Smart Grid Data Management: Challenges & Opportunities

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Smart Grid Data Management: Challenges & Opportunities

Wednesday, March 23rd, 2011, 8:30am - 11:30am PT

Speakers:

Cisco Systems, Inc., Sanket Amberkar, Senior Manager, Smart Grid Marketing

eMeter, Larsh Johnson, Founder & CTO

Foundation Capital, Warren Weiss, General Partner

Stratogic Management Consulting, Alex Shahidi, Principal Architect

Moderator:

AltaTerra Research, Zen Kishimoto, Principal Analyst

Collecting accurate, real-time information is a critical factor for the smart grid to deliver the expected benefits of costs

savings, dynamic pricing, and reduced energy use. But the staggering amount data generated by the smart grid

infrastructure presents formidable challenges for utilities and service providers in collecting, monitoring, and protecting

the data gathered. In this onsite meeting, an expert panel discusses the technologies and business practices best suited

for developing a data management strategy.



Contents

INTRODUCTIONS 3

Zen Kishimoto 3

Warren Weiss 3

Alex Shahidi 5

Larsh Johnson 5

Sanket Amberkar 5

MARKET OPPORTUNITIES 6

Data Usage Opportunities & Utilities 6

FIRST SHORT Q&A 8

Data Quantities 8

Changing Utility Operations 9

Services Versus Software 9

TECHNOLOGY CHALLENGES 10

Current Analytics Technologies 10

The Role of the Cloud 11

SECOND SHORT Q&A 13

Deployment TImelines 13

Data Formating Standards 15

The Public‘s Role 16

SECURITY AND PRIVACY 18

Data Ownership 18

Data Accessibility 18

Security 19

Privacy 19

Utility Trust 21

Control in the Cloud 21

Q&A SESSION 22

Other Industries as Examples 22

The International Perspective 24

The Influence of Public Policy 26



INTRODUCTIONS

Zen Kishimoto (AltaTerra Research): Good morning. I am Zen Kishimoto with AltaTerra Research, based here in Palo

Alto. We are a marketing research and consulting firm focusing on the sustainability business, and this includes

technological solutions in the enterprise sector. I cover the area where IT meets energy and the smart grid.

With the introduction of the smart meter, we have generated a lot more data and have collected that. With that data

we can assess the current power grid much more efficiently and much more accurately than before, and it can make

intelligent actions accordingly. There are many more applications created from that data other than just knowing the

status of the power grid. Those applications will create more business opportunities, but at the same time we have a

number of challenges to doing this. Interestingly enough, we can turn these challenges into new business opportunities.

Today again, as Derek mentioned, we have four different experts in this area and we would like to talk about three

different talking points. One is market opportunities, another is security and privacy, and the last one is the stakeholder

buy in. Within this framework I realized that there are many more areas of interest so, as time permits, we will discuss

other things you are interested to hear. Without further delay, I will let the rest of the panelists introduce themselves to

you.

Warren Weiss (Foundation Capital): Good morning everyone. Thank you for the introduction and for having me here.

My name is Warren Weiss and I come from an early stage venture capital firm called Foundation Capital. We have got

about $2.5 billion under management. The firm is about 16 years old. We spent the first nine years, or so, in traditional

IT. This includes things from inventing things like Atheros in the Wi-Fi business, to Netflix in the consumer business.

That is a broad spectrum of technology and the light bulb went on about 7- 8 years ago that we should take the

technologies that we deeply understand as entrepreneurs, and I am a former four-time CEO, and use them in industries

that had not adopted modern technology. That was the pretty simple thesis that became the demand side of this smart

grid. This is the demand side, not the supply side. This includes software networking and traditional technologies that

were proven, which we could apply to those industries.

That was our thesis and we have a number of investments in this space. Those include EnerNOC, which is a public

company handling demand response; Silver Spring Networks, which is in the networking and communications space;

Control4, which is in home automation space; eMeter, which you will hear about from Larsh today, and is in the smart

grid software space and it ties all of this area; Sentient Energy, which deals with power line monitoring technology; and a

number of other investments that we have not announced. This is a pretty broad spectrum and I come at this from a

very biased view.

I want to be up front with you because one of the questions that we have been asked to talk about is who is going to win

-- the incumbents or the startup companies. I hope in the end that it is the customer who wins and that is either the end

consumer for the utility themselves because that is what it is all about. I think that it is, like in any industry, a “co-

opetition.” When you look at it, you stand on the shoulders of giants so that you can see further. I do not think that it is

possible for a startup company in this space to be successful without partnering. This is because larger utilities are very

risk averse. They have regulatory processes and it is a requirement that you figure out that tricky process of selling to

the utility themselves and working in the utility environment, which can be very, very complex. It is not for the faint of



heart to sell into this vertical, but it is an amazing vertical and probably the most important for security, both in the US

and abroad.

On the applications front, I could probably talk for 20 hours about what I see in this area, but you are essentially going

from an era that is World War I – World War II-ish, where it was an analog disconnected device and the customer did

not have any interaction other than getting a bill from the utility. This thrills us all when we get it every month. You get

it, you realize that it is going up, you cannot understand it, and you are not sure what you can do about it. If you take a

step back and envision a world two decades from now that will be a highly distributed version of what the grid is today,

everyone will be in the power producing business. Everyone in this room will be in the power producing business in the

next couple of decades. This is along with, God willing, some breakthroughs in the storage and battery area. These are

either in fuel cells or batteries, but everyone will be able to store energy. Thus, dealing with power peaking issues and

getting off of the grid, we are going to have to share in a distributed capability to do that.

You have heard a lot about electric plug-in hybrid vehicles making progress. It is going to take a long time. When you go

and charge your car at home, it pulls the power from your home, so the utility needs to be aware of it, bill for it, plan on

the supply side for that. It is a pretty complex undertaking to re-do the electrical grid to support that structure. Solar,

wind, and a number of energies that we can be involved with will change the landscape of this business. Therefore,

when you look at the infrastructure, which is the data and the applications, I believe you are going to have to redo all of

the applications in the enterprise. Any time that you are transforming an industry and are bringing supply and demand

together in a fashion where you are not using a bunch of algorithms to manage what energy might look like, but you are

getting real-time information about consumption.

Think about the iPad phenomenon. I was in India two weeks ago and there were iPad equivalents. Steve Jobs would be

very upset with me if I said they were iPad-like, but they were equivalents for $250.00. This puts people, in a country

where there are 750 million people on a mobile device, and turns them into computer users. Think about a

transformation of an emerging country just like that. What do they want?

Here is a small example of an application. I think we all remember when cell phones came out. The killer application for

a cell phone was billing. It has been kind of the infrastructure killer because of the dynamics of how you use either data,

voice, or video. In the utility industry we have billing systems that were built primarily 20, 30, 40 years ago. So, how can

I offer you time of use pricing and how can I offer you a peaking power rebate?

Now, the utilities can no longer ignore the consumers. You are their customers and you pay the bill. De-regulation

never worked because there was not network to build on top of. There is now. IP is the chosen stack of choice, and I

think you will hear that from the gentleman from Cisco, but I think about a world that can have an app store. You are in

a world today that is basically dominated by mainframe and client server systems. But, it is these smaller applications,

which can be very light weight, that use the data and where eMeter can tie all of that together for the end consumer to

use, it will transform an enterprise.

I will give you a small example of going to the web with a utility company. I do not know how many of you ever do that,

but my son is in college and I tried to add my electric meter to my bill. Thank god I have got an assistant, because it took

me three faxes and two conference calls to do that. In any industry all of those back end systems -- a move, add, delete,

change -- are a pricing change to the platform. In many countries there can be a supplier change. If you think about the

web, they are in the 0.001 web version of their product. If you think about a world where you interact with your utility

through the web, they cannot do that today. But the infrastructure to do that is being built. There are hundreds of



applications around billing, outage management, distribution, automation, all of those things should be thought of as

completely differently as this world transforms itself. With that, I will pass it along to the rest of the panelists.

Alex Shahidi (Stratogic Management Consulting): Good morning, I am Alex Shahidi with Stratogic Management

Consulting. I am focused on the cloud architecture data issues of privacy and security in the context of the architecture

of the transition, which is from legacy systems. Legacy systems being client servers that are two-tier or three-tier, and

we bring those into the cloud. This also includes all of the issues that we need to address in that transition from a

business perspective, in terms of how you transform and in terms of what technology you adopt in the transition, and

then also in the maturity phase. In a nut shell, I think that the name of the game is data protection.

Larsh Johnson (eMeter): Hello everyone. My name is Larsh Johnson and I am with eMeter. I have been doing this

awhile. My first foray into smart grid related topics and dynamic pricing was back in 1985 when I started building what

we hoped to be a smart grid type technology at that point. It ended up becoming a very simple time of use device that

was a part of electro-mechanical metering so you could actually get the time of day information back from consumers in

order to have some of the pricing programs that warren was talking about.

