Ember’s Wireless Chips Power Smart-Energy Efforts
If you’re a glass-half-empty person, you might say the mesh networking technology pioneered by Boston’s Ember Corporation is a solution in search of a problem. If you’re a glass-half-full person, you’d probably call the company’s eight-year history a case study in flexible thinking. Regardless, after years of market struggles, Ember seems to have found a niche where its technology for self-organizing digital radio networks will shine: smart-energy systems designed to give utilities and consumers more control over how they use energy.
Andy Wheeler and Robert Poor, who built experimental wireless sensor networks for the U.S. Defense Advanced Research Projects Agency while they were students at MIT, founded Ember in 2001 with $3 million in seed funding from Polaris Venture Partners, DFJ New England, Stata Venture Partners, and Ethernet co-inventor Bob Metcalfe. (In subsequent funding rounds over the years, the company has raised an additional $78 million.) The idea was to find applications for the concept of ad-hoc mesh networking, in which pairs of transceivers in a network set up two-way communications as conditions allow, and messages hop from node to node until they reach their destination (roughly the same way they do inside the Internet).
In its early years, Ember made mesh-networking software for other companies’ microchips, usually equipment designed to be embedded in temperature sensors for petroleum refinery pipes and other similar devices. But over time, the company has evolved into a chipmaker in its own right—just one that happens to have a special expertise in the software running on its chips. And it has gone open-source, investing heavily in ZigBee, an open industry standard for low-power, low-bandwidth mesh networking.
Wheeler and Poor have both moved on to other companies. Meanwhile, Ember has moved on to new application areas—with the biggest near-term payoffs likely to emerge from a utility industry initiative called the Advanced Metering Infrastructure. In pilot AMI projects in states like California and Texas, computerized “smart meters,” or energy gateways, are being attached to utility customers’ homes. The devices communicate wirelessly both with utility control centers and with in-home thermostats, displays, and smart appliances, allowing utilities to dial back electrical usage during hours of peak demand and giving customers more information about their energy consumption patterns. The home side of these communications depends on technology from Ember, which is the leading supplier of communications chips for AMI devices.
“The core technology is not that different from what Andy and Rob had in mind,” Ember’s president and CEO, Robert LeFort, says. “But it’s being used in applications they never had in mind when they were developing it.”
LeFort joined Ember in 2006 from semiconductor maker Infineon Technologies, where he had spent four years as president of the company’s North American operations. I interviewed him about Ember’s development and its business opportunities last week at the company’s headquarters in the Fort Point district of South Boston. An abridged version of our talk follows.
Xconomy: How did Ember evolve from a software company into a chip company?
Robert LeFort: It’s just very hard to make a business case for embedded software. You typically earn a royalty on a per-instance basis, and you don’t usually cover even the cost of developing the software. So you need to be doing more than just software. The end devices and modules [using Ember's software] were interesting to us, and chips seemed to be a better fit. So in 2003 we introduced our first chip, the 2420, which we still sell today. And in 2004 Ember acquired RF [radio frequency] technology and the chip team that developed it from Cambridge, UK-based Cambridge Consultants. [The company's main products today are newer microprocessor models called the EM250 and EM260, both announced in 2006.] We monetize our software through the chips. I think it’s fair to say that there’s nobody who uses our software who doesn’t also buy our chips. And if you look at our competitors from the 2000 era, the ones who went up the chain and sold just software have not fared so well.
X: Talk a little about the company’s recent turn toward smart energy applications.
RL: There were a variety of things that converged, and some other things that fell off the table. When I first came, we were very excited about commercial buildings and lighting. Wireless mesh networking is perfect for that application, but we learned that it is a very fragmented market that moves very slowly. It’s still a good market for us, but it’s incremental. The home automation market is also good, but somewhat limited until they get the costs down and the maturity up.
