Pondering Intel’s Grand Design for McAfee

Befuddlement and buzz jointly greeted Intel’s announcement today regarding its pending acquisition of security-software vendor McAfee for $7.68 billion in cash.

Intel was not among the vendors I expected to take an acquisitive run at McAfee. It appears I was not alone in that line of thinking, because the widespread reaction to the news today involved equal measures of incredulity and confusion. That was partly because Intel was McAfee’s buyer, of course, but also because Intel had agreed to pay such a rich premium, $48 per McAfee share, 60 percent above McAfee’s closing price of $29.93 on Wednesday.

What was Intel Thinking?

That Intel paid such a price tells us a couple things. First, that Intel really felt it had to make this acquisition; and, second, that Intel probably had competition for the deal. Who that competition might have been is anybody’s guess, but check my earlier posts on potential McAfee acquirers for a list of suspects.

One question that came to many observers’ minds today was a simple one: What the hell was Intel thinking? Put another way, just what does Intel hope to derive from ownership of McAfee that it couldn’t have gotten from a less-expensive partnership with the company?

Many attempting to answer this question have pointed to smartphones and other mobile devices, such as slates and tablets, as the true motivations for Intel’s purchase of McAfee. There’s a certain logic to that line of thinking, to the idea that Intel would want to embed as much of McAfee’s security software as possible into chips that it heretofore has had a difficult time selling to mobile-device vendors, who instead have gravitated to  designs from ARM.

Embedded M2M Applications

In the big picture, that’s part of Intel’s plan, no doubt. But I also think other motivations were at play.  An important market for Intel, for instance, is the machine-to-machine (M2M) space.

That M2M space is where nearly everything that can be assigned an IP address and managed or monitored remotely — from devices attached to the smart grid (smart meters, hardened switches in substations, power-distribution gear) to medical equipment, to building-control systems, to televisions and set-top boxes  — is being connected to a communications network. As Intel’s customers sell systems into those markets, downstream buyers have expressed concerns about potential security vulnerabilities. Intel could help its embedded-systems customers ship more units and generate more revenue for Intel by assuaging the security fears of downstream buyers.

Still, that roadmap, if it exists, will take years to reach fruition. In the meantime, Intel will be left with slideware and a necessarily loose coupling of its microprocessors with McAfee’s security software. As Nathan Brookwood, principal analyst at Insight 64 suggested, Intel could start off by designing its hardware to work better with McAfee software, but it’s likely to take a few years, and new processor product cycles, for McAfee technology to get fully baked into Intel’s chips.

Will Take Time

So, for a while, Intel won’t be able to fully realize the value of McAfee as a asset. What’s more, there are parts of McAfee that probably don’t fit into Intel’s chip-centric view of the world. I’m not sure, for example, what this transaction portends for McAfee’s line of Internet-security products obtained through its acquisition of Secure Computing. Given that McAfee will find its new home inside Intel’s Software and Service division, as Richard Stiennon notes, the prospects for the Secure Computing product line aren’t bright.

I know Intel wouldn’t do this deal just because it flipped a coin or lost a bet, but Intel has a spotty track record, at best, when it comes to M&A activity. Media observers sometimes assume that technology executives are like masters of the universe, omniscient beings with superior intellects and brilliant strategic designs. That’s rarely true, though. Usually, they’re just better-paid, reasonably intelligent human beings, doing their best, with limited information and through hazy visibility, to make the right business decisions. They make mistakes, sometimes big ones.

M&A Road Full of Potholes

Don’t take it from me; consult the business-school professors. A Wharton course on mergers and acquisitions spotlights this quote from Robert W. Holthausen, Nomura Securities Company Professor, Professor of Accounting and Finance and Management:

“Various studies have shown that mergers have failure rates of more than 50 percent. One recent study found that 83 percent of all mergers fail to create value and half actually destroy value. This is an abysmal record. What is particularly amazing is that in polling the boards of the companies involved in those same mergers, over 80 percent of the board members thought their acquisitions had created value.”

