Security for smart meters – it's going to be needed for federal stimulus grants.

The Department of Energy is clarifying the long-anticipated impression that it will focus on cybersecurity as a prerequisite on how it will choose winners of up to $3.9 billion in stimulus package grants for smart grid projects.

Back in June, when the grant program was announced, securing smart meter networks against hack attacks was already emerging as a high priority for the federal National Institute of Standards and Technology, which is developing a set of standards for the smart grid (see DOE Issues Rules for $3.9B in Smart Grid Stimulus Grants).

As the Washington Post reported Tuesday, the DOE is making clear that companies applying for those grants will indeed need to show they've taken security into account. Patricia Hoffman, the acting assistant secretary for DOE's Office of Electricity Delivery and Energy Reliability, made that point to a congressional committee last week.

Smart meter makers and technology providers say that's already happening. Leading smart meter maker Itron, for example, is testing its security with DOE's Idaho National Laboratories, and other companies say they've incorporated cybersecurity as part of their overall offering (see Smart Meter Security: A Work in Progress).

Still, critics say that those security measures aren't robust enough. At the Black Hat cybersecurity conference this week in Las Vegas, security firm IOActive intends to provide more details on a computer worm it has previously claimed could hack a smart meter system to boost or cut power to millions of homes at once (see Hacking the Grid: Is Smarter Less Secure?).

Given that there's going to be a lot of competition for those grants, it's likely utilities and the smart grid companies they're partnering with are paying attention.

Publicly announced applications for smart meter grants include Texas utility Oncor seeking $317 million, Baltimore Gas & Electric seeking $200 million, Maryland-based Pepco Holdings seeking $254 million and Arizona utility Salt River Project seeking an undisclosed amount (see Oncor Makes $317M Smart Grid Pitch and DOE Hands Out $47M for Smart Grid Demos).

DOE security regulations aren't a concern for Landis+Gyr's latest deal to supply 200,000 smart meters in Brazil. The Swiss smart meter maker will build the meters in its own Brazil facility, and it will be the first major smart meter deployment in the nation, though it awaits final certification from Brazil's National Institute of Metrology, Standardization and Industrial Quality.

Latin American utilities tend to be larger than those in North America, with millions of endpoints per utility, Ben Schuman, analyst with Pacific Crest Securities, noted in an April interview. They also tend to lose a lot of power to theft, deferred maintenance and other inefficiencies, he said.

That could make them a prime market for smart meter deployments that can give them more insight into where and how power is flowing or not, he noted. Smart grid companies including Current Group, BPL and Esco are conducting pilot projects on the continent, he said. (For an overview on Latin American smart grid opportunities, check this Smart Grid News article).

Smart meters can help detect power outages and sense when distribution grids are overloaded – and of course, they allow utilities to collect billing information without driving out and looking at meters. Those cost savings are typically the first utilities look to in justifying the cost of installing them to regulators.

But eventually, many smart meter deployments hope to bridge the gap into people's homes to control air conditioners, pool pumps and appliances to power them down to reduce peak demands on the grid and conserve energy (see The Smart Home, Part I).

One of the first tests of such "home area networks" emerged from the DOE's Pacific Northwest National Laboratory, which in 2006 linked about 200 homes in Washington state with prototype appliance controllers that could respond to utility commands.

Last week, PNNL finally announced a commercially available technology from that GridWise project – the GridFriendly Appliance Controller now available for licensing. Battelle, the company that operates the lab for DOE, is working with appliance makers to test it.

Whether or not appliance makers will be interested is another question. One of the biggest "white goods" makers in the world, General Electric, already has a line of "smart" appliances under development, after all, though it hasn't said when it might bring them to market (see GE's Smart Appliances: Smarter With GE Home Energy Manager).

Rival appliance maker Whirlpool has said it will have smart appliances ready by 2015. But anyone with smart appliance plans will have to contend with the uncertainty over which types of technologies utilities are installing to enable that communication and control (see The Smart Appliance: Waiting For the Market to Choose Communications Standards).