Here’s General Electric’s smart grid-as-a-service pitch. The city utility of Norcross, Ga. wants a smart grid, but doesn’t have the money to buy one for itself. GE’s Grid IQ Solutions as a Service will build it for a monthly fee, and then run it all from a giant cloud computing platform in Atlanta.

That, in a nutshell, is the project GE and the Atlanta suburb of Norcross, Ga. announced last week -- and it could mark the start of a new trend. GE hasn't said how much it's charging Norcross per month, or how many months it would take to deliver a profit on the project. But the more utilities GE signs up, the more economical -- or profitable -- the solution becomes.

That’s particularly true on the IT side of the budget. Most utilities don't want to have to buy the servers needed to run today’s smart grid, or to pay the salaries of the people you need to run it. But GE Energy is headquartered in Atlanta, and it has a lot of “computing horsepower” that it can shift around the region, said Mike Carlson, general manager of smart grid solutions for GE Energy. That could give Norcross and other Grid IQ service customers slices of the huge computing assets they only need every month, to process billing statements, say, or manage emergency response communications during a storm -- and let GE's experts manage it all.

Norcross expects to add about $1 per month to bills for the utility’s 4,200 customers to pay for the project, but they’ll get lower meter management costs, quicker outage management response and quicker restoration times in return, Carlson said. Though Norcross hasn’t approved the budget for future phases of the project, “It also sets them up for advanced energy management, like demand response capabilities, electric vehicle integration, and advanced distribution requirements," he said -- pretty much everything you’d expect the smart grid to connect to someday. Eventually, GE can hand the controls over to the utility after a while, or keep running the entire thing from its central command center.

This won't be the last time you hear the words "smart grid" and "service" put together. GTM Research predicts U.S. utilities will spend $8.5 billion from 2011 to 2015 on smart grid enterprise IT. Of course, much of that will be spent by big utilities doing multi-million meter projects, and many of them will choose to own their own IT, Carlson said. But even the biggest utilities are turning to the cloud to manage the flood of smart meter data coming at them -- take the 100-terabyte data management and warehousing project now underway with Southern California Edison, Itron, IBM, SAP and Teradata.

Indeed, the cloud could theoretically do everything a utility-owned IT can do. This isn’t a fact lost on big IT vendors like IBM and Microsoft that are busy designing “smart city” IT platforms. Nor is it lost on GE’s key grid competitors, such as Schneider Electric, which has bought software vendors Telvent and Summit Energy to build up the IT brains behind its power equipment muscle, or ABB, which bought power industry software vendor Ventyx for $1 billion last year, to name two examples. Indeed, Schneider has launched a cloud-based energy efficiency services offering, though for power users (buildings and data centers) rather than utilities.

But GE’s monthly fee-for-service version of smart grid is uncommon right now. Who’s buying? GE is starting with Electric Cities of Georgia, the 51-member municipal utility group that brokered the services deal between GE and Norcross, and stands ready to broker more deals, Carlson said.

All in all, about 3,000 small to mid-size utilities have about 35 million meters that need to be smartened up at some point, Carlson said. Beyond Norcross, GE is testing its services platform in a handful of pilot projects, he added, though he wouldn’t name them.

Municipal and cooperative utilities are a big and relatively untapped market. GTM Research polled nearly 100 municipal utilities this year and found that 40 percent expected smart meters to reach most of their customers in the next three years, but more than one-third of them expected that to take a decade or more. GE isn’t the only smart grid vendor eyeing the market, however -- SAIC's smart metering service offering, IBM’s smarter cities platform and Lockheed Martin’s demand response platform for electric co-ops are three potential competitors. 

Investor-owned utilities are less likely to be interested in a services model, since they get to recover all their capital costs in rate cases argued before relatively politically insulated state regulatory commissions. City utilities and co-ops, on the other hand, have to get rate increases past a city council or an irate faction of members, and have to finance big capital projects with bonds or loans, Carlson noted.

Of course, each utility’s smart grid needs will be different. In Norcross, GE is working with startup Consert, which will offer real-time home energy sensors and controls over a 3G cellular network, Carlson said. That’s a big project for Consert, which won a GE Ecomagination investment last year and is also backed by Qualcomm and Verizon.

“Consert and 3G are part of our go-to-market strategy,” Carlson said, though he made it clear GE would also support mesh networking and other common smart meter communications technologies. Still, it’s a good plug for cellular smart grid, as well as an interesting example of one smart grid platform making use of an existing communications system, rather than building its own. GE hasn’t picked a cellular provider for the project yet, Carlson said.

Tags: abb, cellular, consert, demand response, energy efficiency, ge, general electric, ibm, itron, saas, sap, smart grid, smart meters, southern california edison, telvent