Navigating the multi-trillion dollar smart grid
By Chuck Adams, President of the IEEE Standards Association
The smart grid market potential is enormous. It is projected to support a multi-trillion dollar global industry during the next two decades. But this market is also very, very complex because it will create a universe of cross-industry and cross-technology products and services that we haven't seen before.
This article will share some specific business considerations entrepreneurs and investors will need to keep in mind if they want to pursue smart grid opportunities.
Smart grid will introduce new power grid technologies and services to incorporate renewable energy, distributed resources and demand management services and it will integrate extended transmission and delivery capability into the grid, improving grid energy utilization. At the same time, it will leverage integrated information and communications technologies to create innovative energy-related services for consumers and businesses. Moreover, it will connect to technologies used by the automotive, consumer, healthcare, smart home, ambient assistance and other industries.
Because this new ecosystem will be so complex, entrepreneurs who are evaluating its business opportunities must perform appropriate due diligence in order to succeed. Businesses will need to fully understand their customers' needs and requirements for participating in smart grid services and they will need to understand the various business and regulatory contexts that will influence how customers will receive smart grid services. They will also need to understand the importance of standards in this emerging industry and which standards are relevant to their particular business strategies.
Know Your Customer
The many and significant changes that smart grid will unleash will have a direct and profound impact on customers, but finding success in its many markets and customer segments is not guaranteed.
To succeed in smart grid markets, businesses will have to fully understand their customers' needs and requirements and target the customers while considering the various contexts in which the products or services will be offered.
For example, end-use applications will need to address a user's specific requirements for a device as well as the needs of the specific industry that the application will serve. Some product designs will require access to certain network technologies and partnering with network service providers or vendors.
Businesses must also consider consumer trends and expectations. Consumers have become very sophisticated and are very demanding. They want their new digital products and services to offer better features and performance than ever before. They will have similar "minimal expectations" for their smart grid products and applications.
New Products and Services Must Reflect a Region's Policies
Knowing the customer also requires an understanding of regional issues and technologies in which the customer will receive services. While smart grids around the world will be based on standard architectural frameworks, which facilitate creation of products and services for global markets, specific product implementations will be influenced by regional and national policies and priorities.
"Consumers have become very sophisticated and are very demanding. They want their new digital products and services to offer better features and performance than ever before." - Chuck Adams, IEEE
Europe, for example, is in the early stages of interconnecting all of the national power networks together for smart grid and focusing heavily on developing renewable energy supplies. Numerous regional and national policies address this strategy, including the European Union's 20:20:20 program which has led to a wide range of national targets, laws, and regulations. By 2020, the program aims to reduce EU greenhouse gas emissions by 20 percent compared to 1990 levels; provide 20 percent of the region's energy from renewable resources; and improve energy efficiency by 20 percent.
Recently, the European Parliament voted in favor of setting a binding renewable energy target for 2030. This should also provide new motivation and direction for product development to meet these targets.
Europe is also promoting smart cities. The European Commission has launched a Smart Cities and Communities Initiative to support development of low-carbon and energy efficient products and services for urban areas. Within the U.S. and Europe, Smart Grid technologies are also being expanded to other utilities, such as natural gas and water, which will add even more innovation opportunities for smart city applications.
The U.S. has made it a priority to educate consumers about their energy consumption. A new "Green Button" initiative, launched by the White House, will provide smart meter customers with easy access to their energy usage data in a consumer-friendly format via a "Green Button" on their utilities' web sites. Numerous vendors are already creating solutions for this program. The concept will likely be adapted for use by other countries.
Some individual countries may find that their national priorities coincide with others' and that there are opportunities to transfer technology or knowledge between countries to expedite deployments and the business opportunities they will bring.
For example, China seeks to integrate new storage technologies to incorporate renewable resources into the grid and to reduce the country's carbon footprint. Employing ultra-high-voltage transmission line technology, to distribute power from these energy sources to consumers throughout the country, will be fundamental to the integrated grid infrastructure. This strategy will create many new and important business opportunities, jobs and related economic benefits. A similar strategy is emerging in Germany, which is phasing out nuclear plants and looking for ways to integrate renewables and storage technologies and transmit power from on- and offshore distributed resources to population centers across the country.
