Cisco Smart Grid Powering End-to-End Communications. Rick Geiger Executive Director, Utilities & Smart Grid Business Transformation

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1 Cisco Smart Grid Powering End-to-End Communications Rick Geiger Executive Director, Utilities & Smart Grid Business Transformation

2 Cisco Connected Grid Vision Transform energy production, distribution and consumption using an end-toend IP Platform to sustainably meet the world s future energy needs Architect end-to-end IP-based communications platform integrated with the power grid from generation to consumption Converge utility systems and processes across all key elements of the grid to increase grid intelligence and efficiency Deliver increased grid reliablity, resiliency, power quality and security Enable the Smart Grid to become a platform for energy service innovation

3 Legislative & Regulatory Drivers Net Metering (Energy Policy Act of 2005, sect 1251) Federal Feed-In Tariff Mandate (FERC ruling Jul 10) FERC Demand Response & Market Redesign Policy Renewable Portfolio Standards

4 Environmental Policy Drivers States are Moving Forward Irrespective of National Policy California policies are the most aggressive but many states incl Ohio have pursued similar broad policies 35 States have either Renewable Portfolio Standard (RPS) or Renewable Portfolio Goal (RPG)

5 Open Loop Electric Power Supply 24 Hour advance forecast minute by minute Estimated by on history and weather forecast Dispatch Plan Buy/Sell base load Buy/Sell & Schedule margin, peaking generation Buy/Sell spinning reserve

6 Clean Gen Growth Brings Instability

7 Wind Daily Variation PEAK AVG Source: E.ON Wind Report 2005

8 Batteries Costs Appear to be Falling Faster than Expected 2009 industry estimates projected Lithium Ion Energy Battery costs would likely decline by 25% / 50% over the next 5 / 10-years and that performance would double over the next 7-years Several Automakers and utilities are already seeing proposals in the mid- $400/kWh range for large volume battery pack contracts in the 2011/2012 time period (implying a 30% decline) Market opportunities in Asia, US and EU for stationary grid applications of fast response storage using Lithium Ion technology to mitigate intermittent resources $800 $600 $400 $200 $ E 2010E Sources: Deutsche Bank, Lazard, ESA, Toyota

9 Plug-in Electric Vehicles Forecasts range from 2% to 20% of new vehicle sales by 2020 Research by EPRI and several utilities indicates the need to upgrade 4kv to higher distribution voltage and replace 25kVA transformers to 50kVA Early adoption areas tend to be in affluent neighborhoods that have high degree of existing hybrid vehicle ownership EV residential charging and separate metering infrastructure installation processes can average 45 days Source: Deloitte! For the first time a load will (should?) ask if capacity is available.

10 Demand Response National focus on expanding the role of DR in wholesale market operations and grid management Controllable DR will require enabling Information Communications Technology to integrate DR resources on parity with dispatchable generation Source: NERC July 17, 2010

11 models implications challenges transformation planning

12 Informational Power Greater fidelity about the use of electricity at the customer level changes the leverage in the energy value chain from the producer to the retailer, not unlike the transformation in retail grocery business after the introduction of barcode scanners. Bar code scanners were originally introduced as an operational efficiency investment, but the rich purchasing data combined with affinity cards allowed the retailers to control the channel and evolve their business model from carrying inventory for large food producers to selling shelf space to producers and minimizing the inventory carrying costs. Implication: Smart meters will provide significantly greater fidelity of energy usage information that combined with other products/services could create a similar business paradigm change like barcode did for retailers.

13 Customer Information Who Owns the Data and What are the Privacy Considerations Real Time Access can be defined in many different ways. NIST has defined real-time as the ~10 second meter data accessible to customers through the meter-han interface. Research and expert opinions to-date suggest that customer response to observing the cause and effect of their usage may result in between 1-5% conservation of energy use. This is often described as the Prius effect. The key ROI elements of this service involve: Incremental smart meter functionality to interface with HAN Functionality in meter or communication boards (depending on design) Cybersecurity/network management functionality to support secure handshake Incremental HAN interface in smart meter (wireless, wired) Back-end device management functionality & related hardware Information display functionality (software or device) Incremental HAN interface in or that enables information display (embedded chip or dongle) Non-reoccurring engineering to establish product/service offering Sales & Marketing support Operational support (internal service and customer support) General & Administrative overhead allocation

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