How will the issue of open standards play into smart grid companies' efforts to get a piece of $4.5 billion in stimulus funds?

If a consortium of utilities could have its way, the federal government will focus first and foremost on "inter-system" standards — that is, standards for communications that happen at the borders where utility systems meet each other and those of grid operators, regulators and customers — and avoid messing with "inside the utility" systems already in place.

That's according to a paper on smart grid standards issues prepared earlier this month by a host of America's largest utilities. Given the billions of dollars utilities are now spending on bringing smart meters with two-way digital communications capability to millions of customers — the starting pieces of a future smart grid — it makes sense that utilities wouldn't want to jeopardize their investments.

And given that $4.5 billion in federal matching grants are to be tied to using open standards in smart grid deployments —  at least "if available and appropriate" — there's some urgency to clearing up how the Department of Energy defines what "standards" are in the program for giving out grants it's supposed to have prepared in the next two months.

Complicating the matter is the fact that, despite many companies claiming that their technologies are more “standards-based� than their competitors, clearly defined standards for the emerging smart grid industry aren't really set in stone (see Smart Grid: a Matter of Standards).

(PS - for more in-depth discussion of standards for the smart grid, tune in to the upcoming Green:Net conference hosted by the GigaOm Network, taking place on Tuesday, March 24 at the Golden Gate Club in San Francisco. I will be moderating a session on smart grid standards featuring IBM vice president of energy and environment Rich Lechner, Pacific Gas & Electric's senior director of smart energy web Andrew Tang, Foundation Capital general partner Warren Weiss, and Scott Lang, CEO of Silver Spring Networks. Greentech Media readers can get a 15-percent discount on their tickets by ordering them through this link. What are you waiting for!)

"The primary issue is not that applicable, mature standards do not exist," the utility group white paper noted wryly, "but rather how to get all the stakeholders focused on quickly prioritizing, adopting and implementing Smart Grid interoperability standards across such a broad and complex technical landscape with many projects already underway." (For a look at the paper, visit the OpenSG Users Group.)

To do that, regulators should first work on standards for how utilities get data from one another to regulators and customers, the paper stated. That means standards for things like getting smart meters to talk to home area devices and plug-in hybrid or electric vehicles, or making customer data available through Web-based systems using standard application programming interfaces (APIs).

It also means that "it isn’t necessary to first resolve interoperability of “intra-system� interfaces within the utility’s Smart Grid implementations before projects can proceed," the paper stated. That, no doubt, would be a relief to utilities using smart meters from companies like Itron, Landis+Gyr and Elster, which use proprietary networking standards.

Those companies wrote a letter to U.S. Senators protesting language in a draft version of the stimulus bill — since removed  — that would have required all projects seeking stimulus grant funds to use Internet protocol as a networking standard.

Using IP for smart meter networking has its supporters and detractors. Some companies with proprietary networking systems protest that IP requires more bandwidth than many smart meter deployments can handle. Others say that those concerns may be outweighed by the need to settle on some networking standard.

"We really need to move quickly to a common standard -- and the question I have is, if it’s not IP, tell me what it should be," David Mohler, chief technology officer for Duke Energy, said of why the utility supported requiring the "must use IP" language in the draft stimulus bill.

Some smart meter makers that use proprietary networking systems have also objected to the risk that IP won't be secure enough for a network that, after all, could have the ability to turn on and off millions of home appliances in a way that could cause blackouts if misused.

But Mohler points out that IP is "used for financial transactions, for the architecture for battlefield command by the Department of Defense -- it’s out there. It's proven it can be secure."

In any case, Energy Secretary Steven Chu has said he wants to see open standards in any smart grid project being funded by his department. The 2007 Energy Independence and Security Act gave the National Institute for Standards and Technology the task of developing “protocols and model standards for information management to achieve interoperability of smart grid devices and systems."

The institute got $10 million in the stimulus bill to develop a smart grid interoperability framework, making it the likely arbiter of the meaning of "standards" in smart grid applications. But NIST sees such a complex set of issues before that it will first be working on simply figuring out which areas need to have standards defined sooner rather than later, Patrick Gallagher, the institute's deputy director, told a Congressional committee earlier this month (via CNET).