Smart grid standards will make it possible for China and Germany to find common solutions to the challenges they share and shorten time-to-market for technology deployment, while allowing the two countries to employ solutions that meet their specific needs.
Standards of Interest to Smart Grid Innovators
Standards are needed to coherently build or transform markets and this will be particularly true with smart grid because it is creating such a complex industry and ecosystem. Entrepreneurs targeting smart grid markets in will need to use and leverage applicable standards if they want their innovations to succeed.
Standards are important generally because they make it possible to distribute products to international markets. Standards ensure interoperability while allowing adaptation to specific market requirements. This is true for technologies used at the network level by utilities and service providers or for consumer applications. Standardization opens doors for international business and trade and reduces business costs because it creates economies of scale. Standardization helps companies expedite product development, and it gives consumers more product choices.
The IEEE Standards Association has more than 100 international standards published or in development that pertain to the power, IT and communications domains in smart grid and these standards will give most companies the technology foundation they need to create interoperable smart grid products for regional and/or global markets. The IEEE 2030 standard is an architectural framework providing the interconnection and interoperable interface standards for services that will be delivered over the three technology domains and is the world's only standard facilitating this.
"Standards are important generally because they make it possible to distribute products to international markets. Standards ensure interoperability while allowing adaptation to specific market requirements." - Chuck Adams, IEEE
Other IEEE-SA standards that should be of particular interest to investors are IEEE 1547, which addresses interconnectivity of renewables into the grid, and the IEEE 1680/EPEAT (Electronic Product Environmental Assessment Tool), which is used to manage lifecycle energy utilization.
IEEE is collaborating with many other standards organizations. It is working with the SAE on auto-grid interconnectivity. It has developmental efforts aligned with the ITU that address a wide range of communications technologies, and it has alliances with ETSI, IEC, ISO to ensure the development of technology frameworks that support future markets.
IEEE-SA is also collaborating on standards with many organizations in the Asia-Pacific region. It has memoranda-of-understanding with the Smart Grid Corporation of China. It has MOUs in Korea with the Korean Agency for Technology and Standards (KATS), the Korea Electric Association (KEA), the Korea Electronics Association (KEA), the Korean Society of Automotive Engineers (KSAE) and the Telecommunications Technology Association (TTA). In Japan, it has an MOU with the Telecommunication Technology Committee.
Numerous European standards organizations are pursuing initiatives to address regional needs for Smart Grid. CEN, CENELEC and ETSI are working together through the EU Coordination Project to develop Smart Grid standards that will be used to meet European Commission standardization mandates for the region. The three entities employ a Smart Grid Coordination Group, aligned with the US-NIST SGIP (Smart Grid Interoperability Panel), to define the needed architecture, communications standards, and processes.
For those planning to develop machine-to-machine (M2M) products and services, IEEE-SA's broad standards portfolio and coordination through the IEEE'S 45 technical communities and industry will allow the community to expand and support technologies across the ISO seven-layer stack. For example, IEEE-SA is positioned to compliment and supplement technology communities formed by other standards, such as the one M2M telecommunications and service layer architecture that ETSI is focusing on, as well as the application-level intelligent transportation standards pursued by SAE. For M2M, the IEEE recognizes the imperatives to globally integrate all levels of the technology stack to provide a complete horizontal and vertical service layer structure for M2M communications, services, and device support.
There will also be standards to connect digital health-care services to smart grid infrastructure. The IEEE has developed foundational infrastructural medical device interconnectivity protocols, adopted by ISO and employed in medical SDOs, such as Continua.
Leverage Standards to Bolster Chances of Success
If you haven't thought about standards before, I urge you to now because technology standards are necessary for market development and can facilitate product acceptance. Standards make it possible to distribute products to international markets because standards ensure interoperability while allowing adaptation to specific market requirements. Standardization opens doors for international business and trade and reduces business costs because it creates economies of scale.
These benefits will be particularly true with smart grid because it is creating such a complex industry and ecosystem. For those pursuing smart grid opportunities, international, national and regional standards can be applied to help ensure market success.
About the Author
Dr. Adams served as President of the IEEE Standards Association (IEEE-SA) in 2009-2010, chaired the SA's Board of Governors and represented the SA on the IEEE Board of Directors. Today he serves the IEEE Board of Directors as Chair of Public Visibility. He is also distinguished standards strategist at Huawei.