ABB picked up another dance partner with the planned acquisition of Tropos Networks, a leader in standards-based 802.11 Wi-Fi and WiMAX for smart grid applications.  This is the latest in a spree of major and minor ABB acquisitions, with the most recent big one being January’s announcement that ABB would acquire Thomas & Betts for $3.9 billon.  Certainly Tropos Networks, with somewhere around 50 people, counts in ABB’s “minor” acquisition tally.  But it is significant nonetheless, as ABB is jumping into the communications market while its other smart grid buys have focused on software and analytics (Ventyx, Obvient Strategies) or expansion of power infrastructure and equipment (such as Powercorp).

ABB is no stranger to smart grid communications, with leadership in IEC 61850 standards for substation automation and a popular line of communications gateways.  However, ABB has been largely agnostic on actual communications technologies.  Tropos now puts ABB in the middle of the Field Area Network battle, a crowded segment with many private / public / wired / wireless offerings from a plethora of large and small vendors.  Tropos has had respectable success with Wi-Fi based mesh networks for distribution automation, AMI backhaul, and other smart grid applications, but like others, has found breakaway success elusive.

One of the key assertions of smart grid technology adoption is an evolution from vertically integrated application silos (including communications) toward horizontal multi-layer networks supporting multiple applications.  Yet this acquisition could be viewed another vertical element to ABB’s distribution and substation automation solutions.  And ABB would not be alone, as GE continues to talk about WiMAX field networks, S&C continues to develop its SpeedNet technology, and Cooper Industries (soon to be Eaton) picked up Eka Systems not long ago.  Does this portend a continuing mish-mash of grid communications?

We think the answer is a little yes and little no.  Utility business models still favor projects that have fully self-contained ROIs, making more general multi-application investments in grid infrastructure difficult to justify.  This makes the job of broader communications companies such as Cisco, Trilliant, and Silver Spring Networks (outside of AMI) that much harder.  Yet as each of these solutions adopts IP standards, which is happening though with frustratingly varying degrees, interconnectivity into viable “networks of networks” become more possible, and the benefits of a layered multi-service network can be realized.

Getting back to ABB and Tropos, there are likely other good business drivers for the acquisition outside of smart grid, as there are other industrial automation, transportation, and mining applications where the Tropos solution can help.  And Tropos, whose major strength is in North America, can help expand ABB’s footprint as well.

Naturally, other independent vendors of grid communications technology, including Trilliant, FreeWave Technologies, On-Ramp Wireless, and Silver Spring Networks, are certainly watching and wondering if one of the other grid infrastructure vendors might ask them to dance. Fortunately for them, the music is still playing.

The steady waves of consolidation within the smart energy sector produced a major deal this week with Eaton’s planned $11.8 billion acquisition of Cooper Industries, one of the largest to date.  If anyone thinks energy management or the broader clean technology market is fading, think again.

It’s easy to think of both Eaton and Cooper as big old industrial companies, and in many ways they are.  Most commentary on the acquisition has focused on improved brand and global reach, business diversification, and favorable corporate tax treatments in Ireland, which is where the combined company will be headquartered.  This is all true enough.  But one does not need to look far to see the evolution of smart energy as a major underlying rationale for this combination.

Eaton already has been positioning its technology across the power, hydraulics, aerospace, truck, and auto industry segments as an enabler of energy efficiency gains.  As an example, Eaton is already an established leader in commercial and industrial power systems, data centers, and electric vehicle (EV) charging, all key systems associated with smart buildings, green data centers, and EV infrastructure.

Cooper has been focused on similar power management issues, mostly matching up on either end of where Eaton is today.  Cooper is a leading vendor of utility-focused distribution and substation automation technology, expanding the portfolio with acquisitions including Cannon, Cybectec, Cyme, and niche AMI startup Eka Systems.  This theoretically links up well with Eaton’s existing strength in heavy-duty commercial and industrial power distribution capabilities.  At the end-use level, Cooper’s lighting and controls strengthen Eaton’s reach into the smart buildings area, leveraging at least a dozen different Cooper acquisitions in this space over the last eight years.  As is so often claimed in these deals, end-to-end solutions are now possible.

Leaving aside the usual (and substantial) practical integration issues, the acquisition places Eaton in a unique position to drive convergence of smart grid, smart buildings, and smart transportation, with significant links also into the smart energy and smart industry domains.  This corresponds exactly with the overall “smart energy ecosystem” upon which we here at Pike Research are focused.  Though we are fully aware of the challenges facing the smart energy evolution and convergence, we also see clearly the many opportunities.  Eaton now has the chance to join an elite group of companies, including Siemens, GE, and perhaps most closely, Schneider Electric, that have the scale and breadth to address the full waterfront smart energy opportunities.

So just as the cleantech hype of recent years is subsiding, combinations such as this remind us that cleantech is really just growing up, and that as for all the college graduates hitting the streets during this season, the future is really just starting.

