US utilities scored a $3.4 billion windfall from the Department of Energy last week, money likely to impact a number of carriers and infrastructure vendors with a stake in smart grid networking. CommsDay spoke with DOE spokesperson Jen Stutsman to learn why the federal government is pouring billions into energy networking and the regulatory fate of a segment straddling both the power and telecoms industries.

Both President [Barack] Obama and [Energy] Secretary [Steven] Chu have made clear that modernizing the country’s electrical grid and transitioning to a smarter, clearer electricity system is critical for developing America’s clean energy economy for the future,” Stutsman said. “The Recovery Act provided a total of $4.5 billion for grid modernization and smart grid activities, with the $3.4 billion we announced earlier being the biggest component of that. What these technologies will allow us to do is improve the reliability of the electrical system around the country, empower consumers to improve their electrical use and save money on their electricity bills, and allow us to integrate renewable energy resources onto the grid in a way we’ve never been able to do before.”

Stutsman said the Obama administration had outlined a clean energy future and described the grants as “just the downpayment on that future. But it’s an important one. It’s an important step to catalyze private investors to come into the market and make these investments that will benefit consumers across the country.” Each grant requires the winning utilities and consortia to dig into their own wallets to augment the pot. DOE estimates its $3.4 billion award will ultimately reflect $8.1 billion in associated investments.

The DOE doled out awards to 100 projects from a pool of 390 applications. “Each application went through a rigorous peer review and selection process, where it was reviewed by at least four - and often five - reviewers who evaluated the technical, business, interoperability and cyber security aspects. We looked at technical ability, commercial viability, the qualifications of the management teams and the ability to provide cost share funding to match the federal grant, which was a requirement for each of the applications,” Stutsman explained.

“There were also a range of policy factors that were taken into account during the selection process, including job creation, geographic distribution of awards, pace of implementation, allocation between small and large projects and obviously the amount of funds available. At the end, the department selected the highest-ranking proposals.”

Those proposals are just that, Stutsman said. “We will now enter negotiations with each of these awardees to establish terms of the contract, including specific milestones they must hit. We expect to have the funding awarded onto contracts by the end of the year, and then we’ll turn our atten- tion to the implementation of these projects to ensure accountability and transparency.”

Stutsman admitted the DOE was likely to lose exclusive oversight of smart grids as the utility and telecom spaces converge.

“I think you’re already seeing, on a lot of the transmission and smart grid areas, cooperation and participation by multiple federal agencies,” she said. “Just this week Secretary Chu was one of many signatories for a memorandum of understanding on transmission siting for new transmission lines. That factors into how you see the smart grid. Federal siting for transmission lines has always been something that crosses department lines.”

Carriers and power companies are frequently regulated by the same body on the US state level, but the patchwork of federal agencies means responsibility bleeds from one to the other. “You’ve also seen a lot of cooperation in cyber security and interoperability,” Stutsman pointed out. “The National Institute for Standards and Technology at the Department of Commerce, for instance, is taking the lead with developing interoperability standards for all of these smart technologies. For cyber security requirements we are working with a multi-agency task force across the federal government including the Department of Homeland Security, the Department of Commerce and others to ensure that each of these projects - and all the utilities going forward, have the cyber security standards in place to ensure a secure transmission grid in the country.”

Nevertheless, the DOE sees universal smart grid deployment as inevitable. “What we saw with these awards is that we’re now going to have 100% of the nation’s transmission system covered with advanced monitoring and sensing capabilities,” Stutsman said, adding a second $615 million grant cycle to be awarded this month will go to multivendor integration projects. “The focus of the investment grant program was to get significant numbers of smart meters and smart grid technologies into homes. For a number of the projects we are seeing 100% of the consumers in some of these big areas covered by advanced meters and in-home devices.”

THE UTILITY PERSPECTIVE: Among the winners was the Sacramento Municipal Utility Department, which received a $127.5 million grant to modernize its transmission network. SMUD promised to invest $180.2 million of its own treasure to effect the overhaul, which is slated to include 600,000 smart meters and 50,000 residential management systems by 2012.

