The pilot – involving 500 households – puts into action an innovative energy management system, featuring smart meters and other home energy management technology, that aids residents in making more informed decisions about their energy consumption.

An easy-to-read, touch-screen digital display is installed in participants' living rooms, providing real-time information about their energy consumption.

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The grid has traditionally been designed as a one-way broadcast mechanism: very few, but powerful, energy production stations transmit electricity to consumers. But the move to renewable resources and the advent of new smart devices require an intelligent peer-to-peer network. For example, houses now have solar panels on their roofs, and small micro plants generate electricity; as a result, energy and information must now flow to and from consumers.

So utility companies must become information utilities, transmitting information as well as electricity. They are going to use real-time demand signals to adapt supply, and they will send real-time supply information to modulate demand. To do this, they need to update their data centers and deploy a secure communications infrastructure to connect all elements of the grid back into those centers.

Intelligence in the network will allow utilities to provide better, more reliable service and options to consumers while enabling their own operations to run more reliably and efficiently.

"When we can start programming devices rather than simply turning them on and off, we can begin to fine-tune what we're doing and bring our energy use in line with where it needs to be," says Alan Webber, industry analyst with Pike Research. "So, for example, if you can take a smart device and match it up with a really solid network, you can be proactive – making decisions ahead of time and managing your energy costs much better."

The Smart Grid

The smart grid addresses the diverse challenges utilities face today – with advances such as smart metering, dynamic grid management, demand response, improved security and cost savings.

Smart Metering
A smart meter at a customer's home can report electricity consumption in almost real time, giving residents more choice about when and how much energy they use. In the future, meters will be able to report on and manage the use by individual appliances and allow customers to set preferences around peak and off-peak usage. For example, you will be able to plug in your electric vehicle when you get home in the evening but tell the system to recharge it in the middle of the night, when rates are cheapest and the grid has surplus supply.

Benefits accrue to the utilities themselves, as well – through improved operational efficiency (reading and managing meters remotely, for example) and better theft detection (globally, 10 to 20 percent of energy consumed is not paid for).

Dynamic Grid Management
Often, the only way a utility knows when an outage occurs is when a customer calls to report it, because there is no monitoring to the grid's "last mile."

"As we roll out the smart grid and can connect all our equipment – from the power station to the consumer – over an intelligent network, we will have much better visibility into the state of the equipment at any given time," says Todd Arnold, senior vice president for Smart Grid and Customer Systems at Duke Energy, a U.S. utility company.

Demand Response
The global electric grid is designed for peak capacity. But supplying that extra kilowatt of power to ensure that everyone gets electricity when they expect it is very expensive, and it requires enormous amounts of excess capacity.

The smart grid allows us to begin shifting the time of demand. So, rather than using as much energy during the day, some of that demand (such as dishwashers, clothes washers/dryers and electric vehicles) is moved to off-peak times (at night, for example).

"The point is that an intelligent, secure smart grid provides almost unlimited potential to get creative in addressing our energy challenges, no matter where we are."

— Guido Jouret, Chief Technology Officer for Emerging Technologies, Cisco

"Estimates project that there is enough energy in the U.S. grid alone to replace about 70 percent of the cars on the road in this country with electric cars, without having to build a single new power plant – simply by shifting demand to off-peak hours," says Jouret.

Improved Security
An intelligent, IP-based grid network can address both cyber- and physical security concerns.

Once we start putting control information over any kind of network, we must ensure that no one can hack in, play games with the infrastructure or bring the system down. Physical security is critical, also: infrastructure at the "last mile" sits mostly unprotected and is vulnerable to vandalism. Networked video surveillance technology and access control technology can continuously monitor these remote locations over a smart grid.

Cost Savings
We've seen that a smart grid brings efficiencies to electric utility companies. Customers can see substantial savings, also.

"Cisco, IBM and Nuon have shown that there is considerable value to the customer in being able to monitor their energy use," notes Kjartan Skaugvoll, vice president and general manager of Sales at Nuon, a Dutch utility company. "Participants in our pilot study have seen savings of as much as 200 Euros per year on their utility bills."

Partnerships Are Driving Momentum

To facilitate the successful development of an end-to-end, highly secure smart grid communications infrastructure, Cisco is continuing its long history of building strong strategic relationships.

The company's efforts include participation in ground-breaking pilot studies; the creation of the Cisco Smart Grid Partner Ecosystem, to drive adoption of open communications standards for smart grids; the formation of a Smart Grid Technical Advisory Board made up of leading, innovative utility and energy customers from around the world; and membership in the Zigbee Alliance, to help drive the adoption of IP-based communications.

Greater than the Sum of its Parts

The value of collaboration can be seen in a joint effort between Cisco and Duke Energy. The two are working together to fast-track Duke's plans to transform its electric system into a digital smart grid – creating a more interoperable network that brings more value to the consumer and to the utility.

Their collaboration will consist of a variety of initiatives. One example involves developing and validating an end-to-end smart grid architecture that will be open, secure and interoperable; another entails testing various hardware and software communications capabilities, such as home energy management equipment and durable, weather-proof communications equipment designed for electric substations.

"Cisco has a history of remarkable competence in building out data networks, while we bring expertise in electric and gas distribution networks," notes Arnold. "There is tremendous benefit in working together to integrate these two systems."

Arnold anticipates that one of those benefits will be overall grid reliability.

"With a smart grid, we can build in communication among key operating equipment," he adds. "That has important implications for improving overall reliability."

Different Regions, Different Challenges

Because the state of the electric grid is different, depending on its location, the smart grid is likely to roll out in ways that reflect each region's needs and markets. For example, developed nations will craft strategies to evolve from their current infrastructures.

In the telephony market, developing nations have sometimes "leap-frogged" past land lines directly to cellular coverage. Jouret expects to see a similar jump to innovative smart-grid applications in these regions.

"The point is that an intelligent, secure smart grid provides almost unlimited potential to get creative in addressing our energy challenges, no matter where we are," he notes.

Jenny Carless is a freelance writer located in Santa Cruz, CA.

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