August 11, 2009

Duke Energy struck a long-term deal with San Jose, Calif-based Echelon for the supply of some $15.8 million worth of smart grid technology -- a lucrative win for the technology firm and a possible foot in the door for the big prize, utility-wide deployment at Duke, considered the nation's third-largest electric utility.

          Various firms have been deploying a range of technology pilots with Duke for years as the forward-thinking utility was one of the first to get technology in the field -- including a significant BPL deployment in the Cincinnati area in the early part of this decade.  That was before Duke bought Cinergy and put the latter firm's CEO Jim Rogers in charge of the whole footprint that now stretches from South Carolina to Ohio.

          Meanwhile Duke has played a key role in the ongoing discussions in the PLC standards development arena -- and though the firm is as slow as any to drive smart grid out across its footprint, it has been more active than most in ensuring the utility voice be heard as the nascent industry developed.

          The deal at hand is for Echelon's NES smart-metering system with deliveries expected to start at the end of this quarter.

          Beyond the initial $15.8 million, the deal is a “framework agreement” that sets pricing, availability and delivery conditions but does not guarantee that Duke will choose Echelon for further deployment -- and if it does, the utility leaves open the options of when, where and how much more gear it might order.

          But that's normal.  “Most of the contracts between utilities and vendors are structured this way,” Jeff Lund, VP of Business Development at Echelon, told us yesterday.  Utilities “want to make sure that the technology they use works for their infrastructure before committing to a large-scale project.  We're sure that our technology will work for Duke, so we don't anticipate any issues,” he added.

          Duke received approval to deploy smart grid infrastructure in Ohio and plans to put in over 700,000 smart power meters in the state.  The utility is seeking such approval in Indiana for about 800,000 smart meters.

          Duke is in the process of bringing large-scale smart grid technology to the remaining three states it serves, Todd Arnold, Duke Energy's senior VP for Smart Grid & Customer Systems, told us yesterday.

          “We're in the process of formulating plans and business cases in each of the other service territories that don't already have smart grid plans,” said Arnold.  “There's a lot of work that goes into that but we certainly believe in smart grid infrastructure and want to deploy it in all of our service territories.”

          The utility applied for $200 million in federal infrastructure funds last week to develop its smart grid programs in Ohio, Indiana and Kentucky.  The grant would help speed up the firm's $1 billion grid modernization project in those states (SGT, Aug-07).

            Echelon sought Duke

          Echelon's NES smart-metering system serves as the operating system for nearly 30 million homes in Italy, Germany, France, Russia and elsewhere and Echelon has now established roots in the US.  “Our goal has been to work with forward thinking utilities in the US,” Lund said, and “Duke has been a marquee account on our radar for a while.”

          While this is the first major contract in the US announced by Echelon, the smart grid technology firm has worked with Duke on US soil before.  The two firms collaborated on a pilot program that resulted in the utility installing about 60,000 of Echelon's meters in its Cincinnati service area.

          Since then, Echelon teamed with T-Mobile to help boost smart grid business (SGT, Apr-23).

          So why did Duke pick Echelon?

            Duke likes PLC

          The IOU likes the infrastructure that Echelon uses, specifically the approach of transferring all data over existing power lines, Arnold reported.  Duke is an active UPLC member, we reported extensively in another publication.

          “An essential component,” said Arnold, “of Duke Energy's smart grid design is a scalable, open, interoperable network that supports not just the initial functions we are deploying today but allows for additional devices and sensors to be attached to the network in the future.

          “Echelon's metering infrastructure is a key enabler of that vision with a smart grid approach that includes smart meters, smart concentrators working in conjunction with the meters and network operating system software.”

          What's next for Echelon in the US?

          “We are seeing an increased level of interest in our products and services by utilities,” Lund replied.  “The announcement about our deal with Duke should only serve to further spur interest in what we can do for the smart grid.”

          He stopped short of discussing potential deals but Lund reported that Echelon has “devoted more resources to establishing a US footprint over the last 12-18 months.”

            Duke goes to China

          In unrelated Duke smart grid news, China Huaneng Group, reportedly China's largest electric utility and Duke Energy plan to jointly explore renewable and other “clean-energy” technologies, the US firm told the press yesterday from Beijing.

          China Huaneng Group produces over 10% of the electricity consumed in China, Duke said.

          “We find ourselves at a pivotal point in world history,” Duke CEO Jim Rogers said in a prepared statement.  “To deal with global warming requires rapid action from all of us and clearly China Huaneng Group and Duke Energy are playing a leadership role on this issue.”

          Duke Energy is spending $17 million to study carbon capture at a facility in Indiana, the firm said, and China Huaneng Group built a carbon-capturing demonstration facility at a Beijing cogeneration power plant.  Cogeneration means the generation of power and useful heat from the same system.