Sensors and sensibilities

THERE is not much to see in the city of Bakersfield, north of Los Angeles, but recent events have put it on the global electricity-industry map. As in many other Californian communities, Pacific Gas & Electric (PG&E), the local power utility, had installed smart meters in most households. Soon afterwards customers started complaining about rocketing power bills. For some people they almost trebled. Predictably, this caused a political storm. Local politicians and consumer groups jumped on the issue. Enterprising lawyers launched a class-action suit. PG&E admitted that some of its meters had technical problems, but the higher bills were clearly due to a combination of exceptionally hot weather, increased charges and changes in the rate structure.

An independent auditor found nothing wrong with the smart meters, and California's regulators did not stop PG&E from installing more of them. But utilities and regulators elsewhere, spooked by the incident, have become much more careful before embracing the technology. “Bakersfield is likely to slow down the installation of smart meters—not just in the United States but worldwide,” says Ahmad Faruqui of the Brattle Group, a consultancy. Bakersfield also demonstrates that a smarter world will meet with resistance. The reasons are part technical, part institutional.

A list as long as your arm

Technology is a good place to start. Sensors are getting ever cheaper, but for many applications they are still much too expensive. HP, for instance, likes to point out that its super-sensitive accelerometers are made in the same factories as its printer cartridges. But the firm's sensors are still too pricey to use them for anything but high-value applications, such as oil exploration. RFID tags are a cautionary tale. They were supposed to revolutionise retailing but the readers, software and other gear needed to make them useful is still not cheap enough to be universally adopted.

Equally important, standards for such things as smart meters need to be sorted out. Setting them too early would hamper innovation, but in their absence utilities will hold back from investing, worried that they might bet on the wrong technology. Standards could also become a weapon of industrial policy, in particular in countries that see clean technology as an engine of growth. When China's State Grid Corporation, which operates most of the country's power network, announced its smart-grid plans in June, it also released the standards it intends to implement. Some say this was a move to protect Chinese firms.

The internet-address system is a worry as well. For a computer or any other device to be part of the internet, it needs a unique identifier—currently a long number called an internet-protocol (IP) address. Because of the network's rapid growth in recent years, these numbers could run out as early as the middle of next year. If the IT industry keeps dragging its feet on moving to IPv6, a new address system that uses many more numbers, the growth of the internet of things will be stymied.

Space is also bound to get tight in the ether. A few wireless sensors and devices do not make a difference, but as their numbers grow they will need an ever bigger chunk of the available radio spectrum. The number of wireless subscriptions has now reached 5 billion worldwide, earlier than expected, not least because so many SIM cards now sit in machines that communicate with other machines.

And then there are security concerns, particularly after the Stuxnet worm made the rounds in September. The malicious program quickly found its way into computers controlling industrial processes the world over, demonstrating how vulnerable control systems are to such attacks. But even before Stuxnet struck, security consultants had shown how large numbers of smart power meters could be hacked and shut down.

Turf, ego and power

Yet all these technical issues pale by comparison with the institutional barriers. For a city to offer smart services and save money, its departments have to work closely together, share their data and use a common IT infrastructure. London, for instance, has different payment systems for public transport, bicycle hire and toll roads. Such fragmentation is costly and makes it more difficult to come up with new offers (say, reducing the congestion charge for those who often hire a bicycle). But getting a city's islands of bureaucracy to work together tends to be difficult, says Mark Cleverley of IBM, who helps governments and cities develop plans for smart systems.

The problem is not just that departments often jealously protect their data, something experts call TEP, as in “turf, ego and power”. Officials also lack a common language or generally agreed criteria for a smart city—which is a big issue, too, for the many companies that are usually involved in a project. “It's hard to build a business case if people don't understand each other,” says Simon Giles, in charge of strategy for smart technologies at Accenture.

Things are easier in Singapore. Ministries and agencies compete for reputation and resources, but they also co-operate closely on implementing master plans such as “A Lively and Liveable Singapore: Strategies for Sustainable Growth”, the city-state's roadmap to becoming smart. That helps to explain why Singapore will probably be the first city to combine its various smart systems into a single one.

More generally, Asian countries seem to have an advantage in building smart systems because governments are often less democratic and administrations more hierarchical. China's State Grid Corporation intends to have its smart grid fully built by 2020. The country's government has also made the implementation of IPv6 a central part of its five-year plan to build the “China Next Generation Internet”. It showed off its efforts at the 2008 Olympic games in Beijing, where everything that was connected—cameras, taxis, security systems—used IPv6.

In the West it will often take a crisis to get there. When Thames Water in 2006 failed to meet targets set by the regulator to reduce leaks and was subsequently sold, the new leadership went on to organise things differently. Today, at the utility's operating centre in Reading, the workers who monitor the network, take calls from customers and schedule work crews all sit in one open-plan office, allowing them to communicate much more easily across departmental boundaries.

Similarly, when Bill Ritter became Colorado's governor in 2007, he made the consolidation of the state's chaotic IT systems a priority and named a state chief information officer who is also a member of his cabinet. Since then Colorado has made great progress in achieving one prerequisite for becoming a smart state: a common IT infrastructure capable of delivering new services.

Amsterdam, being the capital of a highly pluralistic country, had to take a different approach. Instead of relying on the municipal administration to become a smart city, it created Amsterdam Innovation Motor (AIM), a public-private joint venture in charge of coming up with projects and mediating between the parties involved. “Being a translator and making sure that a project is worthwhile for everybody are our main jobs,” explains Ger Baron, AIM's project manager.