Then we developed a company from that business that started to automate that with a wireless network and it became

Cellnet Data Systems. It is now a part of Landis+Gyr and it serves about 16 million meters in the US, with online

communications getting information back from consumer premises. Since it was pre-smart grid, that data was good for

looking at how much energy people used on a daily basis, as opposed to down to the next level.

In the early part of this decade, I founded eMeter to look at how to take that same experience and apply it to more

modern technologies that would allow for more real time communication, bi-directional communication, and a new

class of intelligence devices, and make that information useful within the context of the energy company and the utility

operations. These include billing, networking, and grid operations on a whole new form of customer engagement. This

has really been our sweet spot in dynamic pricing and the kinds of things you hear about now with critical peak have

been a part of our lexicon for 26 years.

Sanket Amberkar (Cisco Systems): Hi, I am from a little networking company down the road called Cisco, in case you

have not happened to hear of us. The question that we used to get asked last year, when we first got into the market of

smart grid, was "Why Cisco? What are you going to do in the smart grid space?" If you look at smart grid in the simplest

terminologies, there are really three levels of infrastructure that happen. There is an energy infrastructure, which is

your bulk generation, transmission, distribution, renewables, and all the way down to the meters on building and

homes. We do not do that, but that exists.

What really makes everything smart though is on top of that there has to be a communication layer. If you are really

going to do any form of two-way communication like what Larsh or Warren just mentioned, you really require pretty

much an end-to-end, interoperable, and scalable communication infrastructure. We looked at ourselves and said, “Who

better to do that than us because that is what we have been doing in different industries.” On top of that there is going

to be an application layer of course, which is where all of the interesting applications are. This is again where we have a

lot of experience, not so much in doing applications, but in how you interconnect the network to the applications in

order to get the full benefit of them.

It made it obvious when there were five of us sitting around a table a year and a half ago to say we should get into this.

Since then, we have come in and said that we believe that if you want to go into interoperability, IP does make sense as



the standard on which you build the backbone of communication. It does not mean that every single application

running is running on IP. There are a lot of people who sometimes confuse IP with the internet, and we want to make

sure that when we talk about IP it is really the same as your enterprise IT infrastructure. It is not the internet. For those

of you who are running things, such as data control, you are talking about Ethernet, when is exactly along the same lines

of what we are talking about.

Once we say that, then it makes perfect sense because we have seen this happen before in other industries. We have

done this in the telecom space where we have taken legacy infrastructures and have converted them over into digital

infrastructures, which run communications and tie everything together. We have done this in mission critical cases. For

example, we have done this in government and military types of applications, which are extremely critical infrastructure.

I think we are starting to see how you take that same expertise and apply it to the utility space, which will be a pretty

interesting topic for us to discuss.

MARKET OPPORTUNITIES

Zen Kishimoto (AltaTerra Research): Great. Thank you very much. Let us jump into some of the questions that we

have prepared. Obviously, after some of the discussion, if members of the audience have questions or comment they

can ask them. We want to make sure this is a fairly interactive session. This first question is what are you going to do

with the data? Data has been used for AMI (Advanced Metering Infrastructures), DR (Demand Response), and even DA

(Distribution Automation) these days. I am curious if there are any more opportunities in the data and who will come

out as a leader in that new data application area? Is it the large incumbent companies, the startups, or someone we

cannot even think of at this time? Warren do you have any thoughts on that?

Data Usage Opportunities & Utilities

Warren Weiss (Foundation Capital): I will give you my biased view again. I think that this industry is not one that has

had innovation in a long time. It is very hard for the incumbent vendors to see the future and what it might be because

it, in some cases, displaces older systems that are in place. Thus, I see a lot of innovative startups that offer applications

from outage management, to peaking power pricing, to pre-payment options. There are a million analytics around

revenue and energy optimization, energy efficiency applications, and you can let your mind wonder with getting real

time data and what the usage could be of it. The data visualization part of it, where you have got field service workers

doing outage management, today you know exactly where it is. It has got a MAC address and it sits on a network. You

do not send 15 trucks out to an area code looking for a downed power line. I think that creates great efficiencies for the

utilities. Thus they are all looking for new operational applications.

I think you are going to have to partner with them early on because it will not be obvious that there is an RFP (Request

for Proposal) on the street for this type of application. You have to have great domain expertise and someone like Larsh,

who has been at this a long time, can listen to what they say and build applications. Initially they might view them as

their unique applications. Utilities see themselves as unique, and it is each one of them. I am sure that this does not

surprise you. That is not reality. They are pretty much the same across the board. They might have different regulatory

policies that are driven by the commissions, but the framework for those applications is pretty much the same. I think it

is an exciting time. If I was an entrepreneur I think you can do some incredible things with cloud computing and open

source.



You can partner with legacy players because the legacy players have massive amounts of data. You are not going to

transform a network overnight. You are going to live in the eMeter world, which is a heterogeneous everything. With

these utilities it is like the roach motel. It goes in and it never comes out. It is in there for 30 years and they have to talk

to it, to communicate it, they have to account for it, and they have to be responsible for reporting on it. Thus, any time

you have that level of complexity, if you can think about simplifying their business it would be a great opportunity for

entrepreneurs.

Larsh Johnson (eMeter): I would like to comment on a couple of things. Warren is exactly right. There is a very massive

machine here that is difficult to move. I think that one thing that is very clear is that the entrepreneurial spirit of

developing a new application is not something you find in the energy business typically. It is large infrastructure projects

that take 10 - 15 years, so the entire organization and their parts suppliers are built around these very long term and

massive projects. Therefore, coming up with a quick new fix just does not happen.

That is where I think you have opportunities as entrepreneurs who can understand what their needs are because you

never walk in with a blank sheet of paper and ask them what they would like to do. You say instead that you have

something for them that can help them in this way. That is a combination of technology and business experience for

them.

The second aspect is that the policies that have said we are going to deploy smart meters are also saying that you have

to make that information available to the consumer. Once you start making the information more available outside the

big data center of the utility, now you have opened it up to the entrepreneurs and the consumer facing folks, who can

move more rapidly. I think that the innovation cycle will see new applications that can benefit consumers because this

data is openly available. This is another aspect here that is going to start to drive the industry much more than it has

been in the past.

Sanket Amberkar (Cisco Systems): One thing I would like to add is, if you look at this again from a business standpoint

about how large the opportunity is, I was doing some reading over the weekend and some of the number I have seen

from the software standpoint or a service standpoint, are that today it is maybe $500 million globally as a potentially

addressable market. If you look at it five years from now, it is expected to grow to $4 billion. That is something that is

extremely interesting and an answer to why would you get into this space. When you look at what you can actually do

there, there are a couple of things that we see which are very interesting.

To what both Larsh and Warren mentioned, there are multiple different activities that you can do, which both pertain to

consumer facing data and that pertain to utility facing data. On the utility facing side I see a lot of opportunity.

Probably, I believe, most of the money is to be made there because simple things that they do today you can go and

start automating. There is a lot of process automation that can happen when you start to put distributed intelligence

into the overall network and you start making all of these end points, which so far have really been a manual pull

system, into a truly automated process. Therefore, it saves them significant OpEx.

That is something you will see the utilities prick up their ears and pay attention to. This is because, as you know, the

utilities are running on a return on asset model. CapEx is not so much of an issue, especially if they can get something

into a rate case. OpEx is something they absolutely hate. If you can reduce significant OpEx by doing these types of

things that is where the opportunities are. To go look and ask where the OpEx opportunities are, there are certain

obvious things that reduce outages, which are obvious plays that fall into the DA space. There are things you can do



from a remote workforce management standpoint that definitely fall into that place. There are things you can do from

an emergency response standpoint and how you tie all of these things together. That falls within that space. This is all

besides everything you can do form the consumer side, which we will talk about as well, which fall there. I think that if

you start to look at it that way, it becomes very interesting.

Who are going to be the winners and the losers? I think that Warren had a very good point earlier, which was that the

consumer should be the winner. I believe that they will be at the end of the day. But there are two criteria for what is

going to happen. This is going to happen in phases, and it is going to really determine who the winners and the losers

are. At the end of the day, when it comes to pilots, anyone can do a pilot. Anyone can show proof of concept and get it

working. Eventually, when you take it down, one of the two things that are going to be required is some level of domain

expertise. Obviously, this is an industry that is fairly conservative. They want to see that you have done this somewhere

for them to believe that you truly understand their processes.

The second thing is going to be scalability. At the end of the day, there are going to be so many end points and so much

data. If your solution cannot scale, it cannot go beyond the proof point or beyond the first set of deployments. That is

something that you have to look at very early on, in order to make sure you can make that happen. Whoever that is,

whether they are small startups, and there are startups that have shown that they can scale, and there are the large

players. That is going to be the really interesting thing over the next three years; who is going to come out on top or

what combinations of partners will come out on top.