I suppose I’m trying to say is that just because Intel thinks it has a plan for McAfee, that doesn’t mean the plan is a a good one or, even presuming it is a good plan, that it will be executed successfully. There are many potholes and unwanted detours along M&A road.

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Utilities Still Aren’t Ready to Get Serious with Consumers

In his Green Tech blog, Martin LaMonica of CNET News writes that utilities have acknowledged belatedly that they are poor marketers .With that realization in mind, they are said to be redoubling their efforts to explain smart-grid benefits to skeptical consumers.

Notwithstanding utility executives’ apparent contrition and ostensible commitment to institutional reform,  I remain unconvinced that they have seen the light. I still think they require further reprogramming, a service that disaffected consumers will be only too happy to provide.

As I read through LaMonica’s piece, I noticed the absence of a very important word. The utility executives, despite their recitation of anodyne platitudes, could not bring themselves to say the word, though they ventured occasionally into its outlying neighborhood.

That word? Savings.

Although the article featured many instances of utility bosses talking about getting consumers onboard, getting consumers involved, and treating ratepayers as customers, there was no specific mention of passing significant, quantifiable savings to smart-meter-equipped residential consumers.

Jim Rogers, CEO of Duke Energy, came closest to striking gold. He said consumers will want better ways to manage and reduce their energy use for economic reasons. But he should have gone further .

All the utilities should and must go further. It’s well understood how smart meters, dynamic time-of-use (TOU) pricing, and demand-response programs can help utilities reach their business objectives and regulatory mandates. What’s less clear is exactly what consumers will get from the deal.

It’s too late in game for the utilities to be using nebulous niceties and vague concepts to sell consumers on smart meters and the smart grid. Now is the time for utilities to cut consumers a pice of the action. It’s time to incentivize the consumer with hard ROI numbers and compelling savings. Don’t dance around the consumer benefits; spell them out.

Utilities say they want to treat their consumer ratepayers as customers. Well, customers don’t buy products or services unless they perceive value in doing so. Utility executives seem to realize that what they’re peddling doesn’t have the raw sex appeal of an iPhone or an iPad. Consequently, they should recognize that the value they offer to consumers must include a strong monetary dimension.

It’s long past time for utilities to get specific about the tangible benefits, including savings, that consumers can derive from smart meters. If the smart grid is to result in something more than efficiency and operational savings from upgrades to transmission lines and distribution automation (DA) facilities, consumers must have good reason to play their part in making it happen.

Smart-Grid Post at GigaOM Pro

Readers with an abiding interest in the smart grid might wish to check out a piece I wrote for GigaOM Pro (subscription required) on Cisco’s foray into ruggedized networking gear for utility substations.

In that post, I examine the market opportunity, the competitive landscape, Cisco’s strengths and weaknesses in the space, and some of the challenges the networking giant will have to meet as its seeks to extend its hegemony into what should be a natural “market adjacency.”

GridPoint Among Startups Recalibrating in Search for Smart-Grid Gold

Using GridPoint as an example, Martin LaMonica of CNET examines the hardships some smart-grid startup companies are experiencing as utilities take a discriminating approach to expenditures on technology upgrades.

Even though the general consensus holds that the smart grid eventually will fulfill its commercial promise — most of it, anyway — many market analysts and startup investors now concede that they were overly optimistic regarding their industry forecasts and commercial expectations.

Like a pop star trying to appeal to a fickle audience, GridPoint has reinvented itself on a number of occasions, with its transformations perhaps prompted as much by anxious investors as by customer demand. Depending on one’s perspective, GridPoint is a market visionary seeking to provide comprehensive grid-management software or an increasingly desperate company firing shotgun blasts in all directions.

As often is the case, however, it’s not that simple. In nascent markets, such as the smart-grid space, startup vendors often recalibrate their strategic plans as expectations meet reality. It isn’t unusual for companies to go through several metamorphoses before finding the right path to prosperity — or getting irredeemably lost in the wilderness (where there are no paying customers). It remains to be seen how it will end for GridPoint, but the company is leaving no stone unturned its quest for viability.