Meanwhile, I think smart energy will work really well. It’s something we saw from being so tightly involved with the ZigBee Alliance, just from being down in the trenches and talking to guys about what they were doing. I would say smart energy only made up about 10 percent of our revenue in 2008, but we expect it to be 40 or 50 percent in 2009.
X: You mentioned the ZigBee Alliance. As I remember it, when ZigBee started out years ago it was mainly pitched as low-bandwidth alternative to the Bluetooth standard for home entertainment and automation applications. The one that sticks out in my mind was a remote control for opening and closing your blinds, which seemed kind of frivolous to me at the time. But Ember became instrumental in adapting the standard for more advanced applications, like monitoring devices for their energy usage. How did Ember help to advance that standard, specifically?
RL: We were big proponents of the ZigBee Pro networking standard, and fundamental to that is true ad-hoc routing. We believe that RF links are inherently unreliable. Unlike a Bluetooth device or a cell phone, a temperature sensor that loses its signal can’t move six inches to the right to get a better signal. You need a network that can handle that efficiently. We wanted to build a network where you wouldn’t be constrained by lousy or changing RF links or by having too many good links and therefore too much chatter on the network. We think about these problems much more holistically than guys who started out as chip companies.
The smart-energy guys also wanted high security with public keys, since there’s real money [such as utility bill rebates] riding on how these networks work. So we put in security and a bunch of other things to facilitate messaging and now the network responds.
We have put in certain elements of our IP that we thought were necessary to make this world-class. But it’s not like we’re getting royalties—we have donated to the cause of having an open standard. With Bob Metcalfe as our chairman and first investor, he has lived the fact that open standards win in the long term. We are not a ZigBee company, that is not all that we can do, but that is what we have standardized on.
X: Stepping back a bit—there’s an obvious need for more networking between devices in homes and other facilities, but why does this networking need to be wireless?
RL: For a green-field building, depending on how you do your installation, you can make an argument that installing wireless systems is simpler and therefore cheaper. And if you’re coming into an existing facility, then there’s no question that wireless is preferred to cutting through the walls and running wires. The other thing is that in most facilities and homes, people tend not to monitor the things that you can’t run a wire to. But now, putting an extra thermostat in the baby’s room becomes that much simpler.
The only issue is that wires are still the gold standard. You know that if something has a wired connection, the wire is not going to be your point of failure. So you need to make sure [a wireless system] is robust.
X: And if you’re going with wireless, why should you go with ZigBee? And why a mesh networking approach, rather than some other protocol?
RL: If you’re doing a smart-energy application, you don’t want to be wasting energy; you don’t want to be using half a watt to control a 20-kilowatt device. If you think of a graph with power requirements on the Y axis and speed of communication on the X axis, Wi-Fi is in the upper right at 50 megabits per second and high power consumption, Bluetooth is right in the middle at 1 megabit per second and medium power consumption, and we and ZigBee are in the lower left at 250 kilobits per second, with a typical ZigBee device running for four or five years on two AA batteries. We’re always driving down the power requirements.
The reason for mesh networking is that a Bluetooth network can only handle about seven devices. For point-to-point communication, low-power Bluetooth might be a good solution. But if you want something to live inside a broader network with tens or hundreds of devices, then you need to have a mesh, not just for reliability, but for the ability to communicate at all. Message arbitration and management is an inherent part of the ZigBee standard.
X: How will these wireless smart-energy devices take hold first? What will they do?
RL: In the U.S. we’ll see smart meters first—that already started in 2008, with California and Texas taking the lead. You will see some large-scale pilots in homes this year at relatively low volume, and ramping up in 2010. Your typical electric meter will now be a solid-state device, a mini-PC rather than an electromechanical device. That meter will have two radios in it—one for two-way communications between the meter and the utility, and one going from the meter into the home, which will be the Ember-ZigBee one. These will be replacing the electric meters in the majority of residences in California and Texas, but that will be a 3- to 5-year effort.