Alex Shahidi (Stratogic Management Consulting): I just wanted to add a small comment to you specific question. I

think that large players like SAS have mastered this game. There are several players who are getting in the range of

artificial intelligence, and who can address what you want to do if you define what it is you are trying to do. Specifically,

components and subsets of design and addressing intelligence within ad hoc data will almost definitely come from

startups. I just do not see it, and no disrespect to CIS.

Warren Weiss (Foundation Capital): I like you.

Alex Shahidi (Stratogic Management Consulting): I will finish with one simple statement. If you torture the data long

enough, it will confess. So the ability is there to extract data. The question is what is it you are trying to extract and how

are you going to push it up and down the stream.

Zen Kishimoto (AltaTerra Research): Are there any questions from the audience about what they have said?

FIRST SHORT Q&A

Question from Martin Fichtner (Silver Lake): I have two questions. One is how much data are we talking about? Could

you put into perspective the size? I think Larsh you are probably the best one to answer this. Is this, compared to the

telecom industry, Google, or what Facebook does, comparable?

Data Quantities

Larsh Johnson (eMeter): It is a drop in the bucket. If you are an average home owner with 2.5 people in the house with

two Facebook accounts, and if you have teenagers then all bets are off, the amount of photos, chat, and all of the stuff



you are putting on Facebook dwarfs the amount of data you would get from a home, even in the most highly

instrumented case. This really is not about massive amounts of data. It is about doing a new business process, which is

driving more data than the industry has ever seen. But, it is not about the need for a fundamentally new technology to

handle this data.

One of the things that we are excited about is all of the things that are coming out of startups, who are looking at new

kinds of data analytics. One thing that is also important is that too many times we talk about data analytics as this

monolithic beast. Everything is going to sit in some huge data warehouse and crunch on it. No body works like that.

Everybody has different kinds of segmented business process, segmented data stores, and operational characteristics

that have things that are a little different. We can look at everything from stream space computing, to massive parallel

in memory databases, to basic transactional processes. Our customers have saved over a million field visits because

they do not have to go out and remotely switch customers on and off, or read meters when they change the retailers in

Texas. Those are not massive amounts of data; it is automation of a business process.

At the same time, if you have data streaming in from substations and field grid management stations into energy

management or status systems, you are getting data every four seconds or so and you do not want to necessarily act on

that data tomorrow. You want to act on that within a few minutes, or even a few seconds. That is not something you

are going to put into a database and go back to run some queries or a big data analytics on. That is a stream space

process. Analytics is a big term and you have to look at all of the different segments. I think that there are going to be

different solutions for each segment and I think that there are lots of opportunities for the technologies that have come

out of the highly interactive customer, social networking based platforms that you see out there today. If you think

about how customers behave today, you click and see a result. It is not like you will get one tomorrow. It is a different

world and we think that technology is definitely going to have some applicability in the space we are in.

Changing Utility Operations

Question from Martin Fichtner (Silver Lake): I think this is something that builds on what you said, which is ultimately

data analytics is not monolithic, and you are dealing with things that are done at the operational level at the utility,

where some of the data management is more at the CIO level because it comes in, and the customer... Bridging that is

just challenging from a process perspective, in terms of implementation and getting people to do things differently, and

there is no standard. Every utility does things differently.

Larsh Johnson (eMeter): Right now the utility industry is facing a real challenge in the segmentation between the

control centers and the customer centers. They are really two different worlds within the utility. They refer to it as the

OT vs. the IT. Operational technology, which are some of the most real time operational systems you will ever see.

These are what run the power grid today. These are much more real time, and over the last 30 years have been much

more real time than some of the IT systems that have started to get into that. Things like streams computing complex

and then processing have effectively had their roots in real time control systems, many of which have come out of the

power industry. Merging those operating environments today is not a technical problem so much as it is an

organizational problem. There is a lot of history in the utilities that have driven these things in two separate ways, but

now they are going to have to pretty much going to have to be forced together.

Services Versus Software



Question from Martin Fichtner (Silver Lake): Does that mean a lot of the spending is going to end up being on the

services side, as opposed to the actual software side?

Larsh Johnson (eMeter): I think so. I think that there is going to be a big piece of that. I think that if you look at the big

system integrators, and maybe our friends here at Cisco, and they look at those services as very lucrative. It is a

combination of computing technology, networking technology, security technology, standards, and so forth, and in all of

that there is a lot of opportunity there.

Sanket Amberkar (Cisco Systems): I have three quick comments on that because I want to point out that we sometimes

talk about data very monolithically too, and data is not monolithic. As you know, there is a lot of stuff that happens on

the home side -- the metering side. The way that you look at data from a networking standpoint is in two ways:

bandwidth and latency. Then you look at the application and you start mapping them to that. What happens in the

home is not latency critical. You can take the meter reading any time within a 15 minute cycle, or a one hour cycle, and

if you can get it back that is perfectly fine. At some point there is a collector that aggregates it all, therefore at some

point it might become a bandwidth issue because you are aggregating a lot of data and you are pulling it back at one

time. Eventually that data makes its way back to a data center and there is processing that is happening there.

The other part, which I think are very interesting, and which we can sometimes overlook because they are more on the

utility side of the space, is the latest is critical applications. Obviously what you have happening in substations, what you

have happening from a distribution and automation standpoint, and what you have happening from PMU, where you

are not talking seconds, you are talking milliseconds, is phaser management is happening at millisecond control basis.

That is not where you can compromise how you manage the data. You have to push the controls out and as close as

possible to where the actual process is happening. You cannot have it come back into an operations center, even, to

make those decisions. That is where you are really changing and transforming how the utility looks at the overall data

management, the grid space itself, and the control of it as well. There was another point I had, but for the sake of time I

will defer that to a later part of the discussion.

TECHNOLOGY CHALLENGES

Zen Kishimoto (AltaTerra Research): Are there any more questions at this point? None, okay. We have actually already

entered the second question to some extent. The first question was that we now have data and what are you going to

do with it now. The second question I have is how you are going to collect the data. As the questioner from the

audience asked, there is so much data coming in and generated at the rate needed; now people are now talking about

incorporating weather information into the smart grid, so that you can increase the predictability of the power grid, and

so forth. Do we have a technology right now to cope with such a humongous amount of data, and analyze, store, and

everything else? Do you have any perspective on that Sanket?

Current Analytics Technologies

Sanket Amberkar (Cisco Systems): Sure. What I think we see happening, and I am pretty sure the others on the panel

would agree, is that data is going to be coming in from multiple different sources. Some of them are going to be fairly

legacy things. Think of something as rudimentary as a transformer. The transformer is being monitored by an analog

based system. Someone goes out there, takes a reading, determines what the temperature is, and from that decides

what type of maintenance to do. They have now progressed to a point where they have digitized that information, so



therefore that information can be put onto a network and brought back to an operational center where you can now do

remote monitoring or preventative maintenance on those assets that are distributed. That is just an aspect now of how

you bring information on to a network from something that is fairly legacy.

Then you get into the areas where you are really pushing the boundaries of the other end. You have an end consumer.

The end consumer may have a home energy management system in their home at some point in time, through which

they have the ability to have the data coming to them, and which they are then able to manage, monitor and control.

But, realistically, you do not want to have the end consumer change their behavior per se by introducing a lot of

technology that they may not be too familiar with. What if you make it even one step simpler and have a home

controller, but also have the ability to have the information available on their iPhone, or other portable device, so they

can manage and monitor it from there through an App. This, again, gets to the user adoption aspect as well. Therefore

you see a different aspect of how you tie additional things into the network and make a two way communication from

there. Thus, when it comes back to that, you are having multiple different types of data that have to then run for

different types of requirements, and eventually you are doing a normalizing and incorporating that all together.

That is where we see a lot of opportunity in terms of being able to stream and do what we call quality of service, based

on the priority that the data requires and on where it is going. That is really where you get into the overall network

management of all those data streams. As I said, some of it may be latency critical, some of it may be bandwidth

intensive, and some of it may be going into multiple different types of applications, which you have to have different

ways to support and provide for. That is really the part where the utilities get pretty nervous.

This is one aspect where they are starting to realize that up to this point all they had to do was provide energy, and now

they are going to be providing information as well. Also, they are going to be managing information in addition to

energy. That is where they are looking for help and partnerships, in order to make that happen. That is where

companies like ours say this is really where we bring a lot of expertise in how to manage things such as complex

networks, vast scalable networks, and information at that type of a scale. It is going to, of course, happen through

partnerships because you are going to be talking to people who have the different end points, different access points to

information, and bringing it all together.

The Role of the Cloud

Zen Kishimoto (AltaTerra Research): I have a question I would like to direct to Alex. What do you think about the

application of cloud computing to this particular situation where you are handling humungous amounts of data?

Alex Shahidi (Stratogic Management Consulting): I think that Sanket brought up some very good points and I think

those are the areas in which Cisco will maintain its strength, which is at the switch layer. However, I would really look at

it differently. The question in my mind is, "What is cloud doing to the infrastructure, as opposed to what do you do with

the cloud?" Cloud is happening and it is happening now. Your network is getting sourced to multiple locations. With

analytics, you have Amazon who is giving you the infrastructure. You have Hadoop and Hive sitting on there doing all of

the analytics for you.