GridPoint has struggled as a purveyor of residential energy-management software, partly because consumers remain unconvinced they need such a product and partly because utilities are ambivalent about acting as a sales channel for such products. GridPoint also has tried, with varying degrees of success, to sell grid-management software, including vehicle-to-grid (V2G) solutions, directly to utilities. Now, the company believes it has worked the market oracle by offering energy-management software to commercial, industrial, and government customers, obviating utilities in the process.

There is an identifiable, well-contested market for demand-response software in the commercial and industrial sectors, but GridPoint’s play is a bit different. Through its acquisitions of Standard Renewable Energy and ADM Micro, GridPoint has put together a relatively comprehensive offering for businesses and government organizations pursuing “optimized energy consumption” — comprising reduced costs, longer equipment life cycles, and attainment of corporate-sustainability goals — as well as a greater integration of renewable energy (and, thus, lower emissions) into their consumption profile.

It’s true that organizations can derive efficiency gains and cost savings these sorts of solutions, but customers tend to be keener on adoption if they have a self-appointed or externally enforced “green mandate.” For that reason, large departments and agencies at governments of various levels, even in these straitened times, might be the low-hanging fruit for GridPoint’s latest near-term revenue focus.

As for what LaMonica’s interlocutors, including GridPoint, tell us about the state of the rest of the smart-grid space, I agree and disagree with some of their salient observations. Yes, I agree that it’s exceedingly difficult at this juncture to sell home-energy management solutions to consumers. Most consumers aren’t fully cognizant of the smart grid, and many whose homes have been equipped with smart meters aren’t much interested in the new devices. They typically don’t notice the smart meters until time-of-use (ToU) billing is activated, at which point they are as likely to react with indignation as with bemused curiosity.

It’s not clear to me that utilities know how to sell residential energy-managmeent systems, nor is it obvious that they want to sell them. At the same time, utilities are equally concerned, perhaps for good reason, about allowing third-party vendors, such as Google and Microsoft, to circumvent them and go directly to consumers with home-energy management offerings.

Another challenge, of course, is proving to consumers that the time and money they’ll spend on such systems will be rewarded with a compelling ROI, whether measured monetarily or in environmental gratification. Utilities haven’t worked it out, and neither — as far as I can see — have vendors of such products. For their part, regulators and public-utility commissions (PUCs) seem undecided about how to proceed.

So, yes, the smart-meter-connected consumer remains a tough nut to crack. Interests haven’t yet aligned to bring the consumer the type of value proposition that will persuade him or her to become an active market agent.

But, contrary to what the article seems to suggest, utilities are spending on smart-grid upgrades to their electricity generation, transmission, distribution, and substation infrastructure. Vendors are making money selling products and services to utilities in those areas. GridPoint might have missed that particular target, but others are hitting it. The spending occurs in phases — not all at once, and not in a huge wave — but it is proceeding in measurable increments that continue to grow.

The smart grid is an expansive, sprawling, heterogeneous mosaic of  functions, products, technologies, interdependencies, and ecosystems. Depending on one’s particular vantage point, it will look different. What’s more, not all smart grids, in all parts of the world, are being created equally. Some utilities are ahead of others, and some have different priorities based on economic, environmental, financial, geographical, and policy considerations.

For vendors, as GridPoint will attest, the challenge is in determining who in the smart-grid constellation is wiling to spend now on urgent near-term priorities as well as on long-term strategic initiatives. For some vendors, that will mean reaching outside utilities, while others have found ready markets for their products and services inside utilities.

Cisco Announces Ruggedized Gear for Smart-Grid Substations

Until now, Cisco has done more talking than doing on the smart grid.

Yes, Cisco has made investments, including a notable stake in GridNet, and it has been involved in some prominent smart-grid projects and trials. But those efforts have been tentative, and they haven’t involved Cisco introducing new products specifically built for utility customers pursuing smart-grid deployments.

Earlier today, though, Cisco rectified that situation, announcing a hardened, ruggedized router and a similarly hardened, ruggedized switch, both of which are designed for deployment in utilities’ electricity substations. The new Cisco IP-based smart-grid products — the Cisco 2000 Series Connected Grid Router (CGR 2010) and the Cisco 2500 Series Connected Grid Switch (CGS 2520) — are adaptations of existing Cisco gear.

