The first Smart Grid Cyber Security Summit was held recently in San Jose. IBM’s Andy Bochman, in his excellent Smart Grid Security blog (http://smartgridsecurity.blogspot.com) provides a good review of the proceedings, and I’ll add a few of my own thoughts.

The attendance of approximately 75 people was not bad for a first time event, but well below the typical 200-300 people drawn other smart grid conferences. There were few utilities present. My informal count was three, including invited panelists, with none from California. Interestingly, the California PUC was there in force. A similar cyber security event I spoke at in Washington, D.C. in June attracted no more than 25 people, despite a strong speaker lineup. Is cyber security simply not that high on the industry’s priority list?

After listening to some of the expert presentations, it certainly ought to be. The refrain was consistent: the current grid, with its hodgepodge industrial control system (ICS) technologies, is highly vulnerable to a cyber attack that could destroy critical generation and T&D assets. Resulting outages could last for weeks, causing economic devastation. Smart grid integration could make it worse. Utility IT staffs with some security knowledge don’t understand ICS, and operations groups that do don’t trust, or even like, the IT groups. Nationally, very few experts (perhaps tens to low hundreds) understand enough ICS and IT to be useful. Most industry executives have their heads in the sand. The few that don’t are thwarted by clueless regulators that deny rate cases for even modest security improvements. The recently discovered Stuxnet infestation targeting Siemens SCADA systems (see: http://www.symantec.com/connect/blogs/stuxnet-introduces-first-known-rootkit-scada-devices) provides the first hard evidence that we should be afraid – very afraid. The passion of the alarm sounded by these speakers was hard to ignore, yet where is the progress?

As a recovering marketing executive, I wondered why this message is apparently not getting through. One completely unscientific (and probably unfair) observation is the security messengers appear to be culturally worlds apart from their utility audiences. They are more likely to be in tee shirts than ties, have longer hair and beards, have body piercings and tattoos, and are proud to have been fired more than once for “telling the truth” to their management. Many have chosen to live in rural locations, have backup generators, and own more than one gun. It is hard to imagine a starker contrast to the buttoned-down-white-shirt-and-tie utility executive. Could this be a major impediment to grid security?

The good news from the conference is the tide appears to be turning in recent months. Smart meter vendors in particular have ramped up security R&D efforts considerably. To paraphrase one panelist: “I’ve cried that the emperor has no clothes, and now he’s hired me to be his tailor”. The virtuous cycle of a recognized need creating market demand that spurs robust vendor R&D seems to be underway. Security standards efforts are in full swing, and though some will argue their efficacy, FERC and other agencies are ready to push them. And judging from side conversations amongst the conference expert comparing their congressional briefing calendars, the US Congress is one group that is listening, with some rare bipartisanship.

At Pike Research, we have been forecasting significant opportunity in the smart grid cyber security arena for some time. Most recently, my colleague Bob Lockhart (also at the conference), authored a report on Smart Meter Security, highlighting specific opportunities in this slice of the smart grid. Security needs be a baked-in part of the “smart” in the smart grid, and the innovation opportunity extends across the value chain, including silicon, software, equipment, communications and services. Let’s hope we get there in time.

It is a common opinion of U.S. citizens less familiar with the worldwide solar market; states in the northern regions of the U.S. are poorly suited for solar installations. Naturally, installing vast arrays of solar panels in the great southwest deserts of the U.S. is perceived as an excellent way to generate solar power and move the U.S. towards a greener future. And why not build solar farms in Southern California, Texas, Florida and even many of the states in the southern reaches of the U.S.? Installing solar modules and panels on roofs and on open areas in these states makes sense to most Americans.

But installing solar on roofs and in large utility-scale installations in the New England states or the tier of states from Pennsylvania to Oregon … that just doesn’t make sense …does it? Are not the northern tier states just too far north to offer enough sunshine to make solar installations worthwhile? What about the snow that falls in depths measured in feet in many cases in the winter? Won’t solar modules quit generating power if not collapse under the snow load? To boot, much of the northern tier of states suffers through many days covered with clouds, especially around the Great Lakes.

Interestingly, the long-tested experience of the world’s largest user of solar suggests otherwise. Longtime leader in worldwide support and development of the solar market, Germany will account for about 54% of the worldwide installations in 2010 according to Pike Research estimates. Consequently, Germany provides the best example of location, climate, incentives, and federal-level policy to develop, install, and use solar panels and modules.

But isn’t Germany better positioned than the northern tier of states in the U.S. to receive the sun’s energy? Germany’s latitude is about the same as that of the mid-Atlantic … right?

Wrong! Frankfurt am Main near Germany’s center is located at 50 degrees 10 minutes northern latitude, and that’s not only north of North Carolina but also north of North Dakota. In fact, Frankfurt AM is a little north of Winnipeg, Canada!

To put Germany’s latitude in perspective, the following picture places a map of Germany superimposed on a map of the U.S. at about the right latitude.
Comparison of size and latitude between Germany and the U.S.