The question is, "Now what do I do with it? Where do I route it?" Even within that framework, when you look at it

holistically the question becomes "Where is Cisco sitting? Are you sitting at the data center? Which data center and

which cloud are you connecting to? Are you leveraging capabilities for the right scale, where you are switching between

clouds? Are you leveraging run-my-process type processes when you are actually composing processors in the cloud?"



Thus, I think that the question is much more complex than saying, "How do I take my infrastructure and move to the

cloud?"

The reality is that the cloud, at $4.00 a gig, or even a multiplier of that in terabytes, compared to nickels and dimes in

cloud, gives you no choice but to move to the cloud. Right? So, the question is "How do you address this transition?"

Taking it on, you hire an SI (Systems Integrator), or you could even higher someone like me. I will tell you how you go

from point A to point B, but that is the least of your problems. How do you now connect this? How do you now

integrate with eMeter? How do you integrate with Silver Spring? How do I convince the utilities to deal with this? As

they mentioned, the experts are sitting here dealing with utilities.

We all know that they are certainly stodgy, and saying that they make the rules. However, when you deal with a

contender who is bigger than you are, you need to look at where their weaknesses are, as opposed to trying to figure

out how to move them around. The weakness of the utilities is in the fact that they will not be able to afford to manage,

collect, compile, and process all of this data the way that they have been doing it. It is that simple. They have to shift.

They have no choice, and that is why the startups that Warren is funding will make a lot of money.

Larsh Johnson (eMeter): But, there is a back pressure on that, right? It is that utilities make their money by investing in

assets. Their shareholder return is exactly tied to how much capital investment they make. Thus, for them to build a

data center, buy software to put into the data center, is absolutely the core of their business model. I agree with you. I

am not sure how it is going to transition, but the cost structures in cloud are so much better that it has to be inevitable.

But, I have been in this business for 26 years now and I thought that a lot of things were inevitable 20 years ago. This is

going to take some time because that business model is so rooted in capital investment.

Sanket Amberkar (Cisco Systems): There are actually three phases that occur in this. This comes from what we are

seeing in having conversations with the customers. Like I said, even though we do not have a vested interest initially in

the cloud, we will when they truly start to build out. But, that is one of the things that is so far out there for where their

mindset truly is today. If you start talking cloud to them and tell them that they have to do it right now that is the last

conversation that you are having with that customer. But, having said that, what you are going to start to see

happening, to Larsh's point, is that they do want to build their own private clouds, which they would control and operate

themselves.

The reasons they will put forth are that they will have to comply with security mandates and requirements, and the only

way that they can ensure that is if they can control and operate it themselves. At some point in time, when the scale

gets too big for them to manage, then everything that was said, and which I totally agree with, is going to come to

fruition. This is where they are essentially going to have to outsource that capability. Thus, despite the fact that they do

not like to have an operating expense, when they numbers become significant enough that the cost per terabyte

economics just make more sense, they will see the fact that they should move to a cloud environment.

Now, every utility is going to have to go through that transition. Some are much more progressive and it may be that

warren has been talking to some of the more progressive ones, who see that happening now. Some are, however,

extremely old fashioned, really do not have that much of an IT sense, and are probably going to be more reactive to

seeing how it has been deployed by someone else before they dip their toe in the water.

Warren Weiss (Foundation Capital): We are in an early stage and I think that we would all agree with that. But, I think

that if you go into a utility using words like cloud, they are going to freak out because it means something that is not



under their control, and this will come up for business reasons, security reasons, or something else. There is a utility

here, in California, which runs 4 million network meters in the cloud. It is called software as a service, and let me give

you one statistic that is very enlightening for utilities. One third of all IT workers in the United States working for utilities

will retire in the next six years. They know those applications and most of them were custom built.

The utilities have to find a different way to do business. Thus, you say to the Utility, "By the way, I can manage your

smart gird or you can install the software if you want," you have to give them that option because they need to know

that they can have control if they want to have control, or if they eventually want to turn it back into an enterprise

software infrastructure, it is possible. It is, “Here is the 141 things you can do manage a wireless network you have

never build before, deployed, or optimized, or you just sign in through the web. Why do you not try that first? Oh,

okay, we will try that first. We will do it in the pilot and we will make sure it works." But the optimization that they get

from running this at a private cloud infrastructure today is happening.

Public/private is just a security and cost related issue. At eMeter, you can run a multiple tenant instance of multiple

utilities. We have one in Canada that runs in a cloud infrastructure. So, it is being done, but you have to focus on the

business reason it is being done and not challenge them along the lines of saying they are stodgy, old, and that the only

way that they get anything approved is by passing along money to a rate payer because everything is CapEx incentive.

You have to be much more creative than that and I think you have to do that in any industry during an early stage. But,

it is happening now.

My portfolios have dozens and dozens of very large utilities around the world who are running the grid as a service. It is

the early stage. Connecting to someone’s meter over the network is not monitoring and routing around a bad

transformer when it goes down at a substation, or in one of those green boxes that sit in front of one of every five

homes in the United States. You have to be able to route around those. So those are much deeper into the operations

of the utility and they will take longer to happen because there are a lot of security related issues and a lot of business

processes that need to change in utilities to have that happen. It is a different point of view, but it is happening.

Larsh Johnson (eMeter): That is really those new applications and it is the things that they do not have today. They do

not have the operating groups in place. If you ask who their smart grid operations group is, they will look at each other

and ask what that is. They do not have one. That is why the opportunity exists for that, but you have to offer the

option.

Alex Shahidi (Stratogic Management Consulting): I just have one comment about the time horizon. When you are

talking about opportunities in grid, are we talking about opportunities that are specifically within the utility space or are

we talking about opportunities within the expanded data space? I ask this because once you have intelligent grids in

place, what is the next step? You have smart homes. Then what is the next step? You have smart buildings. Thus, the

horizon should not be the smart grid is something that sits at the door.

SECOND SHORT Q&A

Zen Kishimoto (AltaTerra Research): Do we have any questions from the audience?

Deployment TImelines



Question from Daniel Considine (Sparsix): I think that it is wonderful that all of you are addressing some of these ISOs,

RTOs, and all of it. It is great. How about a little perspective about the sales side? You guys have all been doing this for

25 years in some cases. To put it in perspective for the audience, you have finished your product, done your alpha,

demonstrated it works in a lab, and you may have had a test case done somewhere. How long does it take for you to

get from that point to having a paying customer?

Larsh Johnson (eMeter): That is a painful discussion. There is no way around it, and Warren and I were talking about

this before the discussion started. One of the key issues right now that the industry faces is the procurement cycle that

is built around this idea of buying commodity products that have 15 - 20 year lives and are part of multi-billion dollar

capital projects, like power plants. Thus, you do not have the kinds of dynamics that allow for rapid innovation and for

new technologies to come in and go through the cycle.

I know that Warren has gone through this, where you could be partnered with a utility, spending a lot of time in the lab,

field testing it and actually having great success with it, only to have it go out to RFP and have a competitor come in and

take the deal. The RFP is just fundamental to what they do. It is the procurement cycle that is built into their

organization. In some cases, like when you are dealing with municipal organizations, there are rules that they have to

follow for public bidding, and that sort of thing, and they are required to take the lowest bid as long as it meets the

requirements.

In the investor owned utilities, like PG&E, the rules are not quite as clear, although the behavior is very similar. They

have optimized that behavior to drive down almost every procurement into a commodity procurement. This is very

challenging when you have differentiating technology and the cycle is very challenging when your technology lead can

be eroded when you wait a year while going through a procurement process. So, it is painful, and there is question

about it. When you are in the startup business, you had better have good, solid investors like Foundation Capital to

keep you going because it takes awhile.

Question from Daniel Considine (Sparsix): What is awhile? Is it a year, two years, five?

Warren Weiss (Foundation Capital): Years. It is years to get an enterprise. It takes 3 - 4 years at a minimum, and it

might take 2 -3 years before you sell them to get an enterprise deployment.

Larsh Johnson (eMeter): It depends on what you are doing. A big capital network project will be in that time span. A

web service that goes for consumer engagement on the web, we have seen some people take off and get some traction

relatively soon. But, it really depends.

Sanket Amberkar (Cisco Systems): It would depend. That is a good way of demarking it. It depends on how much

transformation or innovation you are making into their existing operations today. We came out a year ago with a

product. They are now being bought, sold, implemented, and are running because we have gone through the whole RFP

and the pilots. They are now being deployed mass scale, but at the end of the day the product we took to market was

simple enough that it easily fit into what they currently have. Thus, at the end of the day a switch and a router is a

switch and a router, and therefore you are taking an existing one and you are putting in a new one. That is a fairly

simple thing to do.

