1. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 1 Smart Grid Utility Challenges and Telecomm Opportunities Rick Geiger Executive Director, Utilities & Smart Grid

2. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 2

3. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 3 Service Providers and Electric Utilities  Business Model: CAPEX vs OPEX Not an issue for Munis & Co-ops  Business Drivers – Voice & Data vs 120VAC  SLAs  Disaster Recovery  My customers - Who’s your retailer? Not an issue for Munis & Co-ops  Technology Horizons

4. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 4 Coverage – Always a Challenge

5. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 5 Cooperatives

6. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 6 Cooperatives  Are located in 80% of the nation’s counties  Are the largest electric utility network in the nation  Total more than 930 local systems in 47 states  Have 40 million member-owners  Distribute power over 2.4 million miles of line  Own $112 billion in generation, transmission, and distribution assets Source: NRECA

7. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 7 Public Power  Located in 49 of 50 States  2010 Community Owned Electric Utilities  Serving 45 million people  14% of US Electric Power Source: APPA

8. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 8 US Electricity Industry Statistics Number of Electricity Providers % of Total Publicly Owned Utilities2,01061.5% Investor Owned Utilities2126.5% Cooperatives88327.0% Federal Power Agencies90.3% Power Marketers1534.7% Source: Energy Information Administration

9. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 9  Flexible tariffs cause changing demand patterns  More complex to predict  Climate change and energy efficiency goals  Standards and interoperability  Network security and reliability  Stimulus packages  Additional sales volume by electric plug-in vehicles  Economically store electricity Innovation and regulation drive change in the utility industry  Unpredictable renewable supply sources  Distributed generation sources feeding into unmonitored grid areas Changing Supply: Renewable Generation Changing Demand Patterns Regulation/ Compliance New Opportunities Change Drivers

10. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 10 Smart Grid: Transformation of an Industry Distribution (Local Utility) Network Control Center Power Generation Transmission (Utility) Network Control Center Federated Data Centers EnergyInformation Industrial Customer Commercial Customer Residential Customer Distributed Generation Sources

11. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 11 Utilities are challenged with a more complex operating environment  Intransparent build-up (geography & scale)  Significant increase in offtake  Integration of new applications Change Challenges Capacity Commu- nication Capabi- lities  Timing of feedin  Moving load  Increased information requirements  Management of increased stochastic generation  Potential for storage & feedin  Technical specs defined outside utility industry  Competition for ownership of innovative efficiency solutions Distributed GenerationEV & StorageEnergy Management Smart Grid Challenges

12. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 12 Utilities will respond along three dimensions in building the Smart Grid DimensionsRequirementsRationale SG Building Blocks Readiness Capacity Infrastructure Layer Commu- nication ICT Layer Capabilities Applications Layer  Adequate capacity  Transition from distribution focused to contribution capable  Today’s consumption supplied though no demand shifts included  Physical infrastruc- ture to accommodate complex load flows  Basic system status  Creation of an information rich and potentially real time operating environment  Current system highly reliable in “look and see” mode  Increased levels of uncertainty around system behavior  Electricity delivery  Integration of new infrastructure elements  Substitution of phy- sical with virtual capacity  Stable environment with limited need for short term action  Increased system stress through erratic offtake / feed-in ( ) Available todayNot available today Smart Grid Building Blocks

13. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 13 Business and regulatory requirements open new business opportuntities Infrastructure Layer ICT Layer Applications Layer Supply SideDemand SideGrid Operation Energy Storage “Near-Time” Pricing Self-Healing Grid Micro Grids System Engineering Visualization & Prediction Load Mgt. & Balancing Advanced Grid Sens. & Contr. Demand Response SG Building Blocks Smart Grid business opportunties for SPs Smart Grid Opportunities Substation Automation V2G Narrow- / Broadband Enablement Data Integrity Management Smart Meter Building/Home Energy Mgmt Web Services Business Energy Mgt. DG Integration Work Force Mgt. Comms for Vehicles by 2020 Residential smart meters Comms for new installations Energy Management Source: Booz & Company, Newton Energy Research, ABS Energy Research Comms C&I smart meters Application hosting Network of substations Plan, design, operate Top Utilities: We can do it better than SPs

14. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 14 Strategic and architectural challenges: Will Utility/SP infrastructures converge? Market Expectation  Utilities rolling-out Smart Metering  Strong regulatory and public pressue to deliver energy efficiency solutions  SP / Challenger under pressure to enable mass market broadband connectivity Competition Smart Grid as a hosted service  Utility and SP under pressure by declining retail margins  Renaissance of home automation services fueled by energy efficiency solutions (and renewable integration)  Utility and SP independently fighting for retail customer ownership How to develop a communication infrastructure meeting the requirements of an integrated though unbundled utility value chain? Could convergence of utility and SP networks enhance a joint value proposition? What are the regulatory and legal implications?

15. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 15 Way Forward: Developing the Vision for the converged infrastructure network  Develop a converged network position –Outline an end-to-end Smart Grid solution –Win-win value proposition and business models  Explore utility industry readiness  Consider a cross-industry Smart Grid initiative

16. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential T-Systems International Smart Grid 16