As governments and utilities invest in smart grid deployments, the need for robust security measures has become increasingly apparent. Reports that would-be saboteurs have attempted to disrupt the security of the electrical power supply in the United States have added to the urgency for cyber security for the emerging smart grid. Among other motivators, one key condition for smart grid funding awarded last year under the federal stimulus program was that the awardees incorporate strong security into their smart grid initiatives.

Those requirements will drive major investments in smart grid cyber security over the next several years, according to a recent report from Pike Research. The cleantech market intelligence firm estimates that cyber security spending will represent approximately 15% of total smart grid capital investment between now and 2015. Cumulative investment in the security sector will reach $21 billion between 2010 and 2015, with annual revenue reaching $3.7 billion by 2015. While North America will account for the largest share of the market in that year, with revenue of $1.5 billion, other regions will experience rapid growth also, including Asia Pacific ($1.2 billion) and Europe ($784 million).

“The electrical grid is being modernized and transformed into a smart grid,” says senior analyst Bob Gohn, “but industry players have recognized that you can’t have a smart grid without smart security. That’s why total investment in these critical technology upgrades will grow at a rapid pace within the next few years.”

Smart grid deployments result in control networks and IT networks that are more integrated, leading to increased vulnerability to cyber attacks. One of the key elements for the adoption of stronger security for smart grids is interoperable smart grid standards; thus, the U.S. government has appointed the National Institute of Standards and Technology (NIST) to develop such standards for interoperability between disparate systems and industry participants.