As reported by Network World, the CGR 2010 is based on Cisco’s Integrated Services Router (ISR), whereas the SGS 2520 is based on Cisco’s Catalyst 2000 and 3000 series products. The SGS 250 comes in two four-slot versions, with speeds and feeds similar to those of ruggedized switches from smaller players that have been active in the market well before Cisco’s arrival on the scene.

Like those competing offerings from the likes of RuggedCom and GarrettCom, Cisco’s smart-grid networking gear adheres to IEEE 1613 and IEC61850-3 standards for utility substation environments, including the capacity to withstand extreme temperatures. The devices also provide enhanced protection against electrical surges and electromagnetic interference.

Although smart meters and advanced metering infrastructure (AMI) receive a lot of media coverage because of their consumer-facing orientation, smart-grid products and technologies — such as substation networking gear — built for utilities’ distribution networks could possess a greater likelihood of achieving near-term commercial success.

While nobody seems sure whether or when consumers will want to fiddle about with smart meters and home-energy management systems to derive potentially modest savings on their electricity bills — consumers’ willingness to subject themselves to demand-response initiatives also remains unknown — utilities will have a need to upgrade and overlay their electricity-distribution systems with two-way communication networks. Those networks will provide efficiency savings by capturing and transmitting data from multiple intelligent electronic devices in the substation back to utility data centers for analysis.

By making their distribution networks smart, utilities will be able to quickly and accurately identify, isolate, diagnose, and perhaps even automatically repair network faults. They’ll also be able to reconfigure networks on the fly to circumvent trouble spots and keep electrons flowing.

For Cisco, the kingpin of Internet routing and switching, these new products represent a logical entry point into the smart-grid marketplace. Cisco already is a market leader in switching and routing. To get into the smart-grid space, all it had to do was adapt existing products to the specific requirements of substation deployment.

Cisco is hoping to benefit from the inherent conservatism of the utility sector. Utilities prize reliability — and hence risk mitigation — above all else. Utilities prefer to go with the tried and true over the conceptually interesting but unproven; and they also tend to favor established, well-known vendors over startups. Cisco is hoping its Internet market leadership, in enterprises and service providers, carries over to the utility industry, allowing it to tap an opportunity that it believes could be a hundred to a thousand times the size of the Internet, representing a $20-billion market in just five years.

The networking giant’s success isn’t assured, though. While Cisco is the top dog of enterprise networking, it’s a newcomer to the utilities. Even though its brand is known, it’s not known directly by many utility customers. It will have to build a base, as well as relationships and credibility.

In an email message to Forbes, Forrester analyst Doug Washburn discussed the challenge Cisco faces:

“It’s going to be critical for Cisco to forge partnerships with smart grid solution providers, the Accentures and ABBs of the world. Those companies] specialize in the utility industry and can engage the utilities at a business and strategic level, not just the IT and operational level.”

In talking with EE Times, Washburn elaborated further:

“I did not hear much from Cisco on this topic, and it’s an important one since these players (Accenture and ABB, and the like) help utilities determine their smart gird strategy which ultimately drives technology and vendor decisions.”

But Cisco has drawn Accenture’s support. In a press release announcing its hardened networking gear, Cisco includes a salutary quote from David M. Rouls, managing director of Accenture Smart Grid Services:

“Accenture and Cisco have a shared Smart Grid vision. We believe that the inherent value in moving toward a Smart Grid is derived from securely transporting, integrating and analyzing the vast amount of information that results in the transformation from analog to digital. Accenture is particularly excited to enable the data management, event processing, and analytics functionality delivered with the Accenture Intelligent Network Data Enterprise (INDE) and leverage the advanced networking capabilities of the Cisco CGR 2010 for our utility clients.”

Besides, when it comes to entering new markets, Cisco knows the drill, even though this challenge might be qualitatively different from those that have preceded it.

Internet historians will remember that Cisco was once new to carriers. It had to develop domain expertise, develop and acquire new skills, and build and nurture new contacts and long-term relationships. It was largely successful in that endeavor, and it will follow a similar blueprint in attacking the smart-grid opportunity in the utility sector.

