Siemens has agreed to purchase RuggedCom for $382 million or $33 a share, compared to the $272.4 million or $22 a share offer from Beldon. It represents a 50% premium on a per-share basis and, quite frankly, Siemens is a better fit for RuggedCom and for keeping innovation in Ontario.

Siemens Canada, which is based in Burlington, Ont., has a strong and growing presence in Canada — about 4,400 employees and $3 billion in annual revenues. It is also pushing hard into the same smart grid space occupied by its main competitor, General Electric. Ontario is shaping up to become a hub of smart grid development in North America, so it makes sense for Siemens and Vaughan, Ont.-based RuggedCom to hook up.

I was the first journalist to write about RuggedCom with a story in the Toronto Star back in July 2006. Since then it has consistently grown revenues and profits, even during the downturn. “Either we’re going to get acquired by a strategic peer or reach a point where we’ve got … a good story to take it to an IPO,” company founder and CEO Marzio Pozzuoli confidently told me when we first spoke nearly six years ago. Pozzuoli, by the way, was a technology manager in GE’s power management operation before deciding to leave the company to found RuggedCom. Such a good move. The successful IPO part came true in 2007, and now the strategic acquisition part is coming true with the Siemens purchase. As Pozzuoli stated today, “We have great respect for Siemens and believe RuggedCom will be well positioned for continued growth and industry leadership under their ownership.”

Could RuggedCom have done it alone? Perhaps — but with the massive clout of Siemens behind it, it can do a heck of a lot better. That’s just how the cleantech space is expected to be over the coming years, as startups with great technology and proven leadership seek the resources and reach of established multinationals. An added benefit to this deal is that it seems to reinforce Siemens’ commitment to Ontario.

In traditional demand-response, companies such as Comverge and EnerNOC sign up dozens, potentially hundreds of clients that agree to reduce their energy demand when asked.  When a heat wave hits and electricity demand spikes, a power system operator will ask a Comverge or EnerNOC to orchestrate a large-scale demand reduction for a specific period of time. These companies (and their clients) get paid to reduce their electricity, with the idea being that the cost of such programs is far less expensive than the cost of building (and paying for) a natural gas peaker plant to do the job — that is, negawatts is cheaper than natural gas megawatts.

EnerNOC, for example, said it was able to reduce power demand across the United States last week by 1,230 megawatts when asked to kick its services into action.

But this is only one form of demand-response. What about the second-by-second fluctuations on the grid that require what the industry calls “regulation”? Regulation is a way to constantly balance supply and demand on the system, and it’s usually accomplished by power generators that get paid a hefty premium to do the job (In Ontario hydroelectric facilities in Niagara Falls play a major role). In early 2010, Enbala Networks decided to participate in an Ontario Independent Electricity System Operator (IESO) program aimed at proving that demand-response could work for regulation services as well.

The company issued a call in June 2010 for municipal and industrial partners that had the flexibility, when asked, to reduce power demand regularly throughout the day and night. Ideal candidates were water and wastewater treatment facilities, wood chipping and rock crushing facilities, companies that had large electric boilers, chillers and battery charging loads, and partners that relied heavily on industrial ventilation. In other words, anyone that used lots of electricity for equipment that could easily be turned on and off without materially affecting the overall operation of the organization. You might call it flexibility harvesting, and Enbala has built a smart grid platform that does it well.

Enbala went ahead with the pilot project and a year later the company and the IESO appear satisfied with the outcome. Now that proof-of-concept is out of the way, it will be interesting to see where it leads. Will Enbala be able to replicate it in other jurisdictions and turn it into a vibrant money-making business? Will the IESO expand the pilot into a full-scale commercial program, giving the Ontario grid a faster and cheaper way to balance supply and demand?

The smart grid demands no less, and this approach will become increasingly important, along with energy storage, as we add more intermittent renewables to the power mix.

The report touches on electric vehicles and related infrastructure, emergence of the smart home, importance of privacy protection, integration of energy storage, challenges of managing an expected deluge of what I like to call “gridformation”, and the overall importance of industry standards. It also attempts to quantify the expected annual investment in smart grid technologies, systems and training over the next five years.

Disclosure: I was contracted by the IESO to prepare this report so am reserving comment. That said, for anyone interested in Ontario’s smart grid activities this report offers a great sense of where the province is coming from, where it’s at, and where it is going on all things related to the smart grid.

