Cisco Leads Smart Grid Ecosystem Establishment via IP-based Open Standards

Building on the basis of its enterprise network products, Cisco collaborates with services and products from smart grid-related software and hardware vendors to develop its smart grid solutions. Cisco also teams up with electric utilities for smart grid construction. Then, Cisco organizes upstream to downstream vendors to form an industry ecosystem, thereby developing IP-based smart grid standards and conducting product interoperability testing with ecosystem members.

Cisco's smart grid strategies can be divided into five stages. Cisco aims at enterprise customers at the initial stage by launching energy solutions for enterprise customers. Then, Cisco transforms enterprise-level smart grid hardware into standards that can be adopted by electric utilities, thereby making forays into the smart grid business. Next, Cisco cooperates with and provides total solutions for companies that need smart grid equipment supply. Cisco also participates actively in various projects related to the smart grid, and the company gains much field experience on smart grid deployment. Finally, Cisco establishes an ecosystem with partner vendors. By adopting IP-based open standards, Cisco is able to provide an interoperability testing environment for IP-based smart grid products.

Competition Intensifies between Electric Utilities and Data Communication Companies

When FPL's bidding project was released in April 2009, Silver Spring teamed up with Cisco, and Cisco was responsible for the consumer side of business in the project. However, the competition between the two companies has become more and more intense. In June 2009, in the bidding project released by North Carolina electric utility Duke Energy, Cisco was selected as the electric power solution provider. It is observed that Cisco has started making inroads into Silver Spring's market in the utility side. Cisco's move signals that the company's smart grid deployment strategies have already taken shape. As a result, other vendors, such as VAR (Value-added Reseller) and SI (System Integrator), gradually regards Cisco as an important partner in the telecom side.

Silver Spring leads the North American smart grid solutions market, and the company is even nicknamed as "the Cisco of Smart Grid". But Silver Spring's leading position is at risk because Cisco has been aggressively promoting the IP-based smart grid standards and ecosystem. Moreover, starting from providing telecom solutions, Cisco went on to cooperate with vendors in the smart grid business and has gained hands-on experiences in the bidding projects of recent years. Therefore, it is expected that Silver Spring will take corresponding measures, adopting cooperative strategies or cultivating its capabilities for developing Ethernet products or solutions in the near future, in order to compete with Cisco. No matter what strategies Silver Spring is going to take, data communication companies are projected to benefit the most from this competition.

Telecom and Electric Grid Convergence the New Trend; Smart Grid CPE to Create Considerable Business Opportunities

In addition to electric utilities, major telecom operators around the world, such as AT&T, Verizon, and Deutsche Telekom have also started the deployment of smart grid. Through cooperation with electric utilities, they can integrate wired or wireless networks to provide meter data transmission, energy consumption management or terminal control services. Cisco has been working with major telecom operators. Leveraging its years of experiences and solid foundation in the smart grid business, when the standard environment for IP-based smart grid and solutions is established, Cisco is expected to be able to tap the business opportunities in both the electric power and telecom sides in the future. Cisco forecasts that when IP-based smart grid standard framework is finalized, smart grid will create an annual profit of US$20 billion by 2015. Cisco estimates that the revenue brought by the smart grid business will be approximately US$1 billion annually.

Taiwanese companies have been contract manufacturing telecom equipment for Cisco. Based on this relationship, it is expected that Taiwanese vendors will be able to break into the supply chain for electric utilities by developing switches and routers compliant with the smart grid standards. Moreover, when the environment for interoperability testing is in place, Taiwanese companies will be able to tap into the CPE (Customer Premise Equipment) business opportunities via their collaboration with Linksys or bid for CPE procurement projects released by telecom operators and foray into the IP-based smart grid CPE business. Furthermore, it is projected that Taiwanese vendors can take advantage of their long-term foundation in Ethernet equipment R&D and team up directly with the electric utilities to tap into the smart grid business opportunities.

Appendix

Glossary of Terms

List of Companies