Fisker Automotive has named Advanced Lithium Power Inc. as the supplier of batteries for its upcoming Karma plug-in hybrid-electric sports car — and it's taken a stake in the Vancouver-based battery maker as well. The deal includes a $4 million stake in ALP for Irvine, Calif.-based Fisker and Quantum Technologies, which provided its Q-Drive powertrain concept to Fisker and holds stakes in both companies. Fisker's $87,900 Karma sports car differs from that of its rival Tesla Motors in that the Karma is a series hybrid — it contains an engine that serves as a generator for its battery, similar to plans for the Chevy Volt, set to be released in 2010. That gives the Karma an all-electric range of 50 miles with its 22.6-kilowatt hour battery, and an extended engine-and-battery range that the Fisker says is equivalent to getting 100 miles per gallon. Tesla, on the other hand, is building an all-electric sports car, the Roadster, with a 220-mile range and a price tag of $109,000 that largely reflects extra battery costs. Tesla makes its own 56-kilowatt hour battery packs using cells provided by unnamed Japanese suppliers, but has said it would consider buying cells from a subsidiary of Daimler AG, Reuters reports — the same company that Tesla has agreed to provide battery packs to (see Tesla to Build Battery Pack for Daimler). Fisker plans to make its first Karma deliveries early next year, the Los Angeles Times reported. That's a bit later than a November delivery date the company was aiming for as of December (see Fisker Preps Its Production Car). It's also a ways behind Tesla, which delivered its first Roadsters in August (see Tesla Delivers More Than a Dozen Roadsters) and has about 200 on the road as of this month. Fisker has raised about $90 million so far, including $65 million in September (see Fisker Raises Fistfuls of Cash). Tesla had raised about $147 million as of November, when it raised another $40 million in loans from previous investors after some well-publicized financial problems (see Musk: Tesla Hit by Market 'Freefall'). With a bit of bad blood between the two companies, including a lawsuit from Tesla claiming Fisker stole its design and technologies (see Cash-Strapped Tesla Raises $40M, Loses Lawsuit), it will be interesting to see how the two compete in the luxury green car startup field.

GreenVolts has signed a licensing deal with the National Renewable Energy Laboratory (NREL) to bring a solar cell technology into commercial production.

GreenVolts said Monday it plans to use the $500,000 from the U.S. Department of Energy, which oversees NREL, to figure out how to make the solar cells at low costs. GreenVolts plans to use the solar cells for developing its concentrating solar power systems, which use lenses to concentrate the sunlight and then direct it at solar cells for generating electricity. The San Francisco-based company plans to match the DOE fund for the 2-year project.

The NREL technology is called inverted metamorphic multijunction (IMM) Solar cell, which has three layers of active materials for converting sunlight into electricity. Last summer, NREL researchers reported that they were able to improve the performance of their IMM solar cell so that it can convert 40.8 percent of the concentrated sunlight (by 326 times) that hits it into electricity. The IMM solar cell is made up of two layers of gallium indium arsenide and one layer of gallium indium phosphide (see this graphic).

NREL researcher Mark Wanlass invented the original IMM solar cell design, which won a R&D Magazine award last year. Emcore, a maker of multijunction solar cells in Albuquerque, N.M., co-developed the winning solar cell design with NREL and the U.S. Air Force Research Laboratory, the company said. Emcore counts concentrating solar power developer SolFocus among its customers.

GreenVolts wants to use the IMM solar cells for building systems that make use of trackers that sit low on the ground, a design that the company says minimize wind resistance and makes the system easy and less costly to install. The deal with NREL will allow GreenVolts to develop solar cells tailored to its own systems rather than relying on solar cells developed by other companies. 

Unlike some other solar companies, GreenVolts was founded not by researchers in the solar energy field but a dotcom entrepreneur, Bob Cart. The company is developing a 2-megawatt system in order to sell electricity to the Pacific Gas and Electric, a deal that PG&E signed in 2007.

