Want Thirteen Billion Dollars to Invest in Your Smart Grid Network?

Utility executives have heard the arguments for a fully interconnected power distribution network that is resilient, secure, auto-balancing, and self-monitoring and healing – i.e., a Smart Grid. The popular press has picked up on the buzz surrounding a Smart Grid’s ability to provide electricity consumers with real-time information on their bills, improve outage response, and measure the contributions of solar panels or plug-in hybrids. Thanks to the looming energy crisis, the public is becoming increasingly receptive to the notion, and the public utilities commissions are about to demand it.

But it’s not so simple for the utilities themselves, each of which is required to deliver a Return on Resources that is calculated by a complex combination of regulations, infrastructure constraints, and the desires of diverse constituents.

Whether to build and maintain a service-area wide proprietary network to support the future Smart Grid is a complex and expensive proposition. Utilities are required to deliver a Return on Resources that is calculated by a combination of regulations, infrastructure constraints, and the desires of diverse constituents. The business case seems to be taking forever to build a consensus. The questions persist:

• How many meters should be supported for AMI to make economic sense?
• How much data should be returned by the meters, and how often?
• Which service areas will be the first to reap the benefits of AMI?
• How can voluntary TOU programs be offered to an entire service area if the customers who sign up are sparsely spread out?
• What current AMI systems will work with future technologies, from substation video monitoring to two-way communication with thermostats?
• How reliable are small AMI pilot deployments in predicting the success of full-scale system-wide deployments?

Why not use the AMI network that already exists?

Cellular network providers are investing billions of dollars in their wireless networks. AT&T invested a total of $13 billion during the last two years alone. Those investments were spent efficiently in a highly competitive environment to deliver high-speed connectivity anywhere that people live and work. Of course, the primary intent of these expenditures is to support consumer users and mobile workers with web browsing and email. Communicating with meters is a much simpler proposition – and one can rely on these consumer applications to provide real-world evidence that scalability to system-wide AMI will not be a problem.

What does all this investment mean to a utility? Millions of dollars have already been spent by carriers in the service area of almost every utility, targeted at the places where most people spend their time – at the office and at home – creating an AMI network ready for immediate AMI and future Smart Grid applications.

More important is where that money is going next. These billions of dollars are spent in another highly competitive market – for telecommunications equipment. Those vendors spend their revenue seeking technological improvements, cost reductions, and manufacturing reliability. The pressures that drive telecommunications products to low-cost commoditization are as high as in any industry on the planet.

Meanwhile, consumers continue to adopt cellular technology at a rapid pace: GSM, with 82% of the global handset market, is the fastest-growing communications technology ever. The billionth GSM user was connected in Q1 2004 – just a dozen years after the commercial launch of the first GSM networks. The second billionth GSM user was connected in Q2 2006 – just two and a half years after the first billion. The total number of cellular users worldwide is currently 2.8 billion, with another billion on the way in the next two years (see the figure below). To address the needs of these consumers, many billions of dollars (in addition to the billions spent on network equipment) are spent each year in the highly competitive handset market to deliver greater functionality at a lower cost to each individual. These investments accelerate the handset state of the art, from bag phones in the 1990’s to today’s tiny mobile video players.

Mobile Subscription Growth by Region, 2001-2010

Thus, those investments by the network providers are seeding a multibillion-dollar ecosystem that is also pushing down the cost of every utility’s existing AMI network and pushing up its performance. What sort of comparable pressures are pushing for improvement in other AMI communications technologies? As shown in the following table, the difference is quickly apparent.

* Worldwide estimates based on publicly available deployment and revenue figures

† Mesh networks will require a backhaul method, which is expected to be cellular

Deployment and Investment Comparison

Utilities can certainly choose AMI communications technologies other than cellular based on similarities in 2007 performance and cost, but which technology makes the most sense as each of these technologies progresses? In 2010, after another $100 billion has been invested in the development of cellular technology, how will a utility decision to spend millions in ratepayer money on a redundant network appear to the public?

The challenge of an aging workforce at many utilities will put further pressure on the need for the highest Return on Resources and is an additional reason to pursue an AMI initiative. Younger workers, who will replace these retiring employees, have grown up on text messaging and cellular connectivity. They have built an intrinsic knowledge of how connectivity should be provided, and they will be ready to support, utilize, and innovate around the concept of cellular connectivity for AMI.

SmartSynch is the leader in providing cellular connectivity to utilities for their AMI infrastructure. Partnering with global technology leaders to ensure maximum functionality and long term reliability, SmartSynch applies the latest advances created worldwide to better, faster, scalable, more secure, and economical AMI networks for its customers..

Clearly, technologies provided by AT&T Wireless and SmartSynch represent the right path for utilities seeking to capitalize on the AMI capabilities of today, and the Smart Grid opportunities of tomorrow.