While communications technology was used in the electrical grid long before we started labeling it as “smart,” integration of these communications networks into a common fabric is an essential characteristic of the smart grid.  This integration requires adapting existing standards or creating new ones to meet the specific needs of the grid applications.  That process is well underway – as documented in Pike Research’s new report, Smart Grid Networking and Communications.

There are two particular areas of progress to note: the evolution of a standards-based radio frequency (RF) mesh network for field area networks, and broader mainstream adoption of cellular communications.

The RF mesh network used for AMI networks and some distribution automation applications has historically been one of the most proprietary domains of grid communications.  Silver Spring Networks carved out a leadership position in the wave of AMI deployments starting in 2008-2009 by offering an IPv6-based system.  However, due to a lack of available standards, the radio and mesh protocols underneath the IP-layers remained proprietary.  The IEEE and IETF, with the participation of many of AMI vendors, embarked on development of the appropriate standards embodied in IEEE 802.15.4g , 6loWPAN , and RPL specifications.  Even as these were jelling, Cisco and Itron partnered (leveraging the Arch Rock technology acquired by Cisco) to develop a fully standard AMI network implementation, which was finally unveiled at the beginning of this year.  Virtually every other AMI vendor has released IP-based roadmaps and meters promising the flexibility to be “IEEE 802.15.4g ready.”

Dynamic pricing for electricity has long been the holy grail of the smart grid, particularly for smart metering.  The rationale is that if the retail price of electricity actually reflected the true time-based costs instead of a blurred monthly average, then consumers would become more efficient buyers, benefiting themselves, suppliers, the environment, and society.  If we can choose to buy less during demand peaks when generation costs are highest, and buy more when the grid is underutilized, then overall electricity bills will go down, peak demand is reduced, and the associated environmental impacts are lessened.  Everyone wins – so who’s to complain?

Well, quite a few consumer interest groups are complaining, ranging from the AARP to utility watchdog groups.  While some complaints fit within the ongoing smart metering paranoia, there are legitimate concerns as well, including:

• Low-income, elderly, and other disadvantaged groups may not be able to shift to off-peak use, and hence may face higher bills. Images of grandma turning off her oxygen, shivering in the cold or sweating out a heat wave because of smart meters are persuasive.
• There is a general assumption that consumers will happily make “comfort vs. cost” tradeoffs in energy use.  This is counter to the trend toward flat rate pricing elsewhere, including the telecom industry, heretofore the master of time-of-use pricing.
• While there is little argument against “opt-in” dynamic pricing programs, most agree that dynamic pricing must be mandatory or implemented as an “opt-out” program to achieve the desired benefits. This muddles the message of enabling “consumer choice” via smart metering.

Underlying all these concerns is an assumption that for someone to win with dynamic pricing, someone else has to lose.  The goal may be to reduce demand peaks and fill underutilized valleys, effectively lowering the average, but it is true that some will likely pay more with dynamic rates.  The question is who?

Interestingly, opposition to dynamic pricing can be found on both ends of our politically polarized spectrum. Those toward the right fear Big Brother taking control of their thermostats and appliances (here, utilities = government). Those bent leftward see the social good of universal electricity being corrupted, leaving the vulnerable unprotected (here, utilities = big business).  I am sure smart grid advocates would love to unite Tea Party and Occupy Wall Street folks, but not this way!

These complexities abounded last week when I attended the New England Restructuring Roundtable, a group that since 1995 has been meeting several times a year to discuss “revolutionary changes in the electric power industry in Massachusetts and throughout New England.”  This meeting included a terrific panel of leading utilities, regulators, and consultants on the topic of smart grid and dynamic pricing. Among these were Oklahoma Gas and Electric (OG&E), which has an impressive smart grid program underway, and Ahmad Faruqui of The Brattle Group, presenting evidence from a multitude of dynamic pricing pilots.  The data show that not only does dynamic pricing work, but there are clear guidelines for how “dynamic” the pricing should be, and how consumer technology enhances the benefits.

Much of the Q&A centered on the “Who wins, who loses?” question.  What I think has been missing from the broader debate, is the question, Who wins/loses in the status quo of average rates?  Clearly heavy peak users are effectively being subsidized by everyone else.  Efficient users are subsidizing inefficient users. Using class-bias stereotypes, McMansion-owning consumers running heavy-duty HVAC systems, pool filters, and hot tubs regardless of peak periods are being subsidized by other, less power-hungry ratepayers, including grandma just trying to stay warm (or cool).

In this context, consumer advocates should be clamoring for the “peakers” to “pay their fair share.”  And more capitalistic types should welcome systems that make energy a free market with more consumer choice and effective pricing mechanisms.  Of course, programs are likely needed for disadvantaged groups, but this is nothing new.  And there is evidence that even low-income consumers are often able to respond to dynamic pricing incentives and share in the benefits.

Ultimately, regulators and legislators, armed with increasingly better data from pilots and carefully considered consumer protections, will need the courage to drive dynamic pricing implementation.  With smart meter deployments now reaching critical mass, technology will no longer be an obstacle.  And perhaps fairness and markets will converge toward the same goal.