If you are doing something, for example, like the analytics at OPOWER, they came in with a very simple solution that is a

new solution. But I think that they have been able to get enough customers out there because it really did not change



the existing processes in house too much, which would have caused a lot more pain and a lot more hurt. It is when you

start trying to get into doing large transformational things that the timelines will get drawn out more because there is

more potential for risk. I think that is really where you have to pace yourself, irrespective of whether you are a large

company or a small startup, and you want to have a portfolio of different things to the extent that you can. Thus, you

are having certain things that are bringing you revenue in the short term getting you into customer, getting you into

their bill of materials for what they are procuring, and then start expanding out from there if you can afford to do that.

Data Formating Standards

Zen Kishimoto (AltaTerra Research): Are there any more questions or comments? I have one question that was not in

the agenda, but about which I am curious. We were talking about the collection of data. Do we have a standard for the

data format already or is it coming out somewhere, or is it total chaos?

Larsh Johnson (eMeter): Chaos is probably a fair description right now. There is a lot of effort with the DOE and the

stimulus funding triggered a standards effort led by NIST (National Institutes of Standards and Technology), but that is

becoming a very interesting process in and of itself. It is not likely to draw out any near term conclusions, but I think

that over the next two years we are going to see many more standards coming out.

Zen Kishimoto (AltaTerra Research): So each of the utilities has been doing their own thing and when the standards

emerge later, they will try to change.

Larsh Johnson (eMeter): Yes, they will change. There are certain things, like IP, that I think are getting more and more

conventional. But within the IP packets the standards are still somewhat lacking.

Sanket Amberkar (Cisco Systems): Correct. We are starting to see a convergence start to happen. There are certain

things that are legacy that have been built in there from a protocol standpoint that are going to take a longer time to get

converted over because they are investments that have been made. No one wants to just tear something out only to

put it back in again if they do not have to. Thus they want to make sure that is in place, especially when you are putting

in something that is new.

Yes, obviously, I will talk to IP and I am sure that Warren will talk to IP, or Larsh, because those kinds of things are where

we are seeing standardization occur. They are going through a NIST of finalizing how different things that are not IP

today will eventually be brought on to it. Zygbee Alliance, for example, has now said that they will support IP protocol

as a part of the 2.0, so we see that also happening as well. Then there are things that are happening even in their core

operations, like skate operations. You have IEC standards (International Electrotechnical Commission) at 61850. At the

end of the day it is really based on Ethernet interconnectivity within a substation, or an operation like that. That is

something that everyone is eventually moving towards. Maybe it is happening more in Europe right now, but eventually

it will be making its way here.

Actually the new deployments that are happening are abiding by that. You have IEEE 1613 as another example case.

Thus, you are starting to see those take place. It is going to take a little bit longer for things which may have been

proprietary in nature to come over because anyone who makes a proprietary standard is going to want to milk it for

everything they can. But, Warren brought up a very good point. People are retiring. There is an aging workforce, and

therefore the people who know how to run it are eventually not going to be there to do the transition over, so you have

to plan for that transition to happen. The time for that to happen is really now because you have those needs.



We are shocked, for example, when we go into a substation and you see colored wires running through those

substations, where people do not honestly know what wire is what. This is because they have been strung together

over the last 25 years, and in some cases we have seen them run an individual wire for every application, and they are

paying a service provider a fee for that data to come across. They obviously have not gone through the process of

converging a network and consolidating all of that information onto a single one. We are there to tell them that we can

do that and also that the guys in their IT department have been doing this for the last 10 years. Therefore, let us go

ahead and start to look at how you can do that, bring down your OpEx, and go onto a converged network with different

types of data flows running off of it. Those are the kinds of things that you are starting to see happen. And it will also

drive a little bit more of that standardization as well.

Warren Weiss (Foundation Capital): One of the other data management challenges for the utility is in the home area

network. Utilities have not had relationships where they had to deal with people on the other side of the meter, or the

home. In order to instrument your HVAC system, pool pump, water heater, or thermostat, it is not clear that the utilities

are ever going to be able to absorb that capital into their rate base and own things on the other side of the meter. The

utilities are not built to do that, thus there is a whole set of data that is going to come from various appliances and it is

going to be integrated into the network, and yet the dysfunction created by this CapEx/OpEx issue versus just solving the

problem is kind of ties into the larger macro issue of a national energy policy. It is crazy that there is not one. There are

so many utility commissions by state, and hopefully the pain will bad enough at some point that we will see a real

national energy policy because shame on us if the US cannot really get something built.

Larsh Johnson (eMeter): One thing about the standards, real quick. There is some good news there. One of them is

that the boundary layers, especially from the consumer perspective, the Zygbee Alliance just did the Smart Energy

Profile 2.0 release yesterday. That is going to help define how devices in the home are going to benefit from

connections to the utility metering. On the other side, at the data center, there are also efforts that are much more

likely to result with interaction with the utility from the external world through what is called the Open ADE. That is an

open data exchange that will allow consumers ad third parties to get access to their own energy usage data. The same

will happen through open ADR, which is a platform for demand response that I think is also well formed and being

adopted pretty aggressively. Those things are sort of at the boundary layer that allow for interaction outside the utility.

I also think those are getting standardized relatively quickly. Inside the ball it is a lot of different stuff and you have

mentioned several of them.

The Public‘s Role

Question from Daniel Considine (Sparsix): Another question that I have is obviously the utilities operate at their own

pace, but if their customers suddenly have an appetite for change, or the customers are feeling enough pain from the

cost of their energy usage, they will press their suppliers to change their practices as well. How long do you think it is

going to take for people in this country to feel enough pain that they will start pushing their utilities?

Warren Weiss (Foundation Capital): Here in California I hope people are feeling the pain. I have friends of mine who

say that their smart meter increased their bill 4x. I tell them that their old meter did not read it correctly because it was

50 years old. There are a million pieces to this question because if we really wanted to build a distributed smart grid, we

would really incentivize the consumer to help fix the problem. $1,000.00 to put solar on your roof, as a rebate, is

starting behavioral changes but there needs to be much larger incentives. Otherwise there is no choice for the utilities.



They have to build greater capacity than you would ever want to make sure that every time you flip on the light switch it

works. We are not in some third world country where it kind of works. It has to work all of the time.

It is a wonderful question and I think that the complexity level of this industry is such that you have regulatory frame

works that do not match up with realities. If you meet most regulators, they are super bright people. Most of them

come from legal backgrounds. Everything is done on a legal basis. It is not done on a return basis. Therefore, those

people need to understand a lot more about technology. A lot of them are trying, but it is a big leap for them. It is really

the key question that stops innovation from happening. I do not believe that we have a technology problem. We have a

technology adoption problem.

When everything is incentivized by CapEx, we all know that CapEx is not the best return on investment over a long time.

Thus they have a bid and a proposal, and whoever has the best price gets the deal. It reminds me of something one of

the early astronauts said. He was asked how he felt about sitting on top of the first rocket to be launched. "Well," he

said, "how would you feel if you were sitting on top of 60,000 low bidders?" That is a bit of what goes on in this

industry. We are forced, from a transparency standpoint, to buy the low bidder. But the low bidder has nothing to do

with what is going to happen in the next 10 - 20 - 30 years.

The process has got to change. If the procurement process does not we are going to be stuck with a lot of old

equipment. Jeff Immelt at GE made the most startling statement. He said "I have a health care business that I sell $20

billion dollars into every five years, and that is all new equipment. I have a utility business I sell $30 billion dollars into

every five years and it is the same equipment." That gives you a real life example of what takes place here.

Alex Shahidi (Stratogic Management Consulting): I would just like to add one thing. I think that energy is too cheap

and that has to resolve itself. Obviously there are some social implications to that. As long as energy is as cheap as it is,

I do not think that the consumer will push for anything. The second thing is that I think it will take a massive crisis, and

given the way things are we might get one soon.

Larsh Johnson (eMeter): There is actually a proof case here about the cycle. In the year 2000, California had a bit of an

issue, if you recall. We are still paying for that. It is on your bill. Every one of you gets a bill from PG&E, or any utility

that is recovering from that. The nature of that crisis was such that at the time a Berkeley economist called Severin

Borenstein asked for and questioned why we did not have dynamic pricing. It would completely remove any of the

market power from any of the suppliers. I do not care what Enron's under the table dealings would have done if market

power would have happened.

In fact, San Diego Gas & Electric had prices tied to the wholesale market price, and they passed through the exorbitant

prices that started to come through. They did this until the consumers complained and the regulator stepped in and put

a cap on it. That was when San Diego got into the same boat with everyone else, effectively had to absorb the market

price, no pass it through to consumers, and basically now pay it back through bond issues. We effectively said that we

are protecting consumers. We are going to make sure they do not feel the pain of higher energy prices, which is what

they have to feel if we are going to see these kinds of changes.

At the same time everyone, and Borenstein in particular, said, "Why do we not have this dynamic pricing? Why do we

not have peak time pricing?" "We could do that," they replied, "but we do not have any meters that allow you to do

that. We cannot actually bill those things." That is what really started, what was then called advanced metering

infrastructure, the whole push by the California Public utility Commission (CPUC). California really led the way for all of



this because of this crisis. I would say that at this point, 10 years later, we are just getting to the point where those

meters are getting in place.

