Navigant Research Blog

The Comms Are the Cloud

Richelle Elberg — May 14, 2015

The Internet of Things (IoT). Smart grids. The energy cloud. What do all of these have in common? In order to achieve their promise, ubiquitous, high-speed, high-bandwidth communications networks will be needed. The energy cloud, as described in Navigant Research’s white paper, is expected to radically change the electric power industry over the coming decades. The energy cloud will emerge as the old-school, centralized monopoly utility model transforms into a decentralized, intelligent, two-way grid where utilities, markets, and prosumers transact in real-time for a cleaner, more efficient, reliable, and cost-effective energy industry. The potential in the long run is huge.

But today, adequate, ubiquitous communications that meet utilities’ needs for smart grid technology simply haven’t been widely deployed. Even in North America and Europe, where smart grid efforts have been underway for a decade or more, the infrastructure in place to transport all of that valuable data to the systems and devices that need it is, at best, a patchwork quilt of legacy and newer technologies, deployed in an ad hoc manner. The energy cloud won’t become a reality until seamless, high-speed, interoperable communications networks are present gridwide.

Utilities struggle with their communications networking strategies, even as the media waxes enthusiastically about the IoT and the coming nirvana of 5G technology; the recently announced mega-merger between Nokia and Alcatel-Lucent has been attributed to the marriage of the advanced wireless and wired communications that 5G capabilities will demand. But 5G networks are a decade away; a bit of a reality check is in order. Here’s the good news—and the bad news—about communications and the energy cloud.

The Good News

Perhaps the best news for vendors and service providers is the massive demand for utility communications that the energy cloud will engender. Navigant Research estimates that communications gear for basic smart grid communications technology will be a $30 billion opportunity over the next decade.

Communications Node Revenue by Region, World Markets: 2014-2023

Blog chart - RE(Source: Navigant Research)

 

This is likely conservative, based on expectations for deployment of advanced metering infrastructure (AMI), distribution automation and substation automation technology, and on the leading communications technologies used today—microwave, 900 MHz mesh, cellular, etc. (Detailed forecasts can be found in Navigant Research’s report, Smart Grid Networking and Communications.)

Additive to the infrastructure markets included in this forecast will be service fees collected by comms providers, independent network providers (see PDVwireless), networks for electric vehicle charging networks, connected solar panels, and more.

Remember the cell phones of the nineties? The novelty of being able call someone from outside of the home or office? That’s where we are today in terms of smart grid connectivity and applications. We can measure power consumption thanks to smart meters; we can monitor grid devices thanks to new sensor technology. That visibility provides a wealth of knowledge to grid operators—it’s great!

Now think about the explosion of applications—and revenue—that smart phones combined with 4G networks has allowed. That’s where the energy cloud is heading.

The Bad News

Solving the problem of ubiquitous connectivity—with low latency, high bandwidth, and seamless interoperability—is no small task.  Utilities tend to invest in the lowest cost connectivity solution for the application at hand. Once an AMI network is in place, utilities then begin to think about ways to leverage those networks. Now that we can connect to the meter, we could try (insert the smart grid application du jour here)! But all too often, the network in place wasn’t configured with that application in mind. Existing networks can be a serious limiting factor to cutting-edge smart grid applications. But those sunk investments have to be depreciated and a new rate case may be many years away.

Cautious Optimism

Despite the challenges utilities face in developing holistic, long-term, gridwide communications strategies, it will happen. It will take years—maybe decades—but the energy cloud revolution is already underway. Build the comms, and the energy cloud will come.

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