The company already is following the well-worn playbook, hiring utility insiders to join and lead its smart-grid team, obtaining essential skills and valuable customer contacts in the bargain. It’s building relationships with early customers, too, including three utilities that will use its new products  in substation automation trials.

Network World reported that both Cisco products, the router and the switch, start at about $6,000, with the router available in July and the switch available in August. Meanwhile, EE Times reported that the router starts at a list price of $7,800, with the switch prices starting at $5,300.

Cisco has taken a while to make a product splash on the smart grid. This first tangible foray might not have the superficial glamor of a home-energy management play, but it’s a logical first step that allows Cisco to build a bridge from its successful past into a potentially lucrative future.

As Belkin Ramps Home-Energy Management, Where’s Linksys?

As Belkin ramps up its smart-grid activities in electric-vehicle charging and home-energy management, an obvious question arises: Where’s Cisco?

Specifically, where’s Cisco’s Linksys unit, the business that competes against Belkin in the home-nettworking market with a portfolio of wireless routers and other access gear?

Linksys would be a natural player in home-energy management. In fact, it wouldn’t be a stretch to imagine Linksys offering home-energy management or vehicle-to-grid (V2G) applications in residential and commercial environments.

True, Linksys already has powerline products, which were reportedly involved in Cisco’s smart-grid, home-energy management initiative with Duke Power. Nearly a year ago, speculation mounted regarding the imminent arrival of Linksys-branded, home-energy solutions.

Those products have yet to arrive on the market, though. Here are some scenarios that attempt to explain the Linksys no-show.

1) Patience — they’re still coming.

For all I know, Cisco could be on the veritable cusp of making a major Linksys home-energy-management announcement. Such an announcement might have been planned for months, and it might be made within the next few weeks.

2) The best smart-grid opportunities are elsewhere

Cisco might think the smart-grid market’s low-hanging fruit does not include home-energy management systems connected to smart meters. Indeed, considering all the infrastructure upgrades at utility data centers, across transmission networks, throughout distribution facilities, and spanning mesh networks that connect everything together, Cisco conceivably could have more than enough on its smart-grid plate.

What’s more, the home market might prove a tougher nut to crack than the aforementioned areas, most of which are, to varying degrees, “now” markets.

In this scenario, Cisco is treating home-energy management as a secondary consideration, a market segment to be addressed at a later date.

3) Maybe an all-Cisco-branded solution is in the works

In a way, this scenario connects to the first one, and maybe even to the second. Perhaps Cisco is putting together a utility-friendly end-to-end solution that will omit Linksys-branded products. I don’t know whether this scenario is probable — the Linksys brand has consumer cache, and it could be leveraged accordingly — but it can’t be dismissed.

4) Perhaps Cisco is asleep at the switch

Cisco is busy on multiple fronts across a growing number of technology-related markets. It’s entirely possible that Cisco’s market reflexes have slowed, and that it was beaten to the punch by a nimbler rival.

It’s possible, but I’m not buying it. John Chambers and his team waste no opportunity to cite the smart grid’s commercial potential and to emphasize Cisco’s singular suitability to address it. I don’t think Cisco has forgotten about this market.

In all probability, a hybrid of scenarios one and two explains the low profile Linksys and Cisco have projected in home-energy management.

HP Dumps Cold Water on Smart Grid

If the nascent smart-grid market is afire with hype, HP Is doing its utmost to throw cold water on the blaze.

Speaking at HP’s annual Executive Energy Conference in Dubai this week, Ian Mitton, HP’s utilities industry director and global lead on smart grid technology, said smart-grid security has been an “afterthought” in early deployments and that “projects are not happening fast enough,” according to a report in eWeek Europe.

When it comes to HP and the smart grid, we can go one of two ways with our interpretation. We can conclude that HP is right, that security has been overlooked and that market adoption has been tepid; or we can conclude that HP is denigrating smart-grid security and the overall market because it is late to an increasingly festive party.