PG&E is one of the leaders with having more meters online than anybody else. But, I will also say that they are not

offering time based prices to those customers yet. Thus, there is a lifecycle there from when we had a crisis to when we

have a solution and a future infrastructure to do that, and we are just starting to see that. In Ontario, they have actually

said that time of use prices are mandatory, and there are over a million customers today who are on time based pricing.

So, they are starting to condition customers that peak power is more expensive. What is really interesting in Ontario is

that they also pay the US to actually take power at night, because their power prices in the wholesale market actually go

negative. These are all things where if we can start using these pricing signals, and provide that transparency, we will

start to see some of that innovation, but it takes awhile. The regulatory process is a part of the lag on that, and the state

by state regulatory process really adds to it.

SECURITY AND PRIVACY

Zen Kishimoto (AltaTerra Research): Okay, let us move on to the next subject, which is security and privacy. When we

talk about security and privacy, what top level considerations are necessary, such as who owns or can access the data?

Larsh do you have any perspective on this?

Data Ownership

Larsh Johnson (eMeter): I have been doing a lot of talking, so I will be brief. First of all, my basic position on this is that

we have already proven out how to do this, whether it is your banking, your Facebook, or you internet service account.

There is a certain amount of identifiable information that is part of what your contract with your provider allows them

to have, for the purpose of the service for which you have contracted. Thus, if you contract with an energy company,

the information that is generated from you metering and billing is a part of what they are using to provide you the

service for which you have contracted. If you have authorized them to release that information to a third party, then

they should be able to do so. In fact, many people today are requiring that they provide that opportunity. An open ADE

is one of the standards that would make that happen. The agency relationship between the consumer and then the

provider of a service, I think is the model we have seen now in banking, telecom, and other areas, and I think we now

need to apply it here.

Data Accessibility

Alex Shahidi (Stratogic Management Consulting): This particular one is near and dear to my heart because I think this is

really going to be problematic. I disagree with Larsh a little bit about this one. It is not in terms of the availability, about

that I think that he is totally correct. The questions are not about companies like eMeter, and the like, or even Cisco,

who are not typically in the business of selling information, leveraging it, and using it. I think the problem is somewhere

else. I apologize if the example is a little crude, but it reminds me of a joke which is about why dogs lick themselves and

men do not. It is one of those things where if the information is available, if it is accessible, it will be used, and we have

seen that over and over again. The problem is that until now, it has been Facebook, Google, and entities that I, let us

say, have a relationship with and at the same time am a user of. Now, you are at my doorstep. It is very uncomfortable.



I can tell you that in my neighborhood no one has allowed PG&E to install a smart meter. Everyone has refused, and I

certainly have refused, because I am simply not comfortable with that. There is no DMZ.

Warren Weiss (Foundation Capital): Well, this changes things. You did not tell me that in the beginning.

Alex Shahidi (Stratogic Management Consulting): Thus the question is, “Where is the DMZ and how are you managing

that data?” This is actually going to be very might like the utility crisis, it is coming. It has not hit us yet, and here is a

problem. We briefly talked about cloud. About 12 years ago I started a company called Primedius, which was essentially

a reverse proxy VPM. I have the National Security Agency and the FBI as clients, but I could not convince people like

Warren to invest in my company. I do not mean you specifically, but investors.

Warren Weiss (Foundation Capital): I was on vacation.

Security

Alex Shahidi (Stratogic Management Consulting): Probably. The reason is this, in the year 2000, if you told people that

privacy would be an issue, they would look at you and ask what you smoked today. I did not smoke anything. There was

a trend, it was obvious, but I think that we were too far ahead of the curve. We are very close to that curve now, and

that curve was essentially brought forward by cloud.

Bear with me for a second. You use your iPhone, mobile device, or your laptop. What do you use now? You use a

variety of storage providers in the cloud. Your network is flexible. It could jump from a VMP to a T1 if you are a data

center, or in your personal case you are going from wireless to home. There are a whole slew of boundaries that are

being stretched by the very concept of the cloud. The network that your iPhone is running on, or my laptop is running

on, what is happening to it now? Let us say that I am a business and I am leveraging Amazon, I have elastic capacity.

Elastic capacity is happening, and suddenly my data, which is on S3, is now getting shot someplace else.

Maybe I have hired a bunch of people to distribute my data based on cloud classification and it is sitting on four different

clouds. Where is the boundary? Who is having access to this? What is your relationship with your supplier? How do I

know what he is doing to the data, and there is a fine line between paranoia and pragmatism. The pragmatism is that I

need to know what you are doing. Now that they grid is sitting at my door, my home, my fiefdom, I am sitting in there

and now I have devices that are controlling my utilities, my appliances, my stereo, and my other devices. Thus, it is a

whole can of worms that is starting to be opened and needs to be addressed.

One answer is standards, whether it is a PCI 27 or IEEE, or DOE's as you mentioned, it is happening. But, whether it will

happen in time or not is a different scenario. I think that there is where small startups to come in and really manage

that data under controlled conditions, including release and access, updating, and cleaning it. This is not from what you

see in the EU directive, in terms of the ability of the consumer to manage what is going on and what is being

transported. There are a slew of technologies that are either in the concept phase, and there are a couple of startups

starting to work on that, possibly my own, and that is where I think the opportunity is because the consumer will

demand it before they will allow smart meters or these other devices intrude into their personal space.

Privacy



Sanket Amberkar (Cisco Systems): Let me make an attempt to simplify things because this is an extremely complicated

conversation when you get into things like security and privacy. If you humor me for a second, I will try to simplify this

down to a first order approximation of what we are trying to solve here. At the end of the day, what we are trying to

solve here is trust. It is not an issue about technology. It is not an issue about understanding whether we can do it or

not. We have done it already in other industries. Obviously the PCI is a good example in the financial space. But, let us

break it down and separate security from privacy.

There are a lot of things that are happening today, and will continue to happen from a security standpoint, that you are

going to see. This is basically securing the information itself. Irrespective of what is in the information, whether it is

customer information, information that is just moving on the network between substations or between energy

efficiency programs, you still have to secure it because that is critical infrastructure. You are mandated by NERC (North

American Electric Reliability Program) with the critical infrastructure protection guidelines and requirements that they

have to do that. Those are happening because they are being mandated. If you do not meet those, you get audited, and

if you get audited you pay a hefty fine if you do not do that. You will also continue to pay a hefty fine until you get that

remedied. Thus, those are happening, but those are security specific things.

Now, within that, you start to get into privacy. Let me simplify the privacy and not talk about who has access to you

information yet. Let us just talk about securing your own customer data. You have to ensure that you can secure the

data when in motion, thus as it is moving within the home to wherever it may go, be it a datacenter, an operations

application, or anything else. You have to make sure that no one can hack into it, gain access to it, or can do things like a

remote shut off of your meter. Obviously that has to be protected against.

Then you have to secure it when it is at rest. You are mandated for customer billing, for example, to store the data for a

certain number of years, and you have to make sure that it is secured and stored for that time period. This is beyond

what you typically do for a lot of the data that is in a typical enterprise today. Therefore, that puts a lot of requirements

and compliance needs onto the utility itself, which they are doing because they have to do that.

Now, you get into the one part that everyone loves to talk about because no one has a solution for it. It is how do you

manage customer privacy and who owns the customer data. I think that Larsh put it well when he said that there are

going to be contracts between the individual and the utility in terms of what information from the customer can be

accessed in the first place and what of that information can be made available to other applications. If you choose to

take part in those services, those services have to voluntary because every time we make them mandatory, we see what

has happened in Baltimore, where something mandatory gets shut down. It is not going to get past. Then you get into

the aspect of having done this before in other industries, but do you trust your utility with your data today?

That is the harder question to solve because until this point people had not had a relationship with the utility where

their information was being accessed. Now, we are all logical and rational people in this area here, and have realized

that you have allowed your banking information to be made available onto a cloud based service, is being accessed by

the bank and I trust the bank, and what have you there. It is much more concerning to me, as an individual, about what

I am making available there, then you just being able to read a meter. Guess what, your consumption has gone up,

which probably means that you have bought something new in your house and that means that I will come and try to

sell you something else to supplement your purchase.



Guess what, I now have a mash up that knows where you live and I know what your neighbor next door possibly bought,

so maybe you will want to buy this too. That is where I think that concerns start to go, but I think that is where it is

going to take a little more time. To answer the concern that was brought up, that is where you somehow have to build

trust about whether your utility can be trusted with this information. You have to go at this in small steps to make this

happen, where they can see a tangible benefit fist, be it through a pilot of a test, of what they are getting back in return

for the information that they are willing to share. Then, and only then, can you take the larger step forward of providing

them with additional services that are based on that particular customer data.