Ontario has done well with its deployment of smart meters, but it’s often forgotten that the smart grid is much more than that. Smart meters are on one edge of the grid — that is, attached to the customer, no different than a cable modem’s placement in the larger cable infrastructure. But the smart grid is about adding automation, communications and digital technologies throughout the entire grid, from generation to delivery to consumption, with the idea that the information collected and acted on can make the electricity system more efficient, adaptable, reliable and safer, while allowing for the introduction of new services and business models that ultimately benefit consumers.

RuggedCom supplies the core communications technology for transmission and distribution infrastructure. And it’s not alone in Ontario. General Electric decided back in the mid-1990s to consolidate its global operations around T&D equipment and today its facility in Markham is considered the company’s global smart grid headquarters with respect to core grid products. The equipment GE and RuggedCom are designing and manufacturing in Ontario, and exporting to countries such as China, may not be as interesting as smart meters, in-home displays, energy-management portals, or smart appliances, but they’re arguably more important to realizing the true potential of the smart grid.

And Ontario, it seems, is a hotspot for this kind of innovation. RuggedCom’s CEO, in fact, believes the company can grow to more than a billion dollars in revenues over its next 10 years. Canada’s next RIM? Wouldn’t be as as high profile, but certainly the potential for that kind of success is there.

Cavoukian’s latest annual report highlights the privacy risks involved with the rising use of smart meters and the increased collection of granular data about when and where people are using electricity. “In a future smart grid scenario that does not build in privacy, intimate details of hydro customers’ lives could be easily discerned by data automatically fed by appliances and other devices to the companies providing electric power (eg. what time you cook, shower, or go to bed — and the security issues such as whether the house has an alarm system),” Cavoukian writes in her report. “Once inferences can be drawn on granular energy consumption information flowing outside of the home, such as real-time energy use data, future consumers may have questions including: Who will have access to this sensitive data? For what purposes? What are the obligations of companies making smart appliances and smart grid systems to protect my privacy?”

Cavoukian has a new program called Privacy By Design, which places focus on the need to build privacy into new technologies and systems from the outset, rather than scrambling to make privacy/security fixes after there has been a major — and often embarrassing — information breach. The whole point of this is to learn from past mistakes during the early days of Internet, Web and e-commerce development, when companies rushed ahead to come out with services without considering the privacy implications. This got many companies, including big names like Intel and DoubleClick but also high-profile retailers, into a lot of hot water. The rise in identify theft only brought increased attention to the problem. Whether it was disgruntled employees looking to take advantage of this information from the inside, or clever hackers looking to steal information for a profit or for bragging rights, having so much detailed information about individuals in one place is — in Cavoukian’s words — a “treasure trove” that needs to be protected like Fort Knox. You can bet there are already hackers out there looking to make a name for themselves by being the first to access consumer information through smart grid infrastructure, even during these early days.

That’s why it’s crucial that utilities and their partners think of information privacy and security now, rather than as a Band-aid measure later. Not only is this a good strategy to avoid future legal challenges, it will also save them a lot of hassle and embarassment in the long run if they treat privacy/security seriously from Day 1. For that reason, I think Cavoukian’s Privacy By Design message needs to spread across the industry as we embark on what’s expected to be a massive, multibillion dollar smart grid buildout.

Most media coverage has highlighted the growth in laptops, mobile devices, servers and routers, but more eye-opening is the coming wave of “smart” grid devices that will need to have their own IP addresses. Thermostats, smart meters, dish washers, laundry machines/dryers, intelligent lighting (in homes and buildings), electric cars — really any appliances or devices or machine that will be controlled remotely through the Internet. Here’s a question I honestly have no answer to: Are energy management and smart grid/appliance companies — General Electric, for example — aware of this coming shortage of IP addresses, and have they taken the necessary measures to avoid the crisis?

Network World had an informative article on this issue in October.

Apparently it’s not difficult to migrate from IPv4 to IPv6, but it does require a lot of investment in software and hardware upgrades. Will the energy sector be caught off guard by this? I’d love to open this up for discussion from some more knowledgeable people… please enlighten us.

Are we being paranoid? Maybe — but then again, the privacy erosion that came rapidly with the Internet caught many consumers and businesses off guard. Certainly, it’s worth learning from past mistakes and thinking about these privacy issues before, rather than after, the infrastructure and supporting applications for the smart grid are rolled out. Cavoukian co-authored the paper with Jules Polonetsky and Christopher Wolf, who are co-chairs of the Washington-based Future of Privacy Forum. Polonetsky, it should be pointed out, is former chief privacy officer of AOL and, before that, online-advertising pioneer DoubleClick, which was acquired by Google in 2007 for $3.1 billion (U.S.).

