Duke Energy, Echelon team up on $1 billion smart grid project

August 10, 2009: 8:13 AM ET

Last week, the nation's third-largest utility, Duke Energy (DUK) filed an application for $200 million in federal stimulus funds to bolster its $1 billion smart grid initiative in Ohio, Indiana, and Kentucky. Today the company is announcing that it has found a partner to supply the guts for the project -- and it's not who you might think.

While Silver Spring Networks has received plenty of attention for its high-profile investments from Google (GOOG) and Kleiner Perkins, and its superstar board members John Doerr, Al Gore, and Laura Tyson, Echelon (ELON) has been quietly toiling away all over Europe.

Echelon's so-called NES smart-metering system serves as the operating system for nearly 30 million homes in Italy, Germany, France, Russia, and elsewhere. And now Echelon has put its mark on its home turf.

"This is not our first big win. We've been successful all over Europe and in the Asian markets. But this is our first really big win in the US, and that's very important to us," says Ken Oshman, chair and CEO of the San Jose, Calif.-based Echelon. "Right now, [Duke Energy has] approval from the Ohio PUC to deploy a smart grid for 600,000 customers. And by early September it's expected they'll get approval from Indiana for 800,000 more  there."

Whenever utilities embark on a project of this scope -- Duke serves more than four million customers -- they issue a framework agreement solidifying intent to partner with certain entities. That's what happened here. Having tested Echelon's technology in Charlotte, NC, and Cincinnati, the utility has declared its plans to purchase smart meters, networking infrastructure, and powerline communications infrastructure from Echelon. The deal will mean about $17 million in revenue for Echelon, but that number could reach $150 million over five years if Duke rolls out its system across the region it serves as planned.

By choosing Echelon, Duke is diverging, technologically speaking, from many other big smart grid projects in the US. The vast majority of US projects use radio-frequency mesh networks or some other type of standalone communications network to transfer billing/usage data between the smart meters and the utility, according to energy research firm Chartwell. With Echelon (and Verizon, which is also partnering in the system), Duke won't need a communications network. Instead, it will transfer all data over the existing power lines and Verizon's network.

That serves the utility well in two regards, according to Oshman. First, it doesn't have to foot the cost of building or maintaining a separate network. Second, it can transmit and receive a lot more data. "We think we have more for less–and a hell of a lot better solution," says Oshman. "Every 15 minutes we're providing 12 kinds of data, including energy usage for every customer and power quality. For 600,000 customers, we're providing literally terabytes of data a day."

Does Oshman think such an important win will help deflect some of the spotlight away from Silver Spring? "We're working our tails off," he says. "I hope this will help."

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Jeffery O'Brien
Jeffery O'Brien

Jeffrey O'Brien joined the San Francisco bureau of FORTUNE in June 2006 as a senior editor covering the intersection of science, technology, culture, and business. From 1999-2006, he was a senior editor at Wired magazine. As a writer, his work has been anthologized in The Best of Technology Writing 2007 and in The Best Science and Nature Writing 2005. As an editor, his features have been featured in The Best American Science Writing 2006, The Best American Science and Nature Writing 2006, and The Best Technology Writing 2006. He is also the recipient of a Jesse H. Neal Award for editing best single issue, which he earned in 1998 as the editor of Marketing Computers (Adweek). O'Brien is a graduate of the SI Newhouse School of Public Communications at Syracuse University and was a 2006 Templeton fellow in science & religion at the University of Cambridge (UK).

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