Cisco Systems Inc. (Nasdaq: CSCO) has been a big talker when it comes to the smart grid, an opportunity it believes will be bigger than the Internet, in size and return on investment. Today, the networking giant put its money where its mouth is, announcing its first commercially available Connected Grid products.

The new products include a router and a network switch purpose-built for an IP-based electrical grid: the Connected Grid Router 2010 and Cisco Connected Grid Switch 2520, designed to manage power transmission and distribution equipment and to identify and rectify problems in the network.

The boxes use Cisco's IOS operating system and are based on its normal hardware, although the router had to be hardened to survive in a substation, says Sanket Amberkar, senior director of smart grid strategy at Cisco.

"Given that the environment is not an enclosed environment like a building, it's more [susceptible] to dust or extreme temperatures," he says. "It can't have a fan. There are very unique requirements and a different mix of ports compared to traditional routers."

Utilities are moving slowly to introduce advanced meter infrastructure (AMI) to their networks for more precise control over energy usage, but substation automation is also starting to gain traction. Today, utilities are running individual lines for every type of communication that occurs on the network, and the leased-line costs stack up. Utilities can use routers to converge multiple services over the same infrastructure while still keeping traffic separate, Amberkar says. Cisco has a whole line of products planned for the smart grid. According to Amberkar, the focus is on four key areas: grid reliability to improve operations; proactive monitoring of the networks to prevent and mitigate faults; security; and compliance with industry standards and regulatory guidelines.

The company first announced its smart-grid strategy nearly a year ago, but has been quiet while smaller, more agile startups like Silver Spring Networks have made noise in the market. Cisco's official entrance could shake things up. Recently, the company invested in Grid Net, an IP-based smart-grid software maker, as part of its push for a smart grid based on IP. (See Cisco Invests in Grid Net.)

Amberkar says that IP is the way to go because it's built on open standards, making interoperability easy, and it can tap the security and network management capabilities that Cisco has already developed.

In terms of who supplies the network, however, Cisco is neutral. It partners with utilities working with telcos for the data transport and with those looking to build their own networks, which Amberkar says is the majority of them.

"The utility industry is incentivized on a return-of-assets model," Amberkar says. "The more capital expense they put in, the more they can charge rate payers.

Still, it's a market that has piqued the interest of telcos, many of which are already working with Cisco, to sign up partners and customers to use their communication networks for data transmission. (See D Telekom Teams on Smart Grid, Verizon Plugs In Current for Smart Grid Service, HomeGrid Aims for the Smart Grid, AT&T Teams With Silver Spring, and AT&T to Offer Smart Grid to Utility Cos.)

Cisco is testing its new hardware with Southern California Edison and San Diego Gas & Electric in the US, Enel SpA in Italy, and E.on Westfalen Weser in Germany. It also already works with a number of utilities both in the US and abroad on the communication infrastructure of their early pilots.

— Sarah Reedy, Senior Reporter, Light Reading Mobile