Inside the home, you’ll have displays showing electricity usage and pricing information. They may have a “red,” “green,” or “yellow” signal depending on whether energy is cheap or expensive. If you are part of a utility program, they will have the ability to increase or decrease your thermostat remotely. It may also show you the energy being consumed by specific appliances [information collected by Ember-equipped "smart plugs" around the house]. The utilities are looking at aggregating this information so you can see your carbon footprint compared to your neighbors’; they’re getting very creative about what you will be able to do. But the biggest thing is to able to see the full usage for the month, so you can go in and see how much energy you’ve used, and how you’re doing on your bill.
X: I guess the theory is that if you give energy consumers all this information, they’ll automatically make better decisions about how they use energy?
RL: Today, buying energy is like going to a supermarket where there isn’t a price on anything, you have no idea how much you’re buying, and a month later you get a bill saying, ‘This is how much it cost you and this is how many calories were in your basket.’ That is what we have been tolerating in the energy market. So yes, one scenario says that all you need to do is give people information and they’ll do the right thing. But we can’t plan new power plants on the hope that people will use information right. So more likely, utilities will let them sign up for pre-agreed scenarios where we tell them, ‘You can finish this cycle on your washer but you can’t start the next one,’ or ‘Your hot water heater is free, as long as you don’t reheat it during peak demand times.’
X: Who are you selling your chipsets to—the utilities?
RL: The ZigBee board members are involved directly with the California and Texas utilities, but we don’t have direct business relationships with them. We sell parts for the meters and displays they will all use. So the metering industry is the first big customer. Companies like Itron, Landys + Gyr, and Elster Metering, and also a few smaller companies like Tendril, Control4, Comverge, and LS Research. These metering guys have already won the big contracts, and we expect to see an uptick in demand from them this year. From 2010 to 2012, there will be a proliferation of these in-home devices, and then in 2013-14 on, devices we haven’t even thought about. Once you get a home fully connected, there will be a host of new things where people are saying, ‘Wouldn’t it be cool if…’
X: President-elect Obama [this interview was conducted on January 14] has talked specifically about the need to make the nation’s electrical grid smarter. Has that been a boon for your business?
RL: In smart metering, the people deploying and installing the meters are the utilities, the big companies that manage the meters. And what really reassures us is that no one is turning back. Politics won’t be the gating item. The politicians are already pushing the utilities to go faster than they are willing to go. So it’s nice to have a leader who is saying things that you believe in and that are favorable to your industry.
But I think it probably can’t happen as fast as [Obama's] rhetoric would say. It’s unlikely he will accelerate it much. But that’s okay, because it’s moving fast already. For the utilities, things are moving at light speed—remember, this is an industry that is used to working with 10-year-old technology. And to be fair, it’s a little like the car industry. People expect their cars to start every day and to work in the rain. If the electricity goes out for four days it’s not just an inconvenience, it’s a health issue. So the utilities are working under different rules; new technology has to be very well proven and it has to be plug-and-play, and it takes a while to put that into place.
X: What markets are you interested in, beyond smart meters?
RL: We have some really good customers doing residential lighting, and commercial lighting is also interesting to us. You don’t need to be running your lights at 100 percent capacity if there’s bright sunlight outside. The idea is to have full control. We also have a couple of customers doing various types of home health care, assisted living. But that is another area that moves pretty slowly. On telecom stuff, I’m not a big fan of it, but there are users looking at tacking a ZigBee chip onto a SIM card and doing commerce through your handset. They’ve been looking at near field communications and passive RFID for that, but ZigBee is another potential way. There are a few other areas we are loosely paying attention to.
X: What’s the exit scenario for Ember’s investors?
RL: My preferred path would be an IPO. We’re not trying to partner up with anybody to sell anybody on the idea that they need to acquire us. That said, it may be that on the path to an IPO, a deal or a partnership comes up that makes perfect sense. I can see another chip company wanting to acquire us to round out their portfolio. But our focus is on building the business and keeping our customers happy, and the rest will take care of itself.