Utility Trust

Larsh Johnson (eMeter): Let me address the utility trust thing for a second because I think that you all have already

trusted the utility. They already have this information, they already send you a bill every month and to get that

information they send a guy around to your property every month to see you. In some locations your meter may be

indoors, so you actually have to let them into your house. I think that we all have had a lot of fun here, and our friend

Alex is a little paranoid, but I think those are real issues and that the standard of care has been established in other

industries, and we have to apply them here. We have to get clarity about that and we have to do a better job.

The industry does not communicate this very well. To your point about certain things being voluntary, if you want to

have a smart appliance, it is your choice. You have made that choice to have that smart appliance because it has going

to add value to my life, for some reason I think that it will be useful to be, and only if I need to have a third party service

provider will I allow that information to be used outside of my house. The point of have good security technologies and

making sure that information is only used in the ways for which it has been designed, that is a security issue. The

policies around privacy and the options for customers need to define how the rest of this stuff works, but you already

trust your utilities.

Sanket Amberkar (Cisco Systems): Let me just clarify that, because what I mean by trust is not just whether you trust

them with having your data. What I am talking about is trusting them to not sell it to someone else. They trample my

dandelions today to come take my reading. I totally agree with that, and I am fine with that. But I know that when the

data is there, Google is not getting access to it, some third party small startup is not getting access to it, and that data is

locked down and only I can go into it because the name on the bill is mine at the end of the day. Correct me if I am

wrong.

Larsh Johnson (eMeter): That does not change with any of the smart metering by the way.

Sanket Amberkar (Cisco Systems): Correct. The concern, I think, is not so much about that. Smart metering does not

change that. The concern now is if my information is now available into a shared space, for lack of a better term, where

third parties may pay, like they do today for other things, to get access to your information so that they can eventually

sell you a service like I was talking about before. That is where the concern is today. I think that is where people do not

know yet how that will be safe guarded and protected. I think there needs to be some clarity there, but that is still an

evolution.

Control in the Cloud



Alex Shahidi (Stratogic Management Consulting): If I may, I think this got a little bit on a tangent. The stuff that you are

referring to -- data in motion, data address, and data in transit -- the encryption is nothing new. There are 50 outfits

that provide this technology. I think that you are looking at it too superficially. This is not about technology. I am a

technologist, so this is not about paranoia about technology, so please do not confuse the two.

I recommend that everyone, if you have not already, to go to cloudsecurity.org and review the information specifically

about cloud security and the risk initiative from the EINSA (European Network and Information Security Agency) at

www.enisa.europa.eu. You can check it out, as well as the Cloud Security Alliance right here. Look at the detail of the

issues and the concerns. This is not about me being paranoid about somebody looking at my personal utility use. I

really do not care. Most people do not. This is about what is happening because of the cloud.

The utilities, and everyone else, within the next five years, and no longer in my opinion, minus a few, will move to the

cloud for the reasons we just discussed -- cost, performance, SLAs, people retiring, and the legacy people not being

around to service. In that context you have moved your information gathering, processing, and analytics into an

environment over which, whether you like it or not, you do not have full control. This is not about paranoia. This is

about understanding where the opportunity is. I am talking about opportunity, not what I am worried about. The

opportunity is addressing those issues and making money from it. So, let us clear and not be worried about who gets

exposed.

PCI 27001 and 27002 are addressing this at the infrastructure level. FFIEC (Federal Financial Institutions Examinations

Council) is addressing it for you mortgage at the data level appropriate to a multi-tenant environment. The standards

exist. The technology, I would say, is excellent. Indeed, security in the cloud is better than in traditional security. A

cloud environment is easier to secure than a cloud environment by far.

The problem is the intangibles, the SLAs, the entitlements. In the elastic environment, how do I know what I know?

How do I enforce a contract where I have expanded into a whole bunch of new processors, CPUs, and RAMs? They have

been decommissioned and I do not know if the data that is residing on them on the storage associated with that

expanded environment has been properly deleted and destroyed. This is not about paranoia. This is about practical

problems that are directly associated with cloud, with or without smart grid.

Larsh Johnson (eMeter): I think that is where the formation of policy in this industry needs to track what we have done

in other industries, take advantage of those technologies, and apply them.

Warren Weiss (Foundation Capital): I think that Alex needs to get a smart meter so he can help solve those problems.

If you do not participate, you cannot solve problems.

Larsh Johnson (eMeter): We already did that, he just does not know it.

Q&A SESSION

Zen Kishimoto (AltaTerra Research): Okay, do have any questions regarding security? I think at this point we will also

open things up to general questions also.

Other Industries as Examples



Question from Shannon Fraser (US Export Assistance Center): Are there any lessons learner, or have there been

discussions with the banking or telecom industry as to how this might be applied to cloud environments?

Sanket Amberkar (Cisco Systems): Those are conversations that have been happening. I know that conversations that

we have been involved with, or other utilities have been involved with, where they have been talking to their counter

parts in the banking space or the health care space, where you have HIPA and the other requirements, I think that is

being discussed and developed. Again, from a technology standpoint, I do not think that anyone here is arguing at all

that the ability to address it is there.

With the intent and the willingness from the stake holders there, who are those who go and do the implementation

itself? It is really understanding what potential new opportunities are being opened up as a result of that information.

Also, it is which ones you are protecting against, which ones would you potentially allow, which ones are still being

discussed. We are still at the very early stages of that and I think that everyone agrees with that. That is where the

hesitation really is, especially for an industry where, up to this point, it did not have to deal with those issues. At the end

of the day, they say that they do not have customers, they have rate payers. This is making their lives more complicated

than it used to be. Now, I think you are starting to see them look at these and say that there are two opportunities here.

They could potentially have additional revenue streams, or they could have shared revenue streams that they could

benefit and leverage from. Now, the biggest issue is that, unlike the other industries that we talked about, this is a

highly regulated market driven by a lot of policy to make things happen. Things which would be obvious to any

graduating MBA who comes into a space and points out, they say look, it makes sense to me, but my hands are tied. If I

go and do all of these different things, there is no benefit. If I go and increase my revenue, guess what, I have to pay it

back. This is because I am given a certain rate of return that I am guaranteed at the beginning of the year, whether I sell

that much or not. If I do a better job, I really do not get it back in my pocket. But, I get all of the black eyes if it does not

go right. The policy, to Larsh's point, is where we are seeing this.

I will let the cat out the bag now I guess. We are looking at things we call grid-onomics. You cannot take a monolithic

approach to solving the problem. You have to bring at least three key elements together. Technology is the least of it,

but technology is definitely part of it. Then you have the basic business economics itself. Can you make a basic business

economic case given the current regulatory infrastructure to make these changes? Then the third aspect is the policy.

Can you move to shape policy to make it more appealing to make investments that actually make sense to what the end

consumer actually wants to have anyways?

There was a question earlier about whether the consumer can actually influence and make changes happen. Until the

policy does not respond to what the consumer wants, that is not going to help because the business case is not going to

be there to make those happen. Therefore, having the technology is great, but it is not going to be implemented

because you have that triangle that has to get solved. That is actually where we are working with the regulatory bodies.

When I say we, I mean the entire ecosystem of vendors, utilities, and other stakeholders working collectively, both here

as well as in other countries.

We say let us look at this from a global standpoint because you can address it in individual pockets, but you have to

address it overall to make sure that there is consistency in making things happen. I think that is where we would

probably see something that was starting earlier this year. We are expecting it to bear fruit. It is going to take time, but

we are seeing that it is getting a lot more traction. Even within the policy making you are starting to have groups within



the administration who never really talked to each other before. DEO, NERC, and NIST are not as amicable as you would

think. Therefore you start to get them together and start talking. You say to them that they have all of the pieces, let us

start to work together to make all of this happen.

Alex Shahidi (Stratogic Management Consulting): Just to your question specifically, that PCI DSS is the best example. It

essentially was a growth out of the mere fact that the credit card processing industry was losing tremendous amounts of

money. I think that would serve well here for the utility space, where the dynamics change, where the profit, asset,

CapEx and all of those start shifting. I think it would drive an industry wide, possibly a global, standard to at least

address at the baseline. For those who are not familiar, PCI DSS essentially enforces a universal, and take that with a

grain of salt, standard for how you process the data. For example, with your credit card number your last four digits

might be exposed, the expiration date cannot be stored, and so on. You create this framework where even those with

access, have access to a limited subset of information. Then the way that you communicate enforces the encryption in

motion and transit and address. Thus, I think that is the best example to use, and also in terms of a model.

The International Perspective

Question from Daniel Considine (Sparsix): So we have talked about the US utilities quite a bit. As startups and well

established firms trying to address the smart grid, where do the real opportunities lie? Are they here? Are they in

Europe? Asia? If you are trying to address this market, and we say right now that we have taken the observation that it

is taking a lot of effort to get the folks within the energy sector in the united States to work together, are there other

markets that you would recommend that startups go to?