If these three examples are any guide, smart systems may well change the way that local governments, in particular, are organised. Instead of being a collection of departmental silos, they could come to resemble computing platforms. Most services, from payment systems to traffic information, would be provided in only one version and used by all departments—or by private firms that want to offer their own urban applications.

Some cities, such as London, San Francisco and Washington, DC, have already opened their data vaults. IBM, among many other companies, has already built a web-based application called City Forward that takes in data from 50 cities. Yet others are not that generous with their data, which is the third barrier. More openness should be good for innovation, not just in terms of the information itself but how it is handled. But firms with lots of data—be they power utilities or makers of medical equipment—will be loth to give them up, says Glen Allmendinger, president of Harbor Research.

At the same time, Mr Allmendinger predicts, some firms will be forced to give up control of their data. Hospitals, for instance, will hardly put up with dozens of dashboards that monitor the activities of different types of equipment: they will want a unified view. And some clever start-ups and IT firms will find ways around data monopolies. Nobody can stop consumers from giving data about their power usage to non-utilities, for instance. Some private meters, attached to a sensor clamped around the main power line, can now send the data they have gathered to web-based energy-monitoring services, such as Google's PowerMeter and Microsoft's Hohm.

Data are a problem for governments too. Li Yizhong, China's minister of industry and information technology, has expressed concerns about IBM's Smarter Planet initiative. “The US tries to use its information network technology for things as small as controlling one computer or one generator and as large as controlling a whole industry, to control every country's economy,” he is reported to have said. “We must be enlightened and vigorously develop strategic emerging industries, but also must raise our vigilance and cannot fall under the control of anyone.”

China's concerns with IBM's Smarter Planet (called “wise Earth” in Mandarin) point to the fourth set of barriers: government regulation—or the lack thereof. Privacy legislation tops the list. New laws will multiply in response to an increasingly smart world. Germany's government plans to strengthen its rules to deal with Google's Street View, an online service that lets users pan through photos of streets. Among other things, the new bill is likely to enshrine in law what Google has already agreed to do under pressure from data-protection officials: giving people the option to have their house blurred on Street View. Nearly a quarter of a million have done so.

The regulation of smart grids is a murkier area. Some countries push utilities to reduce energy demand, but out-of-date rules encourage them to sell more, says Accenture's Mr Giles. Elsewhere, ill-conceived deregulation of the power market is holding things up. Since the grid now has more than one owner, it is often hard to know who will bear the risks and who will garner the rewards.

A host of new legal questions will also have to be answered. Who is liable if an autonomous system, such as an autopilot that governs the movement of cars on a motorway, causes an accident? What if a single company manages to dominate data from certain types of sensors or control the information about where sensors can be found and which of them are active? And can private surveillance still be restricted when cameras and other sensors make it ubiquitous? “The sensor revolution will challenge hidden assumptions in a bewildering array of doctrinal fields,” writes Kevin Werbach, of the Wharton School of the University of Pennsylvania, in a paper entitled “Sensors and Sensibilities”.

Lastly, consumers may not play ball. PG&E's woes in Bakersfield are not the only example. In Boulder, Colorado, the showcase for smart grids, customers of Xcel Energy, the local utility, are becoming increasingly cross because they will have to pay much of the project's costs. In the Netherlands the government backed down from making smart meters mandatory because of concerns that the data collected could be used to see whether properties are empty or expensive new gadgets have been purchased. Consumers also dislike feeling that they are being squeezed dry, particularly in America, which makes dynamic pricing hard to bring in. Even simple rate plans where the price of electricity depends on the time of day have had to be abandoned after customer protests.

Nor is such resistance limited to smart meters. The smooth introduction of Stockholm's toll system was the exception rather than the rule. In many countries politicians do not even try. Germany, for instance, charges lorries for using its motorways, but only a suicidal government would attempt to extend the system to cars in a country where even buckling up was long opposed by motoring clubs as interfering with drivers' freedom.

Make it attractive

It is odd, then, that everybody loves mobile devices, which are not that different from smart meters or on-board units. In particular, smartphones and the applications that run on them generally keep a close watch on what users do. Even so, nearly 270m of these devices will be sold this year, 55% more than in 2009, says IDC.

The difference is that Apple and other smartphone makers have made it their business to find out what consumers want—traditionally not the forte of utilities and government agencies. For example, it took that flurry of protests to prompt PG&E to open a dedicated call centre for questions about smart meters. Yet communicating with customers should be one of the first things for firms to do when introducing smart meters, says Mr Giles.

Another lesson is that utilities should not try to achieve too many things at once, says Mr Giles, who recently surveyed smart-grid projects worldwide for a study on how to speed up their introduction. Some utilities brought in smart meters and new pricing schemes at the same time, thus overwhelming consumers and obscuring the reasons for higher bills.

To avoid such problems, Amsterdam is trying “co-creation”, in the words of AIM's Mr Baron. “We did not just put in smart meters and ask consumers to pay for them,” he says. Instead 500 households in the district of Geuzenveld were invited to make suggestions on how to save energy and monitor consumption.

Yet utilities may have to resort to social engineering to get customers more engaged. Opower, a start-up, lets them see not only their own consumption figures but numbers for their neighbours too (anonymised to preserve privacy), and offers them tips on saving power. Peer pressure, the company claims, persuades people to reach for the switches much more often. Given enough time, all these barriers to building smart systems can probably be overcome. But how smart does the world really want to be?