In rural America, in search of smart grid infrastructure

Who will build out the smart grid in rural America? Tantalus sees business opportunity. We speak with CEO Eric Murray about what's at stake.

The U.S. build-out of the smart grid is naturally occurring near the nation's population centers -- but one company sees opportunity far beyond city skylines.

Tantalus is a Raleigh, N.C.-based private company that seeks to build more robust electrical grid infrastructure in rugged areas in Canada and the U.S. Instead of vying for a thin slice of territory in a crowded (and consolidating) market, Tantalus is looking to tougher terrain like Appalachia for business.

I spoke with chief executive Eric Murray about how building smart grid infrastructure in rural areas makes business sense.

SmartPlanet: How did Tantalus get started?

EM: We got into this as closet greenies, when it wasn't trendy to be green. We were looking at how to build enabling technology that helped utilities both operationally and from an overall efficiency perspective in the management of the network and distribution -- and ultimately consumption -- of electrical energy at first, and now water and gas as well.

We started out from a distributed control systems paradigm: the systems most factories in the world have that drive coordinated behavior between discrete devices and processes. When we looked at the utility space, it really is a return-on-capital-employed game. Most assets are very inefficient, because they are designed for peak [load] even though they don't operate at it most of the time.

If, in fact, the network is going to be a distributed network, it has to be distributed command-and-control. You've got safety issues, reconfiguring the network -- a whole bunch of things you can't accomplish with a round-trip schema.

The right place to start was to look at small power -- municipalities and cooperatives. That's where operational performance and customer satisfaction all come together. It's a lot simpler for a cooperative. Their business case is a lot crisper, and it has been as the world's gone through deregulation.

We need to have very capable local area network communications. It's difficult at the price point that the smart grid is going to be deployed at. The devices in the home are going to be difficult to connect to the meter.

We had looked at an end-to-end network, versus a local area network, configuration. We started by going after the co-op -- rural -- market, because that was, at the time, the best customer [with which] to demonstrate our superior connectivity.

SP: Why rural? It's a difficult market that, on its face, seems less lucrative.

EM: That segment was in the most need of these solutions. If you look past the press releases, there was a lot of activity but not deployment for a long time. People were getting ready. Some big IOUs on the West Coast explored [the market] with many technologies. Our thinking was, let's understand and learn about the most difficult deployment challenges so that when customers are ready for full deployment, we've cut our teeth.

We went to Kentucky where the topology is difficult. We've learned through those issues, and we've actually designed a system that's significantly superior to our competitors. And it's not just our opinion.

The only place to prove that was the co-op space, because all people were deploying was metering technologies. But now you look at load management, some networks are struggling with the more simple AMI ("Advanced metering infrastructure" --Ed.) deployments in urban areas. When they get to apply for demand-response inside the home or an electrical vehicle in the garage, it's going to be difficult.

SP: Why is it more difficult?

EM: You can't throw $500 an endpoint at the problem. You have to solve it at a very low price point.

With utilities, you have to design a solution so that every meter can be connected. In higher density environments, where you have more meters per square mile, a meter is out in the open. It's pretty easy to connect to.

A load management device that actually curtails [electricity demand], that's not out in the open -- that's hidden away somewhere in your attic or basement. An EV charging station is inside the home.

Connectivity becomes much more difficult when you're looking at penetrating through walls -- stucco, cement, rebar-reinforced infrastructure. If you can demonstrate you've got superior connectivity, when customers are ready, you've got a competitive advantage.

We've helped customers migrate from one technology to another at a very low cost. Utilties have horizons at 20, 25 years. Almost all other industries have five. They want to put something and leave it there.

SP: So going rural is really a competitive advantage for your company.

EM: Yes, it is. The small power market is moving more than any other. Really, there aren't that many in mass-deployment.

How do we stack up against competitors? Every utility is starting to read in the press where some of our competitors are having connectivity challenges.

[On the other hand] we are at a different disadvantage for sure at scaling. We're building up to larger accounts -- EPB is the largest fiber-at-home deployment in North America.

SP: Does your status as a privately-held company help keep you nimble?

EM: Do you know a smart grid company that's public that has made massive profits? If we're making profits in small deployments, we're competitive.

How you design your network and picking the right platform is crucial. Utilities all rush to be second -- they're risk-averse for a reason. They have a huge cost for making a mistake.

Our strategy was to get out and demonstrate. We're dominant in the fiber-at-home market. We've had a number of world-class deployments, and we're seeing right now that utilities are starting to get serious about the other applications: demand-response, distribution automation and so forth.

We're now demonstrating in Lamb County, Texas with a small utility. Eighty percent of their customers are irrigation customers. To control that load -- when the bulk of your power [source] is wind, which is quite intermittent -- you need a demand-response system that can behave rapidly and appropriately. When your only source of load is irrigation, that's apparent to customers -- you're messing with their pocket book.

SP: We've been talking in a fairly detailed fashion about the smart grid and the energy industry. How do you explain what you do to the average person?

EM: Utilities, historically, are a big brother and a bad big brother. They deliver an incredible service -- three-nines (About 99.9% --Ed.) in reliability -- but the cost is so low.

If you look at that, positioning the utility as we as customers get more mobile and have more energy consuming devices in and around the home, enabling the utility to act in our best interests at the community level is really what we do.

High complexity plus low unit cost equals customer indifference. We're realizing that coal is not a free ride. Nuclear is a lot more expensive that we thought two decades ago. And transmission is really expensive.

In that new model, consumers still don't want to be inconvenienced. The consumer is completely isolated from wholesale price signals. If that continues to happen, prices will rise rapidly.

Individuals who don't want to curtail [electricity usage] when the utility asks them to need options. You need the two-way communication equipment for that. They need the ability to opt-out. And they have to do it in such a day that they're not learning about kilowatt-hours and all this junk.

Our consumption has really grown as well. Generationally, it's really obvious that we're becoming much more comfortable with how much energy we consume. We are victims of our own success. We've got a great utility network and we've never figured out how to use it cost-effectively because it's been so cheap.

You need to do this for more than just cash back. You have to drive a change that's both transparent and with societal recognition that, "Hey, this has to be different."

When I tell people on the East Coast and Canada that Texans who had their water shut off show up armed, they get that. This is not some academic exercise. This is real. This issue is a substantial one.

There's a bigger calling here than just making a buck. That's why we're doing this. That's why I'm here.

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