Sanket Amberkar (Cisco Systems): I will take a first attempt at that one because I know that we have been doing a lot of

work outside of the US in fact. What we have been seeing is that there are quite a few different phases. A good way to

look at it is that there are smart grid activities that are happening globally. The reasons that they are happening are

entirely different. The ones in the US, which we spend a lot of time with, have more to do with efficiency and

improvement in how you have the actual delivery of energy and the processes themselves, which have led to smart

metering.

Europe is really driven by the 20/2020, which is a goal of having 205 of all energy consumed being off of renewable

sources of energy by the year 2020. With the exception of Denmark which is at 40% today, the rest of Europe is lagging

behind in meeting, though they have mandates in place which they are working towards. To the extent that you can

part take in that, it is a vast opportunity. We have a lot of engagement with ourselves and through our partners, to do a

lot of those types of activities where you are helping in bringing renewable integration onto the grid much more

efficiently than it has in the past. As a result of that, it helps in bringing price points down as well.

The other issue, of course, is can renewables ever suffice to be the base load? It is not quite there yet, but can you

improve the amount of renewables that are being used and consumed? Yes, you can. China is an excellent example of

an entirely different approach. They are doing an entire five year planned re-investment of infrastructure. Energy is one

of the key ones because, as you have seen, they have passed the US in being the largest consumer of energy in totality.

And that is going to continue to grow at a certain pace, which means that they have to look at their entire energy

infrastructure. Most of it is really on the utility side of things. I will let everyone else talk to things like metering and in

the home. I think those are a little bit further behind. There are definite investments all the way from generation and

transmission and distribution. There are massive things. Actually, they have planned to invest a million kilometers of



fiber optic cable purely for the networking aspect alone of communicating on their grids. No other company has even

attempted to put that much fiber into the network at all. That is a massive investment, purely on one aspect itself.

Australia is very interesting. Australia is a small country, with maybe six utilities at best, with Energy Australia being the

largest of those. But, they are highly progressive in what they are doing. In fact, there are actually startups that have

actually done most of their business there because of the fact that they are very progressive and very similar to the US.

Thus, whatever you implement over there can be applied over here relatively easily, and you do not have the burdens of

the policy and the regulatory restrictions to deal with.

Singapore is a great example, but they are actually quite far ahead and sophisticated. They have implemented a lot of

the things that we have implemented here today. They actually have them in place over there, and they are really more

progressive. But, it is an extremely small market. Now, there are synergies between Singapore and Australia, and the

overall Oceania area, so what you can do there can be applied elsewhere.

Finally you have Japan. Japan is probably the most sophisticated of all. So, it is kind of funny when we have them come

by and talk to us, we say do not talk to us about metering, distributed automation, or transmission automation. What

we are really interested in is net metering. What we are really interested in is how you bring power back onto the

network because we have done everything else. We have seen what they have done and that is pretty impressive. But

that is another area, if you are looking further ahead for something to do, that when you have it proven and tested you

can bring back there, which is an opportunity. Again, the one thing to be cautious about is beware when you go into any

one geography that there are certain certifications you are going to have to pass, which are going to vary from country

to country. Therefore, how much of your product development are you willing to put into that up front? Make those

investments from a policy standpoint that they have, which is local to them, and then how much of that actually

translates backwards to where the larger markets may be. That is your own analysis that you would have to do.

Warren Weiss (Foundation Capital): I would say that in the startup world, selling to utilities is hard, so I would start

with municipals and co-opts, where they are not dealing with the rate base case. It is really coming out of their normal

operating budget, and it is a lot more rational approach to innovation, it is a lot less risky, and you get a reduced sales

cycle. So start with smaller utilities and work you war up. Obviously this is a global phenomenon. If you are a startup

that wants to be in the hardware business, it is really complex by country with the requirements that are out there. You

have to raise a lot of capital to afford to do that. I think that a lot of the innovation can come through software. When

you put up a website, you are a global company immediately. If you are going to build a global company, it has to be a

global company because it is not like you can just build a big company in jus the US. With all of the companies that we

are invested in it is a global ambition. It takes a very sophisticated and senior management team to pull that off.

Larsh Johnson (eMeter): It also takes a lot of airline miles. We are operating on four continents today, including

Australia, with a Singapore power subsidiary using the grid and that technology. It is a challenge. I will say though that

there are a lot of common themes, and they are effectively: 1) CO2 reductions – the social pressure to actually achieve

some sort of carbon emissions reductions, whether it is through energy efficiency or demand response, and those kinds

of things. 2) Energy independence, which is where Japan’s focus is in driving renewables. It is sort of a corollary to

efficiency to demand response. Thus, if you look at it sideways, it is really not that different in some respects. 3)

Initiatives around renewables and storage, and then how those connect to the grid, how do they get metered, and how

do the transaction costs of supporting that as a distribution company?



Again, this is very similar to what we see here in California or Ontario, where you have feed in tariffs for solar power and

so forth. Thus, there are a lot of commonalities. The other major driver is really around market operations. What is

going on in Europe today is not just around the green movement, but also around privatization, where the utility

structures have largely been national utilities. They are now being created in a more private fashion, and they are really

segregating, like we have in Texas and Ontario, the supplier form the retailer and making that a more competitive

market. What that brings to bear is a lot of information sharing that has to go on. Thus, in the settlement process, just

like in any market trading operation, you actually have to settle who bought what and who sold it to whom. That

process takes place every day and that information is shared everyday across the market participants, from the retail

suppliers to the generator to the grid operator, in order to make sure that settlement process works.

That is an ongoing process today and those kinds of things are all very much rooted in the information that we have

been talking about. Thus, the opportunity really is how to use the new technology and the new sources of information

to improve those settlement processes, and make the overall market operations more efficient. What we are seeing

happen in Texas today, because we have installed smart meters, is that the latency of switching between two retail

suppliers does not have to be on the 30th of the month. I can take place at any time. They do not have to drive out and

read your meter, because now you are buying from Reliant energy vs. TXU.

All of these things can happen in a more interactive way, which is what we are used to in all of our purchases. It is now

coming to bear here, and the smart metering information and the immediacy of it is providing that. The same thing is

going to go on in the trading and wholesale markets. Again, there are global themes there about which my job is to

squint sideways to make them look the same. You can have a product that has a minimal amount of localization as we

go from country to country. China is a big exception right now because China is a big grid optimization, and not so much

about the consumer.

Zen Kishimoto (AltaTerra Research): I agree that in Japan, until maybe two weeks ago, there was a case. But right now

TEPCO in the eastern part of Japan does not have enough power. Thus, I think that smart grid technology could be a

very useful technology to accommodate the shortage of power over there. Are there any last questions?

The Influence of Public Policy

Question from Allyn McGillicuddy (Office of the CIO): There are groups of the population today who are the biggest

users of energy, and they are getting a pretty good deal on it. Those groups of people could become very influential as

we move to demand based pricing. Some of those people are very well organized. The two that come to mind are

medical practitioners and the 30% of the people in the energy industry that are going to retire from the energy industry

are going to join a highly organized population of retired people. Those two communities are examples of segments of

the population that will not benefit from demand based pricing. I notice that we do not have any representatives on the

public policy side at the table, so I am interesting in hearing your thoughts about how that will play a role in the

proliferation of smart meter and smart energy technology as we go forward over the next decade.

Larsh Johnson (eMeter): I would like to wedge in on that one because it is near and dear to my heart. I think that there

is a limited amount of information and a lot off it is anecdotal. I think that there is a growing body of data that has been

evaluating time based pricing and dynamic pricing, where customers with a choice, can opt into rates that they think

may benefit them.



Recently we ran a study with 1200 participants in Washington DC, in which they selected a statistically significant

population who were on limited income. They were picked because their rate codes indicated they already had some

kind of subsidy because of their income level. They were enrolled in what was called a peak time rebate project. First of

all, the enrollment rate was higher than other segments of the population. More people wanted to try this out. It was a

rebate, so it meant they could only win.

What happened is that if you reduced your power usage on those specific days, on those specific hours, which they were

told about before, they would get a rebated based on how much they reduced their load. This population, which many

people actually think are not able to modify their behavior because they are retired and at home, actually modified its

behavior exactly as much as those people who were on the other rebate programs. What is also interesting was that the

alternative, which is you have a rate and then you pay more during those same period of time, actually showed a little

bit more response, but it was close enough that the carrot and the stick seemed to work.

The study concluded across a group of limited income population, as well, that the participation was just as good at that

level. Again, choice is important, but we all today pay for a hedge. We all today pay for an insurance policy so that our

energy prices will be capped. That hedge should always be available for those who want it. For those who do not want

to pay that hedge, take a little bit more risk, and modify their behavior, we need to make that available to them. That

does not mean that we pull the rug out from under the people who maybe could not afford it.

Zen Kishimoto (AltaTerra Research): If there are now more questions, I think we will wrap it up for today. Thank you to

Agrion for hosting this event and to all of our panelists for participating. Please join me in thanking them and thank you

all for joining us today.

End.

Documents

Smart Grid Data Management: Challenges & Opportunities