Cisco joins the race for a leaner, cheaper smart grid

Cisco Systems threw its hat into the increasingly crowded smart grid ring today, laying out a more defined strategy and projecting that this market could soon be worth up to $20 billion a year. The core of its plan is twofold: to partner with utilities to lower costs at every stage of the energy distribution process and to upgrade grid infrastructure to reduce outages and improve security.

To accomplish these goals, the networking giant will create an IP-based communications network to give utility companies greater control over their power supplies and how they meet consumer demand. Cisco will provide the switches and routers for the network, as well as backhauling capabilities for smart meters so that consumption information can be transmitted without congesting normal network traffic. It has already reassigned 100 of its staff to focus exclusively on its smart grid projects, and that figure will likely double depending on how things take off.

This more detailed roadmap comes as no surprise, as Cisco has already made moves in this direction. In April, it announced that it has joined forces with General Electric, utility Florida Power & Light and the city of Miami to equip every home and most commercial spaces in Miami-Dade County with wireless smart meters — more than 1 million in all. These meters will provide two-way communication between electricity consumers and utilities concerning energy usage and its costs.

Cisco also has plans to produce sensors that link into and measure the energy use of individual household appliances. The ultimate goal there would be to allow consumers to break down their electrical demand by appliance and to view usage data on their computers, televisions or phones. This content, already provided by companies like Tendril, would empower energy users to easily understand and modify their consumption habits.

The idea is that if consumers and utilities are closely connected — with both understanding when and why energy is being used and how much it is costing — more power will be saved and possibly redistributed to keep grids healthy during peak times when brownouts and blackouts are most likely to occur. This will save consumers money by convincing them to turn off unnecessary electronics when power is at its most expensive — and it will also save utilities money that might have otherwise been spent on maintenance work and emergency response crews. This is no small sum, with analysts estimating the annual expense of U.S. power outages at $50 billion a year. The company says it has several other smart grid-related products in the works and should be tipping its hand in the next year to year and a half.

Cisco is yet another major corporation hoping to get in on the smart grid game, joining players like Intel, IBM, Google and General Electric in the pursuit. Most of these companies complement each other’s efforts, but Cisco’s deeper involvement in the space could spell trouble for other, smaller providers of smart grid networks and software like Silver Spring Networks, SmartSynch and Ambient Corporation.

The shift in focus comes at a very strategic time for Cisco, which announced a 24 percent dip in profits for the last quarter. Industry spectators have been saying for some time that the company’s core networking business has matured to a point where it needs to look to branch out. With the Obama administration dedicating $4.5 billion to the nationwide effort to deploy more than 40 million smart meters in the next three years, it looks like Cisco has made a conservative, yet intelligent choice to diversify.

Next Story: Obama turns to California for new emissions standards
Previous Story: Is the video game exercise trend getting overloaded or just starting?