This article originally appeared in the November 2012 issue of INTERNET TELEPHONY.

With the power industry set to spend substantial amounts of money to modernize the grid over coming decades, a parallel opportunity is arising for telcos to expand their involvement in smarter grids.

According to the IMS Research report The Americas Market for Smart Grid Networking, 2012 released in August 2012, North American utility spending on smart grid in the near term will focus more on distribution automation as the power industry largely completes its work on advanced metering infrastructure. But both areas are ripe for utility-network provider collaboration. As electric utilities add sensors and controls to the grid and seek two-way communications with residential and commercial/industrial customers, they increasingly will come to rely on telcos and public networks for their communication needs. Utilities have neither the capital nor the expertise to achieve the sorts of network capabilities that telcos provide today. Therein lies a major commercial opportunity for network providers, as long as they understand the nuances of electric utility needs and can address entrenched utility cautiousness regarding such a partnership. The two industries historically have had vastly different drivers and objectives that only recently have achieved a degree of overlap that opens the door to mutual cooperation and benefits. The past decade or so has revealed successes and failures in what has been, at times, an uneasy relationship. First, a thumbnail sketch of the roots of the relationship.

 A Brief History

The Public Utility Holding Company Act of 1935 gave power utilities the right to build their own, dedicated networks to provide reliability and security in an era when telcos did not have the technology or the business case to do so. Still, in the mid-20th century, utilities might lease copper lines from local telcos where it was cost effective.  Flash forward to the 1990s. Attempts at collaboration were constrained because the two industries had, and still have, different drivers and objectives. Utilities traditionally invest in infrastructure expecting decades of useful life. Telcos and their technology have evolved on much shorter timeframes based on different market drivers. And, of concern to utilities wary of stranded assets, telcos abandon older technologies as newer ones are developed. For instance, telcos marketed control channels on cell towers – this was CDPD, or cellular digital packet data – to utilities for non-critical SCADA (supervisory control and data acquisition) traffic. That market became saturated, service levels dropped, the telcos moved on technologically, and the service was discontinued. Utilities were left with the dreaded stranded assets and efforts wasted. Their entrenched cautiousness of telco solutions only grew.In another instance, placing communications equipment in high-voltage environments proved impractical. In substations built for voltage step-down and distribution, the physics involved wreak havoc with communications equipment and signals. The network provider might require that it own the communication-isolation equipment and thus needed access to the substation. The utility might balk at that requirement for obvious reasons. While this arrangement could be made to work, the logistical difficulties did not encourage such collaborations to expand. By the turn of the 21st century, certain collaborations made technical and business sense. Utilities began using virtual private networks on public networks for the often point-to-point backhaul of meter and other data. But the two parties had differing perspectives on service levels for their disparate business demands. For broader collaboration between the two industries, one major sticking point remained. Utilities require 24/7 reliability to deliver power to a broad array of stakeholders, and that means service from network providers measured in minutes and hours, not days. Telcos could not or would not guarantee service on that level.   The same held true for telcos’ network ubiquity, bandwidth, speed and, above all, reliability. As we’ll see, utilities have a variety of needs based on those metrics, but the driving fundamental of reliability – utilities call them performance guarantees, telcos call them quality of service agreements – remained a point of contention. When a businessperson encountered a glitch in downloading a file to a smartphone, the delay could be endured. But for grid operators a missed or latent control signal could not be tolerated. That’s not just a grid reliability issue. On a power grid, a spooled or delayed control signal on a telco network could result in a line crew believing the operation command had failed, only to have the device then operate unexpectedly while the line crew was taking other actions to mitigate the presumed command failure.

Parallel Developments

What’s changed between then and now? The telcos’ have built out pervasive IP-based networks to homes and businesses across the country, with improvements in bandwidth, speed, security and, again, reliability that in some cases surpass utility needs. These improvements have been driven largely by e-commerce and entertainment markets and the costs recovered through end users’ monthly bills. Those improvements make the new networks’ performance and cost very attractive to utilities, which do not have the capital or expertise to achieve a similar result.  Take reliability, for instance. A modern IP-based system doesn’t rely on a single path. It’s truly a network. With path diversity a signal can find its way through several different routes if conditions take out a portion of the network. That provides greater robustness and less dependency on a single pathway, which addresses utility concerns for the reliability of control signals.So as utilities have moved into the smart grid era and installed an array of technologies that have a variety of requirements for reliability and security and, to a lesser extent, bandwidth and speed, the telcos have built networks that meet and even exceed those requirements. These parallel developments have put the two industries into a sweet spot for collaboration.

Opportunities for Collaboration

Today, the power industry’s focus on advanced metering infrastructure and distribution automation includes numerous network communication needs that telcos’ IP-based networks can provide. Both AMI and distribution automation provide operational efficiencies and, perhaps more importantly, both figure in utilities achieving mandated reliability targets. Investor-owned utilities report to regulators on reliability indices known collectively, in the vernacular, as SAIDI and her sisters – that’s SAIDI (System Average Interruption Duration Index), SAIFI (System Average Interruption Frequency Index) and CAIDI (System Average Interruption Duration Index). Anything telcos can do to assist utilities in managing those critical indices will be welcomed.The same goes for the cost-effectiveness of a third-party communication network. In the past, one of the biggest costs (up to 40 percent of such a project) and complications for distribution automation was building the communication system that reached all distribution assets. So the availability of a third-party network that can do so cost-effectively without major capital expense can represent the tipping point in a business case, creating an attractive return-on-investment. A few specific needs include many functionalities associated with AMI – remote connect/disconnect signals to smart meters, price signals, outage notification and restoration, demand-side management or load-management systems – can use IP connectivity to reach end customers and haul response data back. Home area networks and intelligent appliances may take advantage of IP-based networks. Charging electric vehicles at home or at public charging stations can use IP-based networks for two-way data transfer. Further, tying together all the controls and sensors and assets in an automated distribution system to extend control and visibility into the last mile will be aided and made cost-effective by IP-based networks.

 Going Forward

 To make those IP-based networks as attractive as possible to power utility customers, telcos should consider the utilities’ traditional and evolving needs for reliability and service. Network providers should craft very definitive statements on quality of service. A utility has myriad needs for communications, some of them requiring extremely high reliability, others not as much. If telcos precisely define their offerings in terms of reliability and coverage, the utility can more easily determine which of its applications can be served by the network.

Coverage naturally impacts utility considerations as well. If a utility can identify large geographical areas that can be covered with certainty by one network technology, that’s extremely useful. Conversely, if the utility has to mix and match technologies house by house or distribution pole by distribution pole, that becomes problematic. Particularly in a distribution automation system, the utility is likely to be the party that maintains the equipment on the pole, so for practical reasons it can’t deal with a mix of different technologies. If a telco is unable to offer that homogeneity, if there isn’t a good match between utility need and telco coverage, no amount of salesmanship is likely to bridge the gap.

Another factor for successful collaboration is the financial model. Much of early network billing was based on content; it was metered pricing. Utilities typically, especially in today’s world, don’t need fat pipes. They have a greater need for reliability. For example, in a distribution system, the amount of data sent from a distribution pole to a control center is less than a tweet. But that signal has to go through. It’s an extremely high priority at an extremely low data through-rate. Telcos simply need to offer pricing structures that reflect the utilities’ needs.  

Sam Sciacca, CEO of SCS (News - Alert) Consulting LLC, is an IEEE senior member and smart grid technical expert and has provided expertise in utility automation and utility telecommunications for more than 20 years.