As companies small and large jostle for position in the rapidly growing smart grid market, more than $2.75 billion will be spent on core technologies for the sector in 2010, according to a new report.
According to The Cleantech Group's 2010 U.S. Smart Grid Vendor Ecosystem report (.pdf), the market for a communications-enabled, IT-controlled power grid is dynamic, diverse and growing -- fast.
The report identified four major trends within the smart grid sector:
First, market players are increasingly interconnected and interdependent. It's a "connective tissue" across multiple layers of the smart grid, driven by the technology itself.
Second, companies specializing in Advanced Metering Infrastructure, or AMI, lead the way in cross-industry partnerships.
Third, simultaneous cooperation and competition is driving the market. Vertically integrated companies and specialists are going head to head, and the wave of acquisitions and consolidation is swelling (Honeywell buys Akuacom and E-Mon; GE buys SNC-Lavalin ECS; EnerNoc buys SmallFoot; etc.), with about 30 transactions per year each year since 2008.
Last, there are a surprisingly diverse group of companies in the smart grid market. Venture-backed startups, established public companies and large private corporations are all in the mix, from Cisco to Itron to GE to Silver Spring Networks. Better still, it's not all Silicon Valley -- there's geographic diversity, too, and about a fifth of those in the U.S. market are international firms.
That's good news, because the impact of the smart grid reaches resonates beyond the limits of its own sector. Let us count the ways: energy management in the homes, facility operations for companies and cities, and technologies that touch vehicles, electronics, and the nation's very infrastructure.
But it's not all roses, either. Authors Greg Neichin and David Cheng warn that the investments from the American Recovery and Reinvestment Act -- about $11 billion for smart grid-related projects -- "did not, and will not alone, solve the hurdles that stand in the way of smart grid deployments."
The report breaks down each of the three main sectors within the smart grid market: AMI, demand response and distribution grid management.
Here is the authors' estimate for 2010 spend in each category:
- Advanced Metering Infrastructure: $1.1 billion
- Demand Response (technology products only): $0.15 billion
- Distribution Grid Management: $1.5 billion
Interestingly, there's a bigger spend on the grid than on smart meters, despite the latter getting all the press.
Here's a brief look at each category:
Smart metering (AMI)
What it is: Adding devices that can communicate data in real-time about electricity use between utility and customer.
What's happening: Deployment of smart meters "has become the focal point" for grid investment in the U.S. Interplay between legacy vendors with end-to-end product portfolios and specialist vendors.
What's at stake: $1.05B in U.S. spending in 2010
Who's involved: Hardware vendors, communication vendors and meter data management software vendors.
Name names: Itron, Landis+Gyr, Sensus, Elster, Silver Spring Networks, GE, Trilliant, Cooper Power Systems, Aclara, SmartSynch, eMeter, Oracle, Ecologic Analytics, Accenture, IBM
Utilities include: Southern California Edison, PG&E, FP&L, Southern Company, DTE, Oncor, Center Point Energy, Pepco Holdings, SDG&E, NV Energy, Ameren, Wisconsin Power & Light
Bottom line: Smart meters are no longer a question of "if," but "when."
What it is: Using connectivity to manage and smooth out demand peaks to save energy and money.
What's happening: Demand response is growing more complex and moving toward automated, transparent access to curtailable loads for commercial and industrial facilities and residential customers.
What's at stake: $1.1B in revenue in 2010. Some $150M is spent on technology products to enable the service.
Who's involved: Large building automation vendors, major CSPs, power systems vendors and upstart technology companies.
Name names: Comverge, EnerNOC, CPower, Energy Curtailment Specialists, EnergyConnect, Honeywell, Carrier, Cooper Power Systems, Siemens, Schneider Electric, GE, Johnson Controls, EnergyHub, Tendril, OpenPeak, OPower, eMeter
Bottom line: With customers happy and public investment, DR is still on pace to be the "killer application" for the smart grid.
Distribution grid management
What it is: Adding intelligence to the network of more than 100,000 substations and millions of miles of electrical line that make up the country’s electricity distribution system.
What's happening: Innovation and improvements, driven by legacy power systems companies, mean better control, efficiency, performance and reliability.
What's at stake: $1.4 billion market in 2010.
Who's involved: The same companies developing legacy grid equipment, from global diversified industrial firms to domestic power systems suppliers.
Name names: GE, ABB, Cooper Power Systems, S&C Electric, Schweitzer Engineering, Schneider Electric, Siemens, Thomoas & Betts, NovaTech, G&W Electric, Beckwith Electric, Subnet Solutions, Telvent, ACS/EFACEC, OSI, RuggedCom, Cisco, Motorola
Utilities include: FP&L, PECO Energy, NV Energy, Con Edison New York, Avista, PPL Electric Utilities, Atlantic City Electric Co, Snohomish Country PUD.
Bottom line: Distribution and substation automation shows "tremendous promise" to improve grid efficiency and performance, and the technology is there. But it needs continued capital investment and the right incentives to succeed.
Home energy management
What it is: Lower your home's electricity bill by seeing and managing your usage, and prepare it for communicating with smart appliances and cars that are just over the horizon.
What's happening: A nascent market filled with wireless sensors, smart appliances and plugs that's garnered interest and development effort from tech stalwarts. It's supposed to benefit both utility and consumer.
What's at stake: $115 million in investment so far in 2010.
Who's involved: Venture-backed startups and major tech players such as Intel.
Name names: Tendril, Gridpoint, EnergyHub, OPower, iControl, PeoplePower, Control4, 4Home, AlertMe, EcoFactor, Intamac, Sequentric, OpenPeak, Cisco, Google, Microsoft
Bottom line: It's all about standards. Watch closely for M&A activity. Vertical integration (gateway, system, appliance) can be beneficial here.
Building energy management
What's happening: Ever more granular data has facilities managers seeing how important energy management is for their sustainability and reliability of previously-siloed HVAC, lighting, IT and security systems.
What's at stake: About $236 billion annually in the U.S., and expected to triple by 2030.
Who's involved: A mix of global leaders and startups.
Name names: Johnson Controls, Honeywell, GE, Schneider Electric, Siemens, IBM, Hara, ENXSuite, SAP, Oracle, EnOcean, SynapseSense, Adura, PowerIT, Verdiem, Redwood, Agilewaves, BuildingIQ
Bottom line: Establishing IP standards and a move toward vertical integration by big players means that you should expect some M&A shakedown in the market.
What's happening: Inverters are helping integrate solar and wind power with the grid, but the challenges are different as you scale in size and scope, from utility power generation to vehicle-to-grid (V2G) charging.
What's at stake: Billions of dollars in benefits.
Who's involved: Small players that fill acute needs and large ones that offer turnkey solutions.
Name names: ABB, AeroVironment, Areva, Better Place, Coulomb, ECOtotality, GE, Leviton, Mitsubishi, Panasonic, SATCON, Schneider Electric, Siemens, SMA, Square D
Bottom line: Extremely challenging and technical. However, benefits include avoiding blackouts, boosting adoption of electric vehicles and renewable energy, reducing excess grid capacity and reducing fossil-fuel consumption.
If nothing more, the report demonstrates that the smart grid industry is not moving as quickly as possible, but instead with careful footing. Many things have to align -- and gently, so as not to disrupt -- to ensure that the U.S. ends up with a more robust, reliable and intelligent grid.