Utility Interest in WiMAX for Smart Grid Growing

powergrid3National Grid, the second largest utility in the U.S., will be testing out smart grid technology based on WiMAX, a nascent wireless technology that provides high bandwidth. The move is the latest of a growing number of large utilities and communications companies investigating how WiMAX can play a role in their smart grid networks.
National Grid will be testing out WiMAX gear provided by Tel Aviv, Israel-based company Alvarion (s AVR), which can connect smart meters and distribution automation devices to the utilities’ back office. Alvarion told us back in May that the company was conducting several smart meter pilot projects and would be announcing its partners in the coming months.

For those of you not familiar with WiMAX, it’s a high-speed wireless technology that service providers are using for the next generation of broadband services. It competes with a high-speed wireless technology being deployed by cell phone companies called Long Term Evolution, or LTE. The WiMAX market is still relatively small — the equipment and device market in the fourth quarter of 2008 was $275 million, and the number of WiMAX subscribers is only at 3.9 million — but it’s set to grow to 85 million subscribers by the end of 2013.
National Grid’s news comes on the heels of several large utilities revealing that they are considering WiMAX for parts of their smart grid networks. Last month San Diego Gas & Electric (SDG&E) said it had applied for stimulus funds to build a smart grid wireless network that would include about 30 percent of its network built with WiMAX. Southern California Edison (SCE) has also said it is looking at WiMAX for part of its smart grid network. Beyond utilities, General Electric (s GE), Intel (s INTC) and startup Grid Net have been the loudest voices for using WiMAX to connect smart meters.
The biggest reason for using WiMAX for the smart grid is high bandwidth. SDG&E told us that WiMAX could be used around major grid assets, like substations, to collect a lot of data from phasor units, which monitor the reliability of the grid and collect information like voltage, current and frequency in real time. WiMAX could also be used to deliver services like mapping information and video tools for mobile workers, or provide video services for facility monitoring.
But another reason to use WiMAX on the smart grid is that WiMAX is an open standard that can benefit from the economies of scale created by participating companies like GE, Intel and Motorola (s MOT). That means the price point of WiMAX gear is expected to come down dramatically if the technology gains traction. Ray Bell, CEO of smart-grid software maker Grid Net, told us that WiMAX chipsets currently cost around $36, but in a year they’ll be closer to $12, and in another six months they could hit $8 or even $6.
Critics of using WiMAX for the smart grid point out that currently there is no nationally deployed WiMAX network in the U.S. Clearwire and Sprint have been building out such a network, yet it’s been slow going. In addition, WiMAX is still very much in the testing stage for these utilities and not ready for full-scale deployment, so we’ll see if the wireless standard ends up making the cut.
Update: An interesting point that Clint Wheelock, analyst for Pike Research, pointed out to me via email is that now that utilities are looking at WiMAX, the big question is whether utilities will want to build their own WiMAX networks or use wholesale capacity like from an operator like Clearwire. So far it looks like utilities are more interested in building out their own WiMAX networks. I interviewed Clearwire on the subject a couple weeks ago and while they said they were interested in the smart grid market that wouldn’t discuss any partnerships with utilities.