Then again, maybe both conclusions are valid. They aren’t mutually exclusive, after all. In some parts of the world, such as Asia and North America, the smart-grid market is exhibiting relatively strong growth, whereas market vitality is less in evidence in many European jurisdictions.

What’s interesting, though, is that 3Com’s H3C, which HP now owns, is said to be well positioned to benefit from booming smart-grid expenditures in China. As the 3Com integration proceeds, HP’s tune on the smart grid might change.

Examining Analogies Between Internet and Smart Grid

In the summary paragraph of a perspective piece he wrote for Greentech Grid, John Steinberg, the CEO of EcoFactor, makes the following claim:

The Internet, the growing importance of the user experience, and the entrance of large tech companies should all be seen as good omens for the future of the smart grid.  These trends will lead to better products and services, which will in turn drive consumer adoption. And consumer adoption will be the key to fulfilling the environmental and economic potential of the smart grid.

For the most part, I agree with Steinberg, though, as the CEO of a software-as-a-service (SaaS) platform vendor offering consumer-oriented smart-grid solutions, he admittedly has a vested interest in promoting his argument.

I am perhaps not as sanguine as Steinberg on two points. In his commentary, he compares the early Internet service providers and their walled gardens — the likes of CompuServe, Prodigy, and AOL — with today’s utilities. His argument is that just as the Internet occasioned the demise of walled gardens and their purveyors, Internet-based technologies providing the communications infrastructure for the smart grid will bring about a similar fate for utilities that resist demands to provide consumers with third-party, energy- and money-saving applications and services.

To a point, I accept that argument. That said, I’m not entirely certain that the aforementioned service providers are completely analogous to today’s utilities. The utility sector is probably the most highly regulated of any industry in the Western world. Any change that comes to the industry will not happen overnight. While I agree that Internet technology will unleash tremendous innovation and valuable services for energy consumers, I suspect the pace of change in the utility sector will be significantly slower than what we experienced in the Internet ecosystem.

In a similar vein, Steinberg asserts that incursions into the smart grid by information-technlogy giants Google, Cisco, and Microsoft represent both validation of the smart-grid market opportunity and a sign that said market has reached a critical phase of maturation. I accept the first premise, but I am skeptical of the second.

Cisco, for example, recognizes the vast growth potential of the smart grid, but it has yet to find a means of tapping into it meaningfully.  Cisco will figure it out, I’m sure, but the company is still learning about the energy business and utilities. It’s a radically different space than anything Cisco has tacked previously, and I think the leadership is Cisco is realizing that it must listen and learn before it prescribes nostrums.

Meanwhile, Google and Microsoft are making similarly measured moves.

There’s real promise in the smart grid, and liberating change will come to the utility industry. However, as Gartner might say, technology vendors seeking fortune in the space should expect to travel through a trough of disillusionment before ascending a slope of enlightenment.

Will Electric Cars Redeem the Smart Grid’s Reputation?

Michael Kanellos of Greentech Media has written a commentary suggesting that electric vehicles might be the silver bullet that overcomes public apathy and outright antagonism toward smart meters and the smart grid.

After explaining that utilities in the United States and Australia have discovered that consumers aren’t enamored of the concept of demand response or of the higher electricity bills that frequently accompany smart-meter rollouts, Kannellos writes the following:

Even avid greenies seem blasé. In Canada, Toronto Hydro has scrutinized the behavior of around 115,000 customers on time-of-use plans. Has cut rate power at night goosed them to shift their behavior? “No. Not really,” said Toronto’s Karen France during a meeting at eMeter’s customer event.

Matt Golden, co-founder of retrofitter/software vendor Recurve, told me recently that the company has installed some energy management dashboards in the homes of clients. After two weeks, the frequency of interaction with the dashboards drops considerably. There have been success stories — customers surveyed in a test conducted by Silver Spring Networks and Oklahoma Gas and Electric were overwhelmingly surprised to learn about their rate of energy consumption — but people seem to be dozing off on what is a very important technology.

So what’s the problem? Utilities and building management outfits are asking people to change their behavior to save pennies. PG&E’s residential rates range from 11 to 49 cents a kilowatt hour. Will you alter your laundry schedule to save 37 cents? Toronto’s spread is 9.9 cents at peak and 4.4 at night.