Disclosure: I co-authored a consumer privacy book with Cavoukian back in 2002 called The Privacy Payoff.

My column today was a snapshot of some energy management projects going on in Ontario, a sign that local utilities are getting energized about the possibilities of energy conservation, given the right technologies in the hands of homeowners and businesses.

I mentioned Milton Hydro’s 200-plus household project in Ontario, but I’d like to provide some context because the results only tell half the story. Here’s what I wrote in the column:

The pilot project, conducted between July 2007 and Sept. 2008, was a collaboration between Milton Hydro, Direct Energy and Bell Canada. Households were given the ability to monitor their energy use through the Internet, as well as through BlackBerry-like devices, and to remotely control the lighting and operation of appliances in their homes.

An easy-to-use Web interface, designed by Toronto-based Lixar SRS, gave them a detailed view of how much electricity individual appliances were using at any point in time. The results showed that one in 10 participating households, when handed this control, used 16 per cent less electricity over 12 months and 18 per cent less during peak periods.

I say only half the story because the Milton project was a bit of a mish-mash of different technologies, some of which worked and some that didn’t work so well. The fact that only 10 per cent achieved savings above 15 per cent per cent is a bit misleading because, as I understand it, different homes were tested with different technologies and protocols. The only common thread was the Lixar SRS energy management software, which Direct Energy hailed as the best part of the project. I’d like to emphasize this because Toronto-based Lixar is another Ontario cleantech company making waves beyond provincial borders. “The most impressive was the Lixar interface,” said David Dollihite, vice-president of product development at Direct Energy. “Lixar has got a leading edge customer user interface for the presentment of energy usage information, and the ability to turn that information into something that’s actionable.”

An example? Some participants in the project were given the capability of participating in provincial demand-response programs. During DR periods, participants saw savings of 44 per cent. Pretty damn good. I’ve taken the Lixar software for a spin, and have to say it lives up to expectations and is super user-friendly. Not only can you monitor overall home electricity use, but you can see what individual devices are using, you can look at historical usage trends, and you can control all of this remotely through an Internet connection or a mobile device. As entire neighbourhoods or cities adopt this technology, one could eventually get the ability to compare your usage to your neighbours or your city average, as well as compare your city to other cities.

There still exists, however, some skepticism in the market. A handful of utility executives have downplayed the new high-tech tools that give homeowners more control. All the bells and whistles are overkill, they argue, adding that most people don’t have the time to monitor their energy use or participate in demand-response programs.

Sure, there’s an element of truth there, but only for those stuck in the past. A retiring boomer couple might not be so enthusiastic, but what about the next-generation of homebuyers who grew up text-messaging their friends, frequenting Facebook and Twitter, and doing their banking exclusively online? I would embrace this technology in a flash if it was available.

It wasn’t long ago that some people dismissed the idea of banking online, or failed to see the value of carrying around a BlackBerry device all day. But my children, for example, will grow up managing their household energy just like they manage their finances, sell stuff on Craigslist, and keep track of friends and family on social networking sites. It will become second nature, and the fact that energy prices will be much higher than they are today will be strong enough incentive.

Don’t believe it? Then ask yourself why Internet giant Google announced in February that it was entering the residential energy-management market with prototype software called PowerMeter? The software, which is expected to be distributed for free, offers similar though less detailed feedback on power use that homeowners got from the Milton Hydro trial using Lixar SRS’s technology.

Google, pretty good so far at spotting trends, has also teamed up with General Electric on smart grid development. GE and other appliance manufactures are readying next-generation washing machines, dryers, dishwashers, air conditioners, and other appliances embedded with switches that can be turned on and off remotely.

If Google’s interest in the market isn’t enough, then maybe the involvement of broadband giants like Bell Canada, AT&T, and Comcast will convince you. Several major telecom companies have announced partnerships with utilities and smart-grid providers because they see the trend taking shape, and they know communications infrastructure will play a crucial role.

Clearly, this future is coming and it’s encouraging to see a Toronto-based company being so far ahead in the game. Lixar, a relatively stealthy venture, is being tested by Duke Energy and Progress Energy, has partnered with HD Supply, and is working with Cisco on smart-grid projects. That’s just scratching the surface, sources tell me. More has been developing behind the scenes.