Navigant Research Blog

Bigger Not Always Better – Cisco Exits Home Energy

— August 16, 2011

As mentioned in an earlier post by my colleague Eric Bloom, last week Cisco began to clarify how its corporate restructuring – “refocusing on core businesses” – would impact its initiatives in energy management and smart grid. Eric discussed the commercial building energy management impact. Let’s take a brief look at home energy management and smart grid.

Laura Ipsen, Cisco’s Senior Vice President & General Manager for Smart Grid explained in a blog post, “…we will transition our focus from creating premise energy management devices to using the network as the platform for supporting innovative applications and architectures.” Translation: Cisco is backing away from the energy-specific Home Area Network (HAN), at least in terms of specific devices and associated management software. This follows a number of field trials, a significant partnership with Control4 announced just five months ago, and some ambitious utility-focused management software. All this effectively goes away.

Why back away now? Cisco could be seen as just the latest big-name tech company jumping off the home energy bandwagon, following Google (PowerMeter) and Microsoft (Hohm). Certainly, the factors driving Cisco’s biggest headcount reduction in its history is not a recipe for patience in the uncertain home energy market. The bottom line however, which may be of small comfort to Cisco’s HAN competitors, is a profitable business case in home energy management, and the industry policies needed to enable such a case, just are not clear enough.

Note this is not the smart grid capitulation that some in the industry have been whispering since Cisco announced its refocusing plans. Cisco remains active in the grid and, specifically with its impressive work with Itron, remains on track. Certainly, its initial grandiose pronouncements are now further humbled, but assuming Cisco stays in the home via Linksys and former Scientific Atlanta devices, they can still do what I always thought they would do: add home energy management as “just another feature” in these devices as the market develops.

This move by Cisco further proves one of my favorite business observations: bigger is not always better. Many buyers, especially utilities, tend to think that working with established vendors is always a safer choice compared to smaller companies. The fact is larger companies often have less resources and patience for emerging technologies than smaller companies that have bet the farm on a given application. The difference is not unlike the old adage about the contributions of chickens and pigs to an eggs and bacon breakfast: the chicken is involved, but the pig is committed.

Vendors focused on home energy management, such as Control4, Ecofactor, Energate, EnergyHub, and Tendril, may feel they’ve been called pigs now that Cisco has joined fellow market-makers Google and Microsoft in declaring their market not worth making. But utilities – especially those now under pressure to prove their smart meter investments will pay dividends for consumers – need to recognize the pigs are the ones truly committed to what is hoped to be a HAN feast.

 

Cisco’s New Building Energy Management Strategy

— August 16, 2011

You probably weren’t on Cisco’s fourth quarter earnings call last Wednesday. And even if you were, there’s a good chance you would have missed Cisco’s Chief Operating Officer, Gary Moore, casually make the following statement:

“We communicated this week the decision to adjust our investments in our energy business to match the needs of the market by focusing on energy management through standards-based solutions and will no longer be investing in premise energy management devices. As part of these efforts, we’re exploring options for our Network Building Mediator and Mediator Manager product line.”

In short, Cisco is rethinking a number of key components of its energy management suite. I would stop short of saying that Cisco is making a full exit from commercial building energy management given that it is retaining and enhancing several key elements of its BEMS platform – including EnergyWise. Perhaps the move could be better described as a shift away from “reinventing the wheel” with energy management, which so many of its channel partners and competitors have made solid strides on, rather than a shorting-out of a central part of its energy management strategy.

Just over two years ago, Cisco launched the Network Building Mediator and Mediator Manager line to build on its EnergyWise energy management platform. Over the last few years, the company has been continuing to enhance the capability of these products, expanding from systems for single buildings to comprehensive, end-to-end systems that enable global energy and facility management.

Over the last two years, however, the commercial building energy management space has become increasingly crowded by a number of good entrants, both large, established building systems players and systems integrators as well as start-ups. Cisco, it could be said, was taking a big bite by developing its own offering rather than honing its usual devices and architectures for smart building applications. When it acquired Richards-Zeta Building Intelligence in January 2009, it was clear that Cisco’s ambitions were big and different from its status quo.

Just a few weeks ago, Ed Richards, the former director of global business development of Cisco and one of the founders of Richards-Zeta, left the company. It would seem that his departure would all but herald Cisco’s exit from building energy management.

Yes, Cisco will almost certainly look to offload the Network Building Mediator and Mediator Manager in an effort to cut its losses. But that isn’t tantamount to an abandonment of its building energy management strategy. What we may end up seeing is a future in which Cisco aims to complement rather than redouble the offerings of other building energy management players, such as equipment vendors (JCI, Honeywell, Siemens, et cetera), IT companies (such as IBM, Microsoft, et cetera) as well as startups such as Optimum Energy and BuildingIQ.

In doing so, Cisco will be able to play to its own strengths – networking architecture development and sales of premium quality devices – while leaving many aspects of building energy management system integration to others. Perhaps this adds up to something less than Cisco originally envisioned, but it’s a safer bet at this point in the nascent commercial building energy management market.

There’s much more to say on the implications of Cisco’s home energy management offering, which my colleague, Bob Gohn, will follow up with shortly.

 

Exploring Distribution Automation’s Blurred Lines

— August 10, 2011

We have been forecasting that distribution automation will continue to emerge as one of the hottest smart grid applications and activity this year has not disappointed. Compared to the higher-profile smart meter and Advanced Meter Infrastructure (AMI) deployments, distribution automation investments often have clearer paybacks, can be deployed gradually with a tighter focus on problem areas, and perhaps most attractively, do not require any consumer involvement (i.e. behavior changes).

