There is no mistaking that SCADA is under assault. Calling its demise is an extreme statement as SCADA will continue to be used in the utility industry for a long time, especially as legacy systems used in substations provide useful communications and control power equipment. However, at the forefront of the smart grid, utilities have turned their attention to distribution automation (DA) solutions that sit outside the substation.
Ten years ago, the assumption was that distribution SCADA would extend into the field to connect a myriad of devices to automate equipment control and decision-making. That SCADA as a narrowband, traditionally wire line communication network has multiple limitations became apparent, from a cost perspective as well as more recently from a security perspective, among other reasons. The IEC 61850 standard has helped to reduce the integration effort that is complicated by the 150+ SCADA protocols in use at utilities today. Though, IEC 61850 adds overhead to data communication, something that is undesirable for narrowband.
Over the past several years, wireless IP-based communication networks have proven to be worthy for distribution automation applications. With its inherent IP-based security mechanisms, ease of deployment, and broadband speeds, wireless communication networks are fast becoming a leading choice for many utilities undertaking a DA project.
To seize on that opportunity, ABB today announced it has acquired the 12 year-old Sunnyvale, CA based Tropos Networks (Tropos) for an undisclosed sum. Read press release here: http://www.abb.com/cawp/seitp202/23012C938DEC1EA0C1257A100025197F.aspx.
Tropos produces a mesh IP standards compliant communication network that operates in unlicensed bands. Tropos has experienced significant traction when it entered the utility market 3+ years ago as a choice for distribution area field networks. Tropos claims that it can achieve above four (4) 9's of reliability (99.9999%+ reliability), which is under a minute of total downtime per year. Wireless IP based networks are viable in the distribution grid. To further the point of viable wireless technologies available to the utility industry, I recently had a conversation with a utility that just successfully tested LTE (4G cellular) for its distribution automation device pilot. The utility was impressed that it supported every device it connected even for the lowest latency requirements of fault detection. It is now debating whether it uses a public carrier, or purchases and owns LTE infrastructure.
For ABB's part, Tropos is yet another strategic asset that it has added to its mosaic of complementary companies over the past couple of years. If there is any question how strategic Tropos is to ABB, the newly acquired company will be aligned with Ventyx and Mincom under the same business unit (Power Systems) in an effort to bring not just products and services but full solutions to the electric utility industry.
When ABB purchased Ventyx two years ago, the company was given responsibility for the network management product line including EMS, DMS, OMS and SCADA product lines. In the DMS space, greater emphasis is being placed on distributed intelligence versus the strict centralized command-and-control of the current generation of DMS. To facilitate distributed intelligence in the distribution grid, more capable communication networks are required as critical infrastructure, and Tropos offers those capabilities.
We can expect to see that ABB will roll Tropos into a more complete offering to the market place. With Tropos now in the portfolio, ABB can seek more opportunity through the IT group as Tropos traditionally sells through that buyer. We do not see any exclusivity impacting ABB's current partnerships, however, we would expect go-to-market efforts to promote Tropos foremost. We may also see that ABB and Tropos will consider a network managed service, where today they use partners. This is not critical but it could play an influencing role in addressing the small and mid utility market, which often rely on vendors for communication network management support.
As an aside note, we wrote about the $100+ million dollar investment that Triliant received almost two years ago. ABB together with GE and two private equity firms funded the investment. We estimated at that time that ABB contributed $20 million to the funding round. Trilliant has a competing offering to Tropos' solution. Did ABB pass on Trilliant as an acquisition target? Could GE be the next in line to pick up a wireless mesh broadband solution for the distribution area network in the form of Trilliant? Time will tell but I would expect that we will see more similar acquisition activity in the space from Schneider, GE and potentially Siemens.