Indeed, Kanellos identifies the problem, in Toronto and elsewhere. But the problem runs deeper than that, and Kanellos, to his credit, addresses it.

A little later in his commentary, Kanellos writes that consumers are wary of smart meters, and of the larger smart grid, because they suspect strongly that utilities will be the only parties to benefit from them. There’s some truth to that assessment, too, especially when one considers utilities’ operational costs savings: no more truck rolls for meter reading or for shutting down or activating service, plus the capacity to shave peak demand and to avoid having to add costly electricity-generation capacity.

For the consumer? Well, the benefits aren’t so clear, and certainly not as compelling. In some jurisdictions, careful consumer ministrations to smart meters mean only the difference between small increases in electricity bills and larger hikes.

Kanellos thinks electric cars will enhance the consumer appeal of the smart grid. To his way of thinking, electric cars are destined to be a huge hit with consumers, who will come to understand that the smart grid, including charging stations at home and out in the wider community, is essential to the sustenance of their new vehicles. At that point, Kanellos believes, consumers will grasp the importance and value of the smart grid, and they’ll buy into the program the utilities are pushing.

Maybe Kanellos is right. Perhaps electric vehicles will rescue the smart grid from public apathy and infamy. Then again, electric cars will not become ubiquitous overnight. A year from now, even a few years from now, not everybody will have one.

In the meantime, the braintrusts at utilities, regulators, and smart-grid vendors will have to devise other means of engaging, rather than alienating, electricity consumers.

Smart-Grid Success Depends on Alignment of Interests

I wonder whether utility executives are suffering from survey fatigue. Every week or so, new smart-grid market research, derived form surveys of the utility industry, hits the streets.

Maybe the utility executives enjoy the attention. That, at least, would explain why so many of the studies seem to receive participation rates that result in useful sample sizes.

Interestingly, the surveys are producing similar findings. One thing that seems clear is that utilities aren’t certain when the smart-grid payoff will come — for them or for their customers.

For instance, according to the results of a Comverge survey of 100 utility-industry attendees at last week’s DistribuTech utility conferencein Tampa, almost an equal number of respondents believed that measurable smart-grid benefits are one to three years from realization (27 percent) as believe that measurable benefits will accrue in 10 or more years (29 percent). Ten years, or more, is a long way off.

While spending on smart-grid initiatives seems strong, with 77 percent of respondents indicating budgets allocated to energy-management resources have increased in the past year, the industry’s smart-grid vision would benefit from greater clarity, coherence, and consistency.

Indeed, if the utilities aren’t sure when they’ll realize a return on their smart-grid investments, they seem even less certain about how and when their customers will derive benefits. I get the distinct impression the utility industry has’t fully thought through the customer angle. The formation of the Smart Grid Consumer Coalition (SGCC) was a sign that the industry at least recognized the problem, but the smart-grid spending priorities of the utilities suggest that remedial action is lagging.

How else to explain why smart meters are getting an aggressive push while smart energy outlets, in-home energy displays, residential energy-management systems remain afterthoughts?

Let’s consider: The smart meter is just a digital two-way, real-time meter. It allows the utility to implement time-of-use (TOU) billing based on variable pricing. Consumers will pay more when energy is in peak demand, and presumably they will pay less when consuming energy during off-peak hours.

But f consumers have no means of accessing information and services that help them reduce their energy consumption during periods of peak demand, they will not realize savings on their energy bills. In fact, if experience is any guide, they’ll receive higher energy bills, which will sour them on smart meters and the smart grid.

That would be unfortunate, not just for utilities and for the vendors that supply them, but for everybody. The smart grid has the potential to deliver value that flows downstream from technology vendors and utilities all the way to their commercial, industrial, institutional, and residential customers.

What needs to happen is proper alignment and reconciliation of interests.,It will not be enough for utilities to foist feel-good sentiments on consumers about how smart meters contribute to energy conservation and environmental sustainability. That’s great, for as far as it goes, but it doesn’t go nearly far enough — not during an era in which tapped-out consumers already will be trying to do more with less.