Though the scale of country sizes may be a little off, note that Frankfurt is located at about the latitude of Winnipeg. Also, Germany also receives a lot of snow in the winter and clouds for much of the year.

So, using world solar leader Germany as an example, would not the northern tier of states be suitable for solar installations? We think so.

Fleet managers are finding they have an increasing array of tools to help lower the environmental impact of their fleet (a.k.a. “Green” their fleet). These include the implementation of “no idle” rules, replacing older trucks with hybrid trucks or battery electric trucks, or improving equipment utilization (basically reducing the size of trucks that are used for particular jobs). Some of the fleet managers I’ve spoken to in the last year have even acknowledged that they have reduced their fleet’s environmental impact by simply reducing the number of vehicles (in most cases this seems to be more based on the economic realities of the last two years, rather than environmental stewardship). One other tool that has emerged in the last few years in significantly higher numbers is using telematics to reduce vehicle emissions.

Telematics offer the fleet manager data about their fleet while providing the driver with information about the route. These data could include everything from engine diagnostics, idle time, fuel economy, tracking emissions data, and cargo information (temperature and trailer location), to detailed routing information, GPS, erratic driving, and real time traffic details for drivers.

In order to effectively reduce emissions from the fleet, telematics are being used by fleet managers to help them reduce the time that vehicles are idling either through rerouting to reduce traffic stops or reducing idling while drivers do their job (such as shutting off an engine during package delivery, etc.). In some telematics systems, the fleet managers can keep the vehicles’ engines operating efficiently by being notified when vehicles are in need of service, and reduce risk by monitoring driver behavior.

According to analysts, C.J. Driscoll & Associates, at the end of 2009, there were about 3.6 million telematics devices in use by fleets, including wireless handheld units. Whether these implementations are done specifically for environmental reasons is a bit murky, because most fleet managers recognize the multiple benefits of telematics for their fleet. Pike Research has found that many fleet managers look to this as a tool for reducing fuel usage, which has a direct impact on their budget. As a result the concept of green telematics is not something that is seen in a vacuum. In real-world situations, fleet managers are more likely to subscribe to telematics for multiple benefits.

That said, in 2009, an estimated 10% of fleets could be described as “Green Telematics Installations” because their main purpose is reducing emissions, in addition to reducing costs. This subset of telematics installations are looking to telematics to help with their emissions targets, but still recognize the other benefits such as lower costs, routing and reduced risks. The combination of continued pressure to meet emissions regulations and tight budgets will send many fleet managers to seek ways to reduce emissions without replacing or eliminating older trucks. As a result green telematics installations are expected to grow at a faster rate than telematics users in general, reaching 1.4 million green telematics installations by 2014, almost a quarter of all telematics installations.

China is likely to become the largest market for plug-in electric vehicles thanks to a larger relative government investment, but will trail the U.S. in hybrid sales.
The Chinese government announced it will spend $14.7 billion through 2020 on alternative drivetrain vehicles, with the bulk of the money going towards all-electric vehicles, according to news reports quoted by Edmunds.com’s Green Car Advisor.

That’s a greater outlay in consumer subsidies, industry incentives and spending on charging infrastructure than in the U.S. which (for now) boasts a much larger economy. The Chinese government would like 5 million alternative-fuel vehicles to be on the roads by 2020.

The U.S. government has committed more than $2.5 billion in incentives for battery makers, consumer purchases, and for charging infrastructure, but won’t come close to the Chinese commitment in future years. Not all of that money is bearing fruit. The DOE gave A123 Systems a $249 million grant last year to manufacture lithium ion batteries in Michigan, ostensibly for electric vehicles under contract to Chrysler. Last week A123 Systems ended its work with Chrysler and is now focusing more on batteries that provide energy storage for the grid.

Pike Research projects that between 2010 and 2015 China will have 1.85 million hybrids and EVs sold , with slightly more EVs (1 million) on the road. In the U.S. more than 2.3 million hybrids will be sold during that time, and 840,000 plug-in and all-electric vehicles.

China has a greater ability to direct its domestic market than the more open U.S. market, and with larger incentives and many first time car buyers coming into the market, it’s understandable that China will pass the U.S. in EV sales. The governments have similar motivations – a desire to reduce carbon emissions, increase domestic production, and enhancing energy security by reducing oil imports. While we’ve heard those arguments here for many years, China imported 52% of its oil in 2008, and if the country didn’t push EVs during the rapid expansion of the auto industry, that dependency would only increase. China also has the advantage of building out the grid with EVs in mind as they are adding generation and transmission capacity while the U.S. will seek to accommodate EV demand through gains in efficiency and stressing off-peak charging.

Pike Research doesn’t expect the EV market to substantially cannibalize hybrid sales. The U.S. hybrid market has been strong for years and will remain so, while hybrid sales in China are starting from a small base.