Pacific Gas and Electric Co. has one of the most ambitious smart meter programs in the country – a $1.7 billion plan to bring meters that can record and transmit information to more than 10 million customers by 2011.

But the installation of all these smart meters is just the first step in what PG&E and other utilities envision. They want a "smart grid" able to monitor and control the flow of electricity to – and from – homes and businesses.

Deciding how to get there from here is the job of Andrew Tang, senior director of PG&E's smart energy web division. Since 2006, PG&E has installed about 1.4 million smart meters – 1.1 million of them natural gas meters and the remaining 300,000 of them electric meters – as part of its $1.7 billion plan approved by the California Public Utilities Commission in 2006.

Now the utility is asking the commission to approve an additional $572 million to upgrade that plan to incorporate new technology from companies like Silver Spring Networks. The commission is set to make a decision on that request at the end of January, he said.

The upgrade initially was set at $623 million, but was revised down after negotiations with the companies looking for a piece of the action. "We were able to get some pretty significant concessions from our vendors," Tang said.

That underlines the opportunity that startups and established companies alike see in making their products an integral part of a future smart grid – one that can modulate power consumption on the individual household and business level to prevent blackouts and reduce costs during peak demand times, incorporate more renewable power from intermittent wind and solar sources, and eventually adapt to a growing number of plug-in electric vehicles needing, and maybe giving back, electricity of their own. (see EPRI Plugs Smart Grid for Energy Savings).

Smart grid, demand response and energy efficiency startups took the second-largest share of green technology venture capital investment in the third quarter, about $272.1 million, though that was behind solar power's record-breaking $1.5 billion haul.

Still, making smart grid-minded hardware and software is cheaper than building massive wind farms or solar panel factories. And rebuilding the grid to make it "smart" will take tens of billions of dollars over the course of a decade or more – making a piece of the action worthwhile.

Q: PG&E is using General Electric and Landis+Gyr electric meters. Are you looking at others?

A: Most companies in their smart meter deployment will use one meter vendor. Occasionally you'll get a company that will say, to back up their supply chain, they'll use two vendors [but usually use the second as backup only]. Because of the size of our deployment, we chose two vendors, and we're giving the two vendors an even split to our deployment. [Ed. Note: Landis+Gyr has provided all of the 300,000 electric meters installed so far, he said.]

Q: What other vendors are you using for your smart meter system, in terms of  hardware and software?

A: In order to do an AMI [advanced metering infrastructure] deployment, you obviously need a meter co that produces the meters. That meter company has to work very closely with your AMI vendor [which makes controls for how smart meters communicate]. Whatever the technology – BPL [broadband over power line, see Will Smart Grid See a Push for Power-Line Networking?], PLC, RF Mesh – all the AMI vendors have to put something inside the meter. [Ed. Note: PG&E has chosen Silver Spring Networks as AMI provider for its electric meters and Aclara for its gas meters.]

The AMI provider is responsible for the network that brings the signal from the meter back the data center. Once it gets there, you need another vendor - meter data management software. Think of this as middleware [between the smart meter data and PG&E's billing, customer service and other systems]. Ecologic Analytics is the company doing that for us.

Q: How have PG&E's plans changed from the early stages of the program?

A: We were using an RF [radio frequency] technology for the gas [meters], and we're doing daily reads on the gas [using technology from Aclara]. ... The gas technology works great. [Ed. Note: PG&E does not replace its gas meters with new meters, but instead attaches Aclara's modules to them, Tang explained.]

On the electricity meters, we were using a power line carrier technology [using technology from Aclara]. It was a low-bandwidth technology. ... As part of our upgrade, we're migrating to an RF mesh technology [using technology from Silver Spring Networks].

Q: Why did PG&E make that switch?

A: With PLC [power line carrier] technology, the signal literally travels over the power line. With RF [radio frequency] mesh technology, the signal travels over the air to some kind of collection point, and the signal can hub from meter to meter [allowing each meter to serve as a relay]. I would call them more mid-band, not narrow-band, not broadband - about 50 to 100 kilobits per second. In an RF mesh network, because each meter is also a relay, they tend to be very, very robust, and if the path back to the collection point is interrupted [by trees or other interfering objects or signals] they can find another path.

Q: With PG&E's proposed upgrade, its smart meter deployment will cost about $2.3 billion. How does the utility justify those costs to regulators?

A: Both the initial case, and the upgrade case, generate business cases that are actually cost-beneficial to our customer. Our initial case was about 90 percent covered by what we call hard operating benefits - instead of having a crew of about 950 meter readers, we no longer need the meter reader positions. [Ed. Note: Some additional savings are to come by making billing more accurate and more timely, he said.]

Then there are some of the demand response benefits we'll have. [Ed. Note: Last summer, PG&E instituted a critical peak-pricing rate for about 10,000 volunteers, who tracked their daily energy usage through their smart meters and adjusted their power usage accordingly. That can save the grid from 7 percent to 12 percent of its daily demand if taken to a wide scale, studies show.]

That introduces one of the key things we want to do with our upgrade technology. ...  Right now, people don't feel connected to how much electricity they use. Our new meters incorporate something called the home area network. That's about getting meter data information into the home in real time.

Q: Tell us about the home area network devices and systems PG&E is looking at. Who makes them and what will they do?

A: The key issue of the smart meter is being able to get information out of the meter, and for the utility to be able to send a pricing or control signal to the meter.

So once you're in the home, how does that translate into devices? We're working with both startup companies and very big-name companies to design products for the home area network ... in-home display screens, control modules, smart thermostats.

[So far] It's been standards work. ... What we're trying to do through the standards body is trying to make sure we have the interoperability. We're also trying to encourage some big names and small names to develop these technologies (see Acquisitions in Smart Grid: Get Used to It).

The other advantages we get is, we get this network that is two-way, and that has more bandwidth for future opportunities [such as demand response control from the utility]. ... The most obvious is thermostat management. We can sign people up to a program, and we can give them a break if they agree on really hot days to increase their thermostat temperature by four degrees.