Cisco chases billion-dollar smart grid dreams

San Jose, Calif.-based Cisco Systems (Nasdaq: CSCO) today announced what some in the industry might have already suspected: The company is seeking to sell its intelligent networking infrastructure into the smart grid.

The directive was secretly announced as an internal company priority for 2009, and again in recent weeks as the company made plans for 2010, said Inbar Lasser-Raab, senior director of network systems at Cisco, in an interview with the Cleantech Group.

But today’s public launch of a cleantech strategy aims to repackage and combine Cisco’s existing technologies to create an intelligent IT infrastructure embedded with sensors and security to serve the forthcoming wave of smart grid adoption around the globe.

The U.S. electric grid loses roughly 7 percent of energy production through faulty transmission lines, theft and mechanical problems. Government investment in the sector has typically not aimed to solve those problems, Lasser-Raab said.

“The grid has only changed to support increased demand; it hasn’t changed structurally,” Lasser-Raab said. “It’s a major industry effort in the initial planning stages.”

The industry has lobbied for the creation of standards for electric grids that would distribute and track energy flow using an Internet-based system capable of supporting a variety of applications developed by private companies (see IBM rides third wave of cleantech).

Cisco estimates the field at approximately $20 billion annually over the next five years, $1 billion of which Cisco thinks it can harness.

Cisco envisions its role as designing the intelligent network infrastructure, as well as bringing in other vendors to plug in components to report and analyze data from the grid. That includes working with systems integrators and companies that sell solutions such as smart meters.

Lasser-Raab drew an analogy to the company’s role in the formation of the Web.

“Cisco helped to connect silos of solutions in an end-to-end standards-based infrastructure called the Internet, and we feel we’re doing very much the same thing for the smart grid,” she said.

The demand for such technology is growing quickly. The government of Ontario, Canada, has mandated installation of smart meters in all businesses and homes by 2010 (see Ontario casts green shadow on U.S.). China mandated smart sensors for generators and substations by 2012, and the U.S. has earmarked $11 billion in stimulus funds for the adoption of smart grid technology (see Cleantech investment drops but stimulus funds soar in 1Q09 and Smart grid could be early winner in U.S. stimulus package).

Cisco has been quietly working on the smart grid effort for a couple years, entering into pilots with utilities that Lasser-Raab declined to name. In April, Cisco said it was working with Florida Power & Light, General Electric and Silver Spring Networks to build a smart grid for the city of Miami, Fla. (see Silver Spring corrals currents in Australian smart grid).

Today’s announcement came with endorsements from the executives of European utilities Electricite de France (EDF), Enel, and Yello Strom, as well as North Carolina’s Duke Energy and Michigan’s ITC Holdings.

ITC Holdings’ Vice President Denis DesRosiers said Cisco already helped the company rollout a security system for smart grid, while Duke SVP Todd Arnold and Yello Strom Executive Director Martin Vesper said their companies plan to work with Cisco in the future.

Much of the necessary technology for the new strategy can be either taken directly from previous products or combined in new ways to serve the smart grid’s needs, Lasser-Raab said.

“The technology exists from when we built IP networks, so we’re taking technology in-house to create a new physical product that would have our security capabilities, our routing and switching capabilities, as well as new standards to support the smart grid,” Lasser-Raab said.

Those include two-way communication systems for smart meters, and switches and routers that optimize energy delivery and use. In January, Cisco launched a new EnergyWise technology for catalyst switches to measure and reduce the energy use of IP-connected devices such as phones and computers. Also that month, Cisco acquired Richards-Zeta Building Intelligence for its technology that integrates building infrastructure and IT applications over an IP network.

Cisco also plans to use its data center portfolio to help utilities collect and store data reported from smart grid systems—data that can later be analyzed through third-party systems and used to optimize the grid (see Fat Spaniel targets EU solar with SATEL partnership).

One of the major challenges that Cisco hopes to address is security of the smart grid network, Lasser-Raab said. A report in April showed that the U.S. electric grid was hacked multiple times by spies in China, Russia and elsewhere.

“We can provide security to protect the substations based on standard IP,” she said. “It’s the only way the industry can manage so many vendors plugging in so many solutions.”

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