IBM to prime pump for smart-grid start-ups

IBM to prime pump for smart-grid start-ups
Posted by Martin LaMonica
July 11, 2008 9:17 AM PDT

IBM has broad green-tech intentions, branching from energy-efficient data centers to cutting-edge solar cell technology. Next up is a concerted smart-grid effort.

The computing giant is preparing a technical "framework" to accelerate new technology integration into the creaky electricity distribution grid, said Drew Clark, director of strategy for IBM's Venture Capital Group, which is charged with aligning start-ups with IBM and its customers.

The idea is to create a common set of communication protocols and data formats that utilities and smart-grid start-ups can adhere to.

With these technical blueprints, based on standards like TCP/IP, new technologies can be plugged into the grid on a large scale, Clark said. What's happening now is a patchwork of smart-grid trials using differing products, an approach that prevents fast technology change.

"The biggest challenge of all this is scale," Clark said. "If we can find breakthrough technology that enables us to bridge the gap between start-up technologies and utility scale on an industrialized basis where we can rapidly move technologies into place, then that's the killer application."

Although people associate smart grids with digital utility meters, the term covers a range of technologies to make the electricity distribution network more flexible and reliable.

CNET News intern Holly Jackson and Martin LaMonica discuss progress on smart grid technology at the end of the daily podcast on Friday.
Listen now: Download today's podcast

For consumers, it can mean having an in-home display or Web site that provides real-time information on energy usage. With the right equipment, they can participate in utilities' energy-efficiency programs and shave about 10 percent off utility bills, according to results of the GridWise smart grid trail last year.

A household could, for example, agree to have the air conditioner thermostat raised a few degrees by the utility when the grid is under heavy strain, such as a hot summer day. To do that, homes need devices that communicate information back to the utility, either using broadband over powerlines or wireless networks.

The benefit of a more intelligent infrastructure is that load can be curtailed as needed and problems spotted more quickly. By flattening out spikes in demand, utilities may not need to build new power plants, which are expensive and opposed in some places for environmental and health reasons.

There are several smart-grid pilot programs going on around the U.S. Most recently, Duke Energy in May launched a five-year initiative to upgrade nearly all of its 800,000 customers with digital meters capable of communicating back to the utility.

There are also many smart-grid companies, taking on various aspects of the problem, from the devices, networking, or software utilities need.

Not so fast
But for all the activity, there are serious challenges standing in the way of broader adoption, not the least of which is money.

Utilities tend to be conservative when it comes to technology investment and regulations don't always foster large investments in energy efficiency, say experts. IT-related investments can take a back seat to things like upgrading decades-old transmissions lines.

The technology for digital electric meters and networking, meanwhile, is relatively untested.

"It's probably similar to the challenges in terms of sending information reliably and securely on the Internet but in this case there are some twists," Clark said. "You have power lines, big ugly transformers in the way, and analog devices--systems that were never set up for this."

IBM is developing a software framework for writing applications that takes advantage of the two-way communication of smart-grid technologies.

It will seek to define what sort of information needs to be communicated between utilities and consumers as well as protocols. Clark said that IBM, which is already involved in a number of smart-grid trials, intends to further detail the initiative later this year.

With a more predictable technical infrastructure, start-up companies could have utilities test and adopt their product more quickly. And it would create a platform for a broader range of applications to be developed.

For example, a person who charges an electric car away from home may want to charge a credit card or home electricity bill. Right now, building that application would require a lot of costly custom technical integration.

Trouble for start-ups?

Although regulators and utilities have been saying for years that the electricity grid needs upgrading, there are more questions than answers on how it will eventually take shape, said Jeff Osborne, an energy analyst at Thomas Weisel, who spoke on a panel at the CTSI Clean Tech conference in Boston last month.

From a business perspective, it's not clear where there is money to be made, although in the short term software-related businesses, like demand response, look promising, he said.

"Selling to utilities is extremely hard," Osborne said. "People are looking more for a software play than a commoditized hardware play."

Louis Szablya, executive vice president of smart grid company GridPoint, said that there are difficult questions over how the smart grid gets paid for. But he thinks that consumers are pushing for better services.

"Society is beginning to demand clean and efficient power. The smart grid enables that," he said.

IBM's Clark said that the technology problems are overshadowed by business and regulatory issues.

As a result, some smart-grid start-ups will struggle, since their venture capital backers can't expect them to spend 20 years having their technology tested and adopted by utilities.

"It's a difficult problem facing all start-ups. It's not just that utilities are not traditionally IT investors. It's that, from their point of view, they need to be sold on a business model--and it needs to work for the start-ups, too," he said.