The implementation of smart-grid technology will create an explosion of two-way data and new security challenges that telecom service providers are uniquely positioned to address, according to the head of Verizon Communications Inc. (NYSE: VZ)'s global energy and utility practice.

The data explosion will be the result of, not only deploying smart meters and equipping homes for remote energy management, but also needing to monitor and control utility infrastructure, including substations and distribution facilities, and to secure the entire grid, says Rilck Noel, managing director for Verizon's global energy and utility practice. (See Can Utilities & Telecom Team on Smart Grid?)

Noel, who joined Verizon about a year ago after a career working in and consulting for utility companies, believes utility companies that once happily ran their own fiber optic networks will be willing to outsource to telecom operators the networking required to support smart grids.

"There has been a shift in utility executives' thinking," Noel says. "They recognize that their existing networks might not be able to handle that large volume of data."

More utility executives are open to the idea of a hybrid network, which includes their existing fiber optic facilities but is complimented by a network built and operated by Verizon, AT&T Inc. (NYSE: T), or other telecom operators.

"Our goal is to collaborate and work with the utilities, so they have the reliability and security they need for their networks."

Verizon doesn't want to take over control of the utility network, in part because utilities need to show their regulators that they are in control, but can provide network operation and network security on a managed services basis.

Smart grid will require a new level of security because it will link much larger utility infrastructures, creating the potential for much larger outages. Where today's utility companies operate on islands unto themselves, a real smart grid will link the utilities, not just in the US, but also in Canada and Mexico. That will enable greater efficiency in using power, particularly if power can be shared among different climates with different usage peaks. But that linkage also, potentially, creates greater vulnerability.

"Today, you could have an outage that affects hundreds of thousands of people, but when the grid is fully connected, if something goes wrong, an outage could affect 10 to 20 million people. That's one of the big security concerns."

Telecom network operators have branched out into managed security services and are in position to offer the wide array of services, including protection from Internet-based threats, that a massive data network required for smart grid will need.

Linking the electricity infrastructure for smart grid also poses new issues for network resiliency, Noel says. Where today's utility networks are built to continue operating when a small number of faults occur, future networks will have to sustain operations with a much higher number of faults. Regulators at the federal level are looking at the network reliability needs, he adds.

Home energy management using smart grids will require massive amounts of two-way communications, often machine-to-machine, to enable decisions on when and how to power home appliances to vary with fluctuations in power pricing.

"Today we are developing a lot of solutions with our partners on home energy management networks," he says. "So basically the different devices at your house can be turned on and off automatically or consciously on your part, depending on the price of electricity. The intent is to have machines making decisions for us -- I don't see myself at work spending 20 minutes figuring out how to save a dollar here or there."

Those solutions will be built on a combination of wireline and wireless networks, Noel stresses, and that is another capability Verizon believes it can bring to the utility industry.

Within its local service footprint, Verizon is in a position to leverage its FiOS network to offer remote energy management, and it today can offer utilities a more accurate picture of outages when they occur.

"When we see a cluster of FiOS boxes losing power, we can quite accurately pinpoint where the outage is happening," Noel says.

— Carol Wilson, Chief Editor, Events, Light Reading