San Diego Gas & Electric has scrapped its plan to build a private, licensed WiMAX network to support all its smart grid applications.

The utility is now coming up with a new smart grid communications strategy, one that will likely use a mix of private, piblic, licensed and unlicensed technologies including Wi-Fi, WiMAX, LTE cellular and to a smaller extent, proprietary RF solutions.

SDG&E, which revealed the shift in strategy in a recent filing with the California PUC. does not expect a delay in any of its smart grid plans as a result of the change, and expects to be able to repurpose some of the deployed equipment.

The shift is notable, however, because SDG&E was one of just a handful of North American utilities investing in comprehensive private WiMAX networks as the backbone for its smart grid activities, a group that also includes CenterPoint Energy and Hydro One. But single-solution utilities are rare. Instead, it's becoming far more common for utilties to deply hybrid technologies in access and backhaul networks instead of relying on just one form of communications. That can allow utilities to find the best trade-offs between cost and technical capability, it also poses challenges for integration and network management, whcih is giving rise to a new market segment within the smart grid.

Private WiMAX networks do offer high-performance communications without being tied to a specific network carrier, as with 3G and 4G LTE cellular communications.Utilities choosing WiMAX instead of public carrier cellular typically do so because of the lack of control and high data costs of cellular networks. However, the once-promising market for WiMAX has somewhat dropped off in the past eighteen months in favor of 4G LTE cellular, which is being widely deployed in the U.S. by public carriers including Verizon and Sprint.

In 2009, SDG&E received a $28.1 million grant from the U.S. Department of Energy to build a wireless communications backbone network for its smart grid activities. SDG&E decided to build a WiMAX network to cover a wide range of utility needs.

Late last year, SDG&E revealed that it had acquired a license to 10 MHz of its own spectrum from the FCC. The utility planned for the high performance, private wireless network to be complete in late 2013, to be used as a general-purpose smart grid network for greater operations integrity, direct control, security, and cost efficiencies.

SDG&E soon found that its new spectrum was also of interest to AT&T and Sirius/XM Radiod radio, driven by the lack of available spectrum in the U.S. and increasing demand by carriers to meet the needs of consumer broadband. Seeking more capacity to build 4G LTE for consumer broadband, AT&T and Sirius asked the FCC for a rule change that would allow it to use SDG&E’s newly acquired spectrum as a buffer zone for wireless signals.

Instead of fighting the request, SDG&E worked on an agreement that saw the utility withdraw its protest to the FCC, and AT&T acquire the spectrum from SDG&E. Financial terms of the license transfer, now pending approval by the FCC, were not disclosed.

“It can be risky for sure,” said Josh Gerber, lead architect for SDG&E's smart grid program, about utilities purchasing private spectrum. “Telcos spend billions and billions of dollars on this, and local regional utilities don’t have the appetite to make that sort of investment.”

SDG&E had deployed some pilot sites for the WiMAX network this year, but the change in strategy doesn’t mean that money was wasted. SDG&E learned some lessons from the pilots that will help them elsewhere, and some of the equipment can be reused in other frequency bands.

SDG&E’s change in communications strategy could end up being the best thing for their long-term communications strategy. Communications technologies are evolving rapidly, and SDG&E is now in a position to take advantage of the more advanced solutions available today.

Gerber noted that SDG&E was always operating with a backup plan for its communications. SDG&E’s backup plans include a mix of public and private networks, and various frequencies and technologies. The utility recently completed a trial of On-Ramp Wireless’s long-range, low-power, high-penetration wireless technology.

“We didn’t anticipate this spectrum outcome as much as we were aware of other risks,” he said. “But we were prepared for contingencies.”

One reason SDG&E originally picked private WiMAX was because public carrier networks have limited backup power, which could be risky for SDG&E in emergency situations, especially because it operates in fire-prone areas. Gerber said SDG&E is reluctant to be completely dependent on that infrastructure because the utility doesn’t have priority for reconnections, as public safety agencies do.

Going forward, Gerber said, SDG&E is going to work closely with carriers, who are more open to jointly developing solutions for utilities than they were a few years ago.

Public carriers are being much more aggressive in courting utilities with attractive data rates and promises of reliability service-level agreements than they were just a few years ago. With the availability of 4G LTE on the horizon for utility applications -- and all the benefits that technology offers -- public carrier networks have the potential to solve many of the backhaul and network prioritization challenges utilities are facing today.