Itron's Philip Mezey on growing smart grid
- Nov 2, 2010 6:00 am GMT
- 569 views
I recently had an opportunity to sit down with Philip Mezey, who serves as senior vice president and chief operating officer for Itron North America. Here are a few excerpts from that conversation.
Intelligent Utility: How do you view the North American market, vis-à-vis smart grid?
Mezey: "There's a great deal of diversity to the North American market. We sometimes make the mistake of talking about this continent as if it's a homogenous entity. Even across the large investor-owned utilities, the power market includes Ontario, California and Texas, which really have been leaders in the move to smart meters.
"Their drivers are different. Texas pursued a deregulated model to stimulate competition. Ontario had a strong environmental driver and an awareness around the end of life for coal plants. California pursued avoided generation; try siting a new power plant or transmission line there!
"We need to be sensitive to the many nuances of this market. Some of these utilities have very constructive relationships with their regulators—the utilities have a lot of credibility and regulators are open to innovation. In other markets, regulators are very skeptical and very concerned about affordability issues."
Intelligent Utility: How does your company assess the opportunities?
Mezey: "We think this is an opportunity to build a sustainable business over time. The industry wants to hear that everyone is getting a smart meter or everyone is investing in smart grid today. I don't think that's prudent. It would be exceptionally difficult to deliver high-quality products and services in a peak-demand scenario.
"It's actually healthier to have the market develop over a decade or two, to deliver positive business results and make sure the smart grid works. We're thinking sustainability over a long period of time. We feel we need to participate more broadly than just delivering a product.
"It will take the market some time to develop. There may be fits and starts along the way. There are consumer pushback issues, technology problems, company failures and consolidations. That'll affect adoption rates. Our approach is really to push for open standards that unlock innovation."
Intelligent Utility: Your professional life is rooted in Silicon Valley. What are you hearing in those quarters about smart grid and software's role?
Mezey: "It's very difficult to be a pure software play in the smart grid market. It's difficult to get fair value for your work and to provide the support for your products in the marketplace. It's a tough, tough business model.
"Among other things, you're competing against Google PowerMeter, which is free. You're up against an inevitable App Store model of 99 cents. Are there people who will figure out how to do that? Yes. I don't think they'll be large companies with significant corporate overhead. I have trouble seeing how they'll have explosive public offerings with large multiples. Instead, large acquirers are putting together portfolios. But as a standalone play, unless you have a low-cost model, it's a tough place to compete.
"Are there unmet needs and opportunities in the software space? Absolutely. When we talk about a bi-directional flow of energy, vehicle-to-grid and broad-based adoption of solar and managing complex networks, balancing power - things people talk about at the 'slideware' level—there is a lot of work that needs to be done. There are a number of start-ups and I wish them well because they're a well of innovation."
Intelligent Utility: What else would you emphasize, to cap this conversation?
Mezey: "This is the best time to be in this industry, with the opportunity it represents to influence the ways we've thought about the utility space. We're using lessons learned from the telecom space. We understand the value of open systems and the effect that standards have on innovation.
"Also, smart grid costs too much. If every utility has to build a lab to prove out the technologies and acquire new skills and do industrial-strength security for millions of endpoints and meet all the challenges and seize the opportunities that smart grid offers, the cost is too high.
"If you look at the rate cases being filed, people are very hung up on the costs. If we don't address that as an industry, this is going to be a short ride.
"The utility industry has been plagued by islands of automation, which raise total cost of ownership. We need to materially address that with a platform that allows us to integrate many different products from different suppliers. We need to speed up the time-to-value for our customers and reduce total cost of ownership."
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