The term Distribution Automation (DA) actually covers a broad range of technologies and applications. Initially, it meant adding basic remote control capabilities to field-based devices, but increasingly includes advanced, dynamic optimization of the distribution grid. This is especially important as distributed generation and plug-in electric vehicles edge toward widespread deployment. As the evolution continues, the lines between DA and other smart grid applications, such as substation automation and AMI, begin to blur. Just this week, Elster Group announced the formation of the Smart Grid Voltage Conservation Alliance (SGVCA), a “working group that seeks to accelerate the adoption and validate the business benefits of voltage conservation for utilities through the convergence of Distribution Automation (DA) and Advanced Metering Infrastructure (AMI).” It turns out that smart meters can be very effective sensors for dynamic voltage monitoring, enabling significant efficiency savings for utilities and consumers alike.

This is a good opportunity to mention an upcoming conference in that I will have the pleasure of chairing this November in Raleigh, NC. The Smart Grid Distribution Automation Conference will explore these various aspects of DA applications and opportunities, including sessions on Fault Detection, Isolation, and Recovery (FDIR), Volt/VAR control, the future of substation automation and Supervisory Control and Data Acquisition (SCADA) technologies, DA/AMI integration, cyber security concerns, distribution and outage management systems (DMS/OMS), integration opportunities, electric vehicle support, and data analytics. Developed by Smart Grid Update, this event represents a uniquely intimate conference with a mix of individual presentations from industry leaders and a series of highly interactive panels that dispense with generic presentations and dive directly into audience driven discussion. I have the privilege of participating in many high-quality conferences, but this type of format is often the most fun.

It may not be obvious at first, but blurring the lines between different smart grid applications represents one of the key promises of the smart grid. By breaking through the traditional application silos of the past, a more generalized smart grid infrastructure can be leveraged to deliver new applications and value beyond the original, narrowly focused business cases. Certainly there are challenges to be faced along the way, ranging from the technology itself to organizational structures, but these are what make the smart grid such as fun place to be!

 

Smart Energy and Smart Transportation Country Profile – Australia

— July 19, 2011

Since the 2010 federal election, it has become increasingly clear that the “green” movement in Australia has come out of the shadows. With street marches to encourage a high carbon price (launched on July 10th) and increasing interest in smart grids and alternative vehicles, it is timely to provide a short overview of the current movements Down Under.

Background

Australia has a population over 22.5 million people, of which some 89% live in cities. The cities of Australia include two C40 Cities (see note), Sydney (population 4.5 million) and Melbourne (population just over 4 million). According to the 2008 census results, Australia has 8.1 million households.

Australia’s Energy Profile in 2008-2009

In 2008, according to Australian Energy Statistics, Australia consumed 5,773 PJ, of which 39% came from coal, both lignite and brown coal, and a further 34% came from natural gas. Although, as a country, Australia has the potential of many MWs of renewable energy to date it only supplies 5% of energy consumed.

Energy use is clearly dominated by just three sectors, electricity general, transport, and manufacturing, which cumulatively make up over three quarters of energy used.

Greenhouse Gas Emissions

In 2008, GHG emissions, in CO2 equivalent (MT CO2-e), totaled 576.2 million metric tons of carbon dioxide equivalent. Energy, stationary, transport, and fugitive emissions, makes up 72% of all emissions in 2008.

Smart Energy

Smart Grids Project

Australia is testing smart grids with the “Smart Grid, Smart City” project. In 2010, a consortium was awarded AUS$100 million to roll out and test a smart grid across districts in Sydney and Hunter Valley (better known for its wine!). The consortium is being led by EnergyAustralia and includes GE Energy Australia.

The project runs from 2010-2013 across Newcastle, Scone, Sydney CBD, Ku-ring-gai, and Newington and is being rolled out to allow residents to see real-time analysis on energy use.

The project includes (but is not limited to):

  • Installation of 50,000 smart meters
  • 2,000 homes converting to “Smart Homes” where residents can switch appliances on and off remotely via smart phones
  • Rolling out energy storage in homes with solar
  • Installing 25 solid oxide fuel cell micro combined heat and power (SOFC mCHP) from Ceramic Fuel Cells, Ltd. (CFCL) and five wind turbines
  • Installing of 12,000 smart sensors
  • This is an initial project to assess the usefulness and impacts of smart grids. If it is a success, then it will be interesting to see if the government rolls this out across territories.

    Renewable Energy Systems

    In August 2009, the Federal Government of Australia implemented a Renewable Energy Target scheme. The aim of the scheme is to ensure that 20% of Australia’s electricity supply will come from renewable sources by 2020.

    Much more recently, on July 7, 2011, the government announced through an emailed statement that it will set up a $3.4 billion (A$3.2 billion) Australian Renewable Energy Agency to consolidate support for renewable energy technology development. The agency will have an independent decision-making board appointed by the government and a chief executive officer appointed by the energy minister on recommendation of the board.

    Smart Transportation

    To date smart transportation in Australia has been limited to a handful of fuel cell buses in Perth, trails of a limited number of BEVs (around 20), and charging stations. The State of Victoria, capital Melbourne, is leading Australia in developing an integrated transport plan.

    In 2012, Renault will launch the Fluence Z.E. in Australia, with BetterPlace providing the infrastructure.

    Finally, on the on July 10, 2011, the Australian Prime Minister Julia Gillard announced a carbon tax to cover 500 of Australia’s top polluters, which are estimated to be responsible for more than two thirds of Australian carbon. According to local press, it is expected that the starting price of the tax will around $25 (AUS$23) per metric ton starting in July 2012.

    (Note: C40 cities is a Clinton Climate Initiative of the mayors of the 40 largest cities in the world. The aim of the C40 group is to create more sustainable cities, and reduce GHGs by common standards and group procurement of cutting edge technologies.

     

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