Much has been written about the potential impact of Big 3 bankruptcies on the hundreds of suppliers that sell parts and assemblies to them. Part of the logic of the auto bailout was that if any one of the Big 3 were to fail, it would bankrupt some of the tier 1 suppliers. This, in turn, could put additional pressure on the auto companies they supply. Hence, if GM were allowed to fail, Ford could be put in danger. The interconnectedness of the automakers, suppliers, dealers meant that any one failure could set off a catastrophic chain reaction, resulting in the loss of millions of jobs. A separate meme has also emerged, especially as it relates to the allocation of DOE grants and loans. This meme is can be summed up as “Silicon Valley vs. Detroit,� but more broadly, it is a debate as to whether taxpayer money is better used to support the struggling traditional automakers or to support the innovative startups (Tesla, Fisker, Aptera, etc.) What is becoming clear is that these two ecosystems are more linked that many realize, and that the pressures on the traditional automakers and suppliers threaten the viability of the startups as well. Ironically, if GM fails or causes their suppliers to fail, they may inadvertently kill the electric car again. In spite of the government support given to GM and Chrysler, the fundamentals of the automobile industry are continuing to weaken. With sales slowing and inventories building, it isn’t clear that “bridge loans� alone will solve the crisis. Suppliers, which have always operated on thin margins and intense pressure, are raising the warning that they too, may need government support or face collapse. One recent example was American Axle, which (according to Reuters) warned that problems at GM and Chrysler may force them out of business. Many of the startups in the automotive space rely on the same supplier base for key components, such as driveshafts, transmissions, interiors, suspensions and electronics. The failure of these suppliers, or the pressures of near-failure, could easily ripple to the startups, whose small size makes them less equipped to deal with supply chain disruptions. A case in point can be found in the public filings of Fisker Automotive’s technology partner, Quantum Technologies (QTWW). Quantum is the other side of the joint venture that formed Fisker Automotive in 2007, and is responsible for the development of the drivetrain for the Fisker Karma. Aside from the contract revenues Quantum receives from the Fisker JV for the development of the drivetrain, a significant part of their core business was supplying high pressure hydrogen storage bottles and other related services for GM’s fuel cell vehicles. In Quantum’s press release on Thursday, March 12, Quantum’s CEO hints at weakness in that line of business:

“Total revenue in the third quarter of fiscal 2009 was $5.9 million compared to $7.1 million in the third quarter of fiscal 2008, a net decrease of 17%. The decrease in consolidated net revenue is primarily related to a decline in product shipments and engineering services provided to General Motors in fiscal 2009 compared to fiscal 2008.�

Later in the release:

“Contract revenue for the Quantum Fuel Systems segment increased $1.1 million, or 24%, from $4.6 million in the third quarter of fiscal 2008 to $5.7 million in the third quarter of fiscal 2009. The increase was primarily due to higher development program revenues related to development of the "Q Drive" propulsion system for the Company's affiliate - Fisker Automotive. This increase was partially offset by a decline in hydrogen and fuel cell system programs with General Motors.�

What is not stated in the press release, but can be seen in the first line of the income statement on their recent 10Q, is that revenue from “net product sales� has collapsed from $7.2M for the 9 months ending Jan 31, 2008 to only $814,134 for the same period ending Jan 31, 2009. While I don’t know for sure, I suspect that this collapse in product sales revenues relates to their hydrogen fuel cell business with GM. While contract revenues from affiliates (the Fisker JV), jumped from $1M to $9.3M, more than offsetting the decline in product sales, this revenue is not really customer revenue. The revenues from the Fisker contract is cash from equity investors in the Fisker/Quantum JV that then shows up as revenue for Quantum as they do the work to build the drivetrain for the Karma (It would be interesting to have been a fly on the wall for that contract discussion.) CEO Alan Niedzwiecki sums up the situation this way:

"The Company's third quarter operating performance was impacted by the downturn in the economy and especially the challenges faced by our automotive OEM customers. Despite uncertain times, we remain optimistic that the continued focus on hybrid and "green vehicle" technologies will benefit Quantum as dramatic change continues to take place in the automotive industry.�

Which leaves me wondering what risk Fisker Automotive faces as their JV technology partner struggles with pressure in their core business. A possible survival strategy appears to be the same as their competitor, Tesla Motors, and seemingly every automotive company today:

"We continue to advance technologies under funded Department of Energy programs and additionally have applied for a $175 million loan in connection with the Department of Energy's $25 billion Advanced Technology Vehicles Manufacturing Loan program. … We are also in the process of applying for grants under the 2009 Economic Stimulus Package and other government programs available to the Company."

Darryl Siry is the Senior Analyst for Cleantech at Peppercom Strategic Communications. He is also the former chief marketing officer for Tesla Motors. You can read more at his blog at http://www.darrylsiry.com or email him at djsiry@gmail.com.