Chris Hood's Blog – HoodAtWork

NY Times – To Build a Smart Grid, Start With Smart Meters December 1, 2009

FOR nearly 30 years, Itron has dominated the American market in what had been a profitable but unglamorous field, automating power, gas and water meters. But with $8 billion in government and private money devoted to modernizing the power grid, meter automation is suddenly a growth industry. Without millions of new smart meters, no smart grid is possible.

Like many established technology companies, Itron has wrestled with how to adapt. It faces well-financed and well-connected start-ups offering the prospect of managing energy use from a desktop computer.

Even as it has lost big contracts to agile new competitors, Itron has maintained a cautious pace. Now that strategy may be paying off, with the most prominent start-up stumbling over the introduction of its new system.

Itron, of Liberty Lake, Wash., was started in 1977 on the first wave of modern meter reading. Utility bills were assessed by workers who went house to house using pencil and pad to record readings from mechanical meters.

Itron replaced the pad and pencil with a hand-held computer so that meter readings could be loaded into a computerized billing system.

In time, the meters could send signals to trucks driving though a neighborhood. The trucks could read as many as 16,000 meters a day, compared with 500 meters with its most advanced hand-held reader. Itron quickly grabbed and has held 50 percent of the automated meter market in the United States.

Itron maintained its lead by carefully — some would say slowly — engineering solid technology.

But the smart grid requires a major shift. For it to work, meters must collect information not once a month for billing, but every few minutes, a huge amount of data, so a utility can save energy by channeling only as much electricity as an area needs at a time. An industrial area might need large amounts of power in the day, but less at night.

New smart meters also need two-way communication. Before they just sent billing information to the power company. Now a power company needs to send instructions back through the meter to home appliances, like a thermostat, that can be adjusted by a few degrees on a hot day to avoid a brownout.

The idea is that if electricity is used more efficiently, fewer plants will have to be built, pollution will be reduced and people will save money.

While everyone seems to know what they want the smart grid to do, few agree on how to do it. Each meter company wants to establish its design for the grid as part of the standard. The first recommendation will come from the National Institute of Standards and Technology next month. The standard will continue to evolve by a consensus of state and federal regulators.

Of the start-ups in the smart grid business, none have a higher profile than Silver Spring Networks. The company is backed by the renowned venture capital firm Kleiner Perkins Caufield & Byers, counts Google as an investor and has Al Gore, a Kleiner Perkins partner, on its advisory board.

Silver Spring, of Redwood City, Calif., conceived a strong marketing message — creating the Internet for electricity.

“You can call it marketing, but they did drive the right message home,” said John Quealy, an industry analyst. Silver Spring’s innovation was to look past meters to market the system that connects them. It proposes to build a network based on Internet protocol that would connect meters from a variety of companies to its version of the grid.

That message has been a success for Silver Spring. In 2009, when Itron announced winning few contracts, Silver Spring announced four major contracts and called itself the “most widely adopted smart grid platform in America.” In response, Itron designed its meter and systems to adapt with software to the Internet protocol, or other standards.

“We have lost some deals and have not been as competitive as we might have been, but I don’t think if we went more quickly we would have had the right system,” said Deloris Duquette, Itron’s vice president for investor relations and corporate communications.

Itron focused on delivering on its old contracts. It did not bid on new work for nearly a year. It spent 15 months with Southern California Edison designing how the system would be used, then spent a year testing its metering before introducing it to the public.

It also changed its marketing. “We are being painted by the competition as a stodgy meter company,” Ms. Duquette said. “We aren’t. We are, and have always been, a technology company.”

Itron changed its advertising slogan to “Smart grid reality” from “Smart metering for the smart grid.” That may seem minor, but it is beginning to resonate. Silver Spring gained ground selling its system’s potential, but the deployment has not been entirely smooth.

A lawsuit in California claims that the metering system for Pacific Gas and Electric overcharges customers. California State Senator Dean Florez has called for a halt to the smart meter deployment, and the California Utilities Commission is investigating. The utility said the higher bills resulted from a rate increase and a hot summer. Eric Dresselhuys, executive vice president of Silver Springs, declined to comment.

Since making the changes, Itron said, it is a finalist for contracts it would have not been considered for previously. “It’s the credibility that we really understand the requirements, that we have things in the field that are in operation, and that we have thought this through for the long term,” said Richard Creegan, an Itron vice president.

Mr. Quealy, the analyst, said, “Utilities are buying technology to avoid risk.”