The smart grid can’t be exclusively about utilities saving money, either as result of not having to utilize higher-cost energy-generation facilities for peak loads or of not having to build new electric-generation facilities to cope with rising demand. Consumers will have to share in the benefits; if they don’t, they’ll become adversaries, not partners.

Of course, the smart grid shouldn’t just be about making or saving money. It plays into a bigger picture, having to do with economic viability, industrial growth, technological innovation, and environmental sustainability. (That’s another post, which I will save for another time.)

Nonetheless, to the extent that money can and will be made, the utility industry must give careful consideration to ensuring that everybody in the value chain derives real benefits. If such consideration isn’t paid, then the rosy market forecasts might never come to fruition.

IBM-Johnson Controls Partnership Signals New Automation Wave

As Internet protocol proliferates, pervading every device that can possibly be networked, automated solutions are reaching into new realms and exploring untapped possibilities.

They’re also providing a dynamic foundation for new technology partnerships. One such partnership, which includes a smart-grid aspect, involves IBM and Johnson Controls.

The two companies are combining forces to improve the energy efficiency of office buildings and other commercial and industrial facilities. They’ll achieve that result by integrating IBM’s business-analytics software and middleware with Johnson’s building control technology. The objective is to deliver an automated system that will automatically turn off lights in unoccupied rooms or buildings, identify areas of heat loss, and shut off and turn on HVAC systems as required.

IBM and Johnson Controls worked together previously to deliver energy-efficiency solutions for the data center. As a result of those customer engagements and others, they realized more was possible.

Clay Nesler, Johnson Controls’ VP for Global Energy and Sustainability, explained how the partnership evolved:

“These capabilities have been available for a long time, but they haven’t been widely applied . . . . Both organizations are committed to open standards and Web technologies. So while this would have required a lot of engineering and R&D work several years ago, we now hope to leverage as many standards as possible,”

That’s the key: Standards are facilitating the development and delivery of automated-management solutions, including many of those applicable to the smart gird, that were too cumbersome, too unwieldy, too ocustomized (and therefore too expensive) in the past.

This is why the networked machine-to-machine (M2M) market is seen to offer so much promise, not just for IBM and Johnson Controls, but for every major information-vendor that has its eyes open and its skin in the game. Think of Intel, which can provide chips for the embedded devices; Cisco and its network infrastructure; Oracle with its analytics applications and databases; Dell with its servers; Ericsson with its wireless-networking technologies. Also consider the new business possibilities for wireless operators worldwide.

It’s a huge opportunity, and the smart grid, broadly defined, is a big piece of it. Technology vendors have a correspondingly large stake in ensuring that it is done right. Expect them to become active and involved partners with utilities, regulators, and governments.

Cisco Invests in Smart-Grid Management Vendor

Cisco doesn’t fall in love with technology, but it is enamored of big market opportunities.

As such, Cisco’s unspecified investment in smart-grid management vendor Grid Net shouldn’t be construed so much as a bet on WiMAX than as a hedged wager on utilities requiring more than relatively low-bandwidth wireless mesh networks to carry all the aggregated traffic that will be generated by multitudes of embedded devices.

Oh, and Cisco probably liked Grid Net’s existing partners, which include previous investors Intel and General Electric. Both companies stand to benefit from Grid Net’s success, and from the proliferation of WiMAX somewhere other than in the 4G networks of wireless operators, most of whom are gravitating toward LTE, WiMAX’s nemesis.

Bear in mind, too, that utilities — who can’t have their networks go down — are inherently cautious entities that prize reliability above all else. They tend to avoid doing business with startup companies, favoring tried-and-true suppliers such as GE. That GE already was in Grid Net’s corner no doubt figured favorably in Cisco’s calculations.

One other factor played a role, too. Grid Net competes against Silver Spring Networks, an IPO-bound vendor of smart-grid management systems that Cisco views as a looming threat, what some have even called an aspiring Cisco of the smart grid.

Not surprisingly, Cisco wants to be the Cisco of the smart grid.