SMUD communications director Elisabeth Brinton said the utility would have gotten around to a smart grid rollout “eventually” but admitted the free money prodded it to “accelerate our investment.”

Brinton told CommsDay the California power company had a different perspective on smart grids than its carrier peers. “When you’re asking how a utility thinks of smart grid, we think of it as unifying technology that creates an end-to-end system between the supply side - which is power generation, whether it’s traditional sources like hydroelectric power or new renewable sources like wind and solar - and connects the onboarding of those resources all the way through the transmission and distributions aspects of the grid all the way to our end customers, be they business or residential.”

But the fundamentals remain the same across both industries. “The smart grid is essentially creating that integrated network using different types of technology and using interoperability so that very disparate types of technology can operate effectively,” she said, comparing the visualization of the smart grid to the Web.

“The physics of operating a grid are very complex. You have to be able to move electricity over long distances, you have to ramp up the voltage so you don’t lose, and then to get it safely into neighborhoods and homes and businesses you have to downgrade the voltage several steps along the way. And electricity can’t be stored, so it’s all a live circuit. Because of that, the smart grid technology creates this end-to-end system and the ability to start automating all of the zillions of transactions along the way to enable this big system to interoperate. A lot of this is software, so it’s analogous to the Internet, or the ability to bring together all these parts into a whole.”

Although some utilities have chosen to invest in their own infrastructure to handle smart grid communications and data networking, SMUD opted to work with a pair of undisclosed regional carriers. “We are partnered with two different carriers. We have a broad geographic region, so we have a primary carrier for our large urban core and we’re working with another carrier for our rural area.” Names are being kept under wraps while SMUD navigates the DOE negotiation phase, but Brinton said the top smart grid suppliers from the telecoms perspective - think Cisco Systems - were often considered negligible players from utilities’ POV. She cited Landison Gear and Silver Spring Networks as key vendors for the DOE pitch.

“Part of the reason we were successful in receiving our fully funded grant request is the fact that we’ve been laying a foundation for a smart grid for a while,” Brinton continued. “This is the real deal. We’ve done a number of successful pilots, and I think that’s why we were well positioned to be successful in this competitive grant process. We’re really thrilled, because we’re one of the Top 10 awards in the nation and we’re receiving 63% of all of the money coming into the state of California. It really positions our region - Sacramento - as the smart grid leader for the state.”

REGULATION BREEDS EFFICIENCY: Brinton spun conventional wisdom about regulation on its ear, insisting the stringent oversight utilities endure drive them to pursue better efficiencies. “You think telcos are highly regulated? Electricity load service providers are incredibly highly regulated! Keeping the lights on is a vital service, everything from enabling hospitals to run and emergency services’ phones to work,” she emphasized.

“The telecoms need us, because the modern phone system doesn’t run without electricity. We’re a core vital infrastructure. So anything that enables us to take our grid as a whole up to another level of reliability is fabulous. So that’s really important from a regulatory perspective, because that allows us to function more effectively and for a lower cost.”

Brinton said the two industries were similar in several respects, including the need to wrestle with “literally miles of wires and infrastructure.” And both are fighting against a life as dumb pipes. “Smart meters enable us as electricity services providers to start customizing programs and creating different solutions and products, which ultimately makes our customers happier. What it does is moves electricity away from being a base blind stupid commodity. It makes it smart and alive and living, something that is connected to how people uniquely want to live their lives.”

That means custom packages of the sort offered by ISPs and mobile carriers. “For example, you may want to always be warm. You may want your home to never go below 80 degrees in the wintertime, and you’re happy to pay for that. So we could create a warm home energy solution package for you. Whereas I always want to be cool, and I also have a budget, so I never want my utility electric bill to go above $70 in the winter. I could then create a very focused package for people on a budget. It allows the electric utility to finally jump into the modern age of real customer segmentation,” Brinton said.

“With smart meters connected to this smart grid system, customers are going to be able to see data and information. They’re going to be able to make choices and start getting smart themselves about understanding the cause and effect about different choices they make. It’s very cool.”