Gluing the Grid Together

Silver Spring Networks, one of the earliest smart-grid companies, was founded in 2002 by software engineers who saw a need for standardized technology that would enable systems throughout the grid to communicate with each other. “You want a secure network infrastructure that can be connected to an arbitrary number of devices—thermostats, displays, electric vehicles, anything that plugs into the grid,” says Silver Spring’s chief technology officer, Raj Vaswani.

So the company developed devices, services, and software to help monitor and manage energy supply and use for both consumers and utilities. Today, its products can be found in a number of projects in the United States and Australia. Oklahoma Gas and Electric, for example, has built its communication chips into smart meters and uses its software to read them. Consumers can monitor their energy use by way of a Web portal that Silver Spring provides. The utility now manages demand so much better that it has been able to shelve plans for two new power plants, which would have cost up to $320 million.

Silver Spring raised $100 million in venture capital in December 2009, bringing its total funding to around $250 million. And it has been broadening its scope beyond meter networking and into software, which has a higher profit margin. This expansion has the potential to cause problems. “There’s a risk that they are growing faster than they can support,” says Steven Minnihan, an analyst at Lux Research.

But failing to grow would be risky as well. Heavyweights like GE and Cisco are entering the smart-grid market with the advantages of name recognition and, in the case of GE, an already established foothold in the global energy market. Vaswani, however, describes the business scenario for Silver Spring as one of “coöpetition” rather than competition. Fixing the grid will take a great deal of infrastructure, he says: “No one company is going to be able to build all of it.” He adds that Silver Spring and GE already do a lot of business together as partners.