First Mover Disadvantage in Smart Gridland

It's been proven that it works in chess and as everyone knows, like a charm in tic tac toe. In the business world, according to Wikipedia, first mover advantage: "... is the advantage gained by the initial occupant of a market segment. This advantage may stem from the fact that the first entrant can gain control of resources that followers may not be able to match."

Well, as you know, in the heavily regulated utility sector, it's not exactly a cut-throat competition. In fact, it's not a competition at all. But that doesn't mean it's not worth watching who's out of the gate first with AMI and Smart Meter deployments, who's received Smart Grid Investment Grant (SGIG) funds and is now obligated to deploy something of significant size, and who's holding back, keeping their powder dry.

The earliest of early movers (you know who you are in that big state just north of the Rio Grande) who began their own experimenting long before the SGIGs were a twinkle in the current administrations' eyes are probably best positioned to make the right Smart Grid technology deployment decisions at the times and places of their choosing. But the new first movers, the 100 or so SGIG grantees, who are making deployments now of thousands or millions of residential Smart Meters, are, IMHO, in a less than optimal position.

They are choosing hardware, software and communications tech well before most of the relevant standards (including security) have settled. Are moving before their customers, in some cases, are fully in tune with what's going on and how it will impact their bills or their service. They've often asked for rate relief to fully fund these deployments and may well be asking for more in an unfortunately short amount of time when it turns out they've placed bets on the wrong vendor and standards horses.

From speaking with analysts, utilities, and some of their providers, my sense is: laggards may have a real advantage here. How's that you say? Here's how:

• As long as they are active and attentive laggards, waiting, watching and learning, they may come to thank their lucky stars that their SGIG proposals were not selected
• They can tinker with residential pilots that number in the tens or hundreds of meters, vs. thousands and millions
• They'll have a longer lead time to educate and prepare their customers for coming changes
• And laggard utilities will be able to select and deploy, with far more confidence than they can in early 2010, technologies based on a more mature, settled standards landscape

As the Latin proverb says, "Fortune favors the bold". Or maybe Bill Shakespeare has the words most appropriate here: "Discretion is the better part of valor." For the moment, hold your course laggards, but watch, learn, and get ready for your turn.

Photo Credit: CarbonNYC / David Goehring @ Flickr

Empire State: Building with Smart Grid Grants, Hold the Security

There was a release today from Governor Patterson's office in Albany about the creation of a new Smart Grid Consortium in New York. Feel free to read the release, as it exhibits strong exothermic properties. Within it, however, is a reference to the new NY State Smart Grid Consortium Smart Grid Vision and and Technical Plan Report (Draft).

I would encourage you to use it as a resource, there are some nice charts, and it is truly a tutorial on merging real energy thinking with real politicking around grant dollars. Jobs, dollars, energy, etc., like political Prego, "It's in there."

As all of us in the Smart Grid community know, there is a double-edged sword in the hands of government these days, and it is called the Smart Grid Investment Grant Program, and we have written of it here before. A real boon, for all of the incentive it provides, and a recipe for long-term disaster as it drives substantial investment long before the community has matured in its understanding of need and security.

Most unfortunate in this report is its complete lack of focus on security, except for sprinkling the word into the document, hoping perhaps to ward off any real requirement of substantiated activity. I urge the NYS Consortium to remember that there are few areas of the country where blackouts have caused such chaos, and where potential blackouts would have such a devastating effect on the enormous financial, media, and technical communities that populate it. This graph, from page 44, says it all:


Someone in a New York utility has got to be doing something...

Lockheed Throws its Hat in the Smart Grid Ring

Looking for business ... and perhaps a handout. Like many other large co's who have recently made their intentions known re: Smart Grid stimulus monies, Lockheed brings modest energy credentials to the table, so partnering with an expert is the way to go. More importantly, though, from this blog's point of view, is Lockheed's comparatively deep background in cyber security. Let's see if they choose to play a leadership role or not.

Here's the announcement.

Security and the Smart Grid Investment Act

From South Jersey to You: The Courier Post Online reports that PSE&G is applying for federal stimulus dollars as a source of funding for their grid upgrade to make it Smart Grid capable. As they look for approximately $76M ( 50% of the expected costs of the improvements ) in tax dollars, the utility is highlighting the project's effects on job creation and advancement of Smart Grid goals. They are applying for a grant through the Smart Grid Investment Grant Program, which has made $3.9B available for Smart Grid Technologies and Grid Infrastructure.

One interesting note within the Grant program ( which you can look for at FedConnect ) is located in Part IV, Section B.3.b. It is a requirement for a project plan within the application for grant to contain a:

technical approach that describes how the project will address interoperability and cyber-security;

On request of the SGSBlog, PSE&G Investor Relations is going to see if they can produce a public copy of that section of the application. More data as it becomes available.

No (Smart Grid) Security, No Peanut

Earth2Tech touches on Smart Grid security again, this time on DOE using what should prove to be an effective lever:

As Patricia Hoffman, the acting assistant secretary for the Department of Energy’s Office of Electricity Delivery and Energy Reliability said in a testimonial last week, the DOE may refuse to hand out smart grid stimulus funds to an otherwise promising project if that applicant can’t prove that the project has addressed cyber security concerns. Well, we should hope so — if we learned anything from the buildout of the Internet it’s that networks that have sophisticated connections will have increasingly sophisticated hackers.

But is DOE expert on cyber and other security issues? How will it know which projects to green light and which ones to deny? These questions are on the author's mind as she concludes:

We just hope the DOE is able to accurately assess the projects when it comes to security.

Same here. But since Smart Grid security standards are still being hashed out by NIST and others, it's hard to imagine what DOE will use as a baseline re: security goodness.

DOE and Providers Talk Smart Grid Stimulus Tactics

You can't say interesting things aren't going on in smartgridland. More and larger pilot deployments are happening, standards are evolving, industry groups are jockeying for position. And there's little doubt security considerations will get lost in the shuffle. This Ars Technica article does a nice job of laying out the competing interests and players in the smart grid stimulus scrum.