San Diego’s Solekai Moves to Catch Wave of Smart Grid Software Development

6/4/10Follow @bvbigelow

Solekai Systems was founded in 2002, and quickly became one of San Diego’s fastest-growing privately held companies. By specializing in digital video software development and engineering services (set-top boxes and related hardware) for customers like Sony Electronics, TiVo, Pioneer, and DirectTV, Solekai’s revenue soared by 1,536 percent from 2003 to 2006—to $18.2 million.

That was enough to land Solekai on Inc. magazine’s 2007 list of the 500 fastest-growing private companies, but Solekai founder and president Martin Caniff has become more circumspect since then. Nowadays Solekai executives say the company’s revenue falls somewhere between $20 million and $100 million a year. Today digital video development still accounts for roughly 70 percent of Solekai’s work, and vice president of engineering Tim McConnell says the company’s software is running in more than 50 million devices. But Caniff and longtime friend Marco Thompson, who joined Solekai as CTO in February, tell me they are now targeting a huge new opportunity for exponential growth that’s ideally suited for the company’s 75 employees.

It’s called the smart grid.

Martin Caniff (left) and Marco Thompson

Martin Caniff (left) and Marco Thompson

To Thompson, who helped start and run CommNexus, the San Diego telecom industry trade group, and who also co-founded Express Ventures, an early stage venture capital firm, the smart grid is “like a new hunting territory for a new San Diego sub-industry.”

Most people don’t understand what the smart grid is, and the definitions tend to get bogged down with IT buzzwords and acronyms. Still, it represents a transformation nearly as fundamental as rural electrification was 70 years ago. (We have organized a panel to explain just how fundamental the changes will be at the Xconomy Forum: The Rise of Smart Energy that is set for Tuesday June 8 at UC San Diego.) The smart grid basically calls for overhauling the existing power grid in ways that add sensors and two-way communications to the electric power distribution system, enabling grid operators to give a network ID to every component on the grid, including every electric meter, transformer, and circuit-breaker—and to use advanced IT and data management tools to operate the power grid more efficiently.

Thompson sees millions of new electronic components as part of this transformation. They include smart meters; home energy use display screens; appliances; wireless devices; capacitor bank controllers; and all the switches, routers, and servers needed to create smart grid network architecture. Thompson says that overhauling the grid will necessitate two types of software development—the traditional enterprise-level work done by the Accentures and Booz Allen Hamiltons of the world—and the kind of development needed to integrate all the embedded, consumer-facing devices that utilities are installing as part of the smart grid. “Embedded is much harder than enterprise,” Thompson says, “but we do both.”

Thompson has been working energetically to focus Solekai’s internal resources on the emerging opportunities in smart grid development. When Thompson joined Solekai, Caniff said in a statement, “Marco has shown an ability to lead in two areas critical to the future of Solekai. One is keeping ahead of the curve on the technology that goes into complex consumer devices. Second is his understanding of large market shifts regarding technological changes over time.”

Thompson also has been working to energize San Diego’s broader high-tech community about potential smart grid business opportunities, chiefly by hosting briefings on technology innovations and other areas of development.

For example, Roberto Aiello of Liberty Lake,WA-based Itron, gave a briefing yesterday on a thicket of technical standards that are being imposed on smart grid developers. “It’s a standards engineer’s wet dream,” says Aiello, explaining that a smart grid framework for standards under development by the National Institute of Standards and Technology (NIST) so far calls for 16 initial specifications, with nine additional specs likely and another 15 under evaluation. Understand, Aiello says, that each single specification, like the IEEE 802 wireless standard for local area networks and metropolitan area networks, probably encompasses a family of 50 particular broadcast layers, such as 802.11, 802.15.1, and 802.15.4.

Yet the stakes are high enough to make it worthwhile. Aiello, who was previously the founder and CTO of San Diego’s Staccato Communications, estimates that the global annual market for smart meters alone is $3.9 billion—with a compound annual growth rate of 19 percent over the next five years.

“Smart grid communications are definitely where the Internet was 20 years ago,” Aiello says. “The only difference is that 100 percent of the houses need to be connected, the components need to last 20 years, and if something fails, people die.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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