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Summary:

While the idea of an investment bubble growing for the smart grid isn’t new, the rhetoric around the question of whether or not we’re in the midst of a smart grid bubble has only risen in recent weeks. At the AlwaysOn Going Green conference in Sausalito, […]

smartgridbubbleWhile the idea of an investment bubble growing for the smart grid isn’t new, the rhetoric around the question of whether or not we’re in the midst of a smart grid bubble has only risen in recent weeks. At the AlwaysOn Going Green conference in Sausalito, Calif. this week, a panel of tech execs indicated that they had seen a lot of unwise over investment in the smart grid space and Adrian Tuck, CEO of home energy management firm Tendril said, “We’re falling into a classic trap: a bubble.”

Tuck’s industry — home energy management — is certainly one of the areas that has seen over-investment from venture capitalists. In just the past few months, home energy management startups Tendril, AlertMe, Control4 and EcoDog raised multimillion dollar rounds. There’s a low barrier to entry for companies in this space (basically a couple of developers) and for venture capitalists that have a history of investing in web firms, home energy management is something they can easily understand.

But there’s a bigger shift in investing in the smart grid industry taking place according to some investors, and which I argued in a GigaOM Pro article (subscription required): the first wave of infrastructure companies are already well-established, says Foundation Capital partner Adam Grosser, whose firm backed smart grid network provider Silver Spring Networks. Companies that bet on smart grid infrastructure several years ago are already big enough to be ruling the market where large companies win utility deals.

The opportunity now is in next generation applications that will run on top of that infrastructure, like more mature software for demand response and billing. To find out the hot next-gen smart grid ideas, check out GigaOM Pro.smartgridbubble

  1. [...] How to Avoid a Smart Grid Bubble Posted September 18, 2009 Filed under: Uncategorized | http://earth2tech.com/2009/09/18/how-to-avoid-a-smart-grid-bubble/ [...]

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  2. As long as we have human nature, we will be blowing bubbles.

    As long as people are “familiar” in a general way with “something they can easily understand” ( oh the sins under the words of that phrase!) they will be caught dumbfounded when it —the same process gives the same results as ever.

    To paraphrase:

    Oh show me the way to the next market bubble
    Oh don’t ask me why.
    For if I don’t find the next market bubble
    Then surely I will Die!

    Let’s just hope the “smart” grid is true enough to the name not to go down with it when it comes and bursts!

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  3. If I understand correctly what Bob Metcalf suggested, when he said: “By the way, you might think I’d be sorry the Internet Bubble burst, but I’m not. Al Gore and I may not have invented the Internet, but we invented the Internet Bubble. What we need now, and seem to be getting, is an Enertech Bubble,” could be at odds with the message of this article. But them, Bob suggests something that is missing from today’s Smart Grid: FOCACA – FREEDOM OF CHOICE AMONG COMPETING ALTERNATIVES.

    FOCACA is missing because the Smart Grid is one incremental extension of the obsolete Investor Owned Utilities Architecture Framework that leads to one regulated architecture Smart Grid business model. To get FOCACA there is a need to make a paradigm shift to the Electricity Without Price Controls Architecture Framework, which leads to the Silicon Valley Model business model architecture competition.

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    1. You had me at FOCACA. Is that like the bread?

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      1. Ja, ja, ja… It is not Focaccia, but FOCACA. Wikipedia says: Focaccia (Italian pronunciation: [foˈkaːtʃa]) is a flat oven-baked Italian bread, which may be topped with herbs or other ingredients.

        To get a better understanding, Bob Metcalf added that:

        In today’s discussions of energy you will hear about various SILVER BULLETS, including various forms of taxation, mitigation, sequestration, gasification, biofuels, nuclear, photosynthesis, photovoltaics, and hydrogen. And you will hear somebody wisely say there really are no silver bullets. I disagree.

        My silver bullet is FOCACA, an acronym short for Freedom Of Choice Among Competing Alternatives. If it’s progress you want, rely on FOCACA — in politics, where it’s called democracy, in economics, where it’s called free markets, in culture, in religion, and in the technological innovation of clusters. I learned this watching the Internet evolve and proliferate.

        To follow the logic of the need for a paradigm shift, I suggest readers to take a look at the EWPC article “Strong Evidence of Why Utilities as We Know Them Will Fail,” at the address http://bit.ly/x88IH

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  4. First off, let me say, I really enjoy reading earth2tech.

    What I read from this article is “I’m a VC, please don’t compete with the company I have put my money into, but please do provide a piece of the puzzle we need, so I don’t have to invest more.”

    That’s not to say that Adam Grosser isn’t credible however, he is.

    Smart Grid is just getting going, and innovation is supposed to stop? If innovation of the internet stopped, we wouldn’t have the great sites that we have, and depend on, today. And there wasn’t, and isn’t, only one company making servers, or server solutions. Furthermore, the DoE standards list was only just ratified in May.

    Katie, you just reported in June via Reuters that Smart Grid wasn’t a bubble seen here:

    http://www.reuters.com/article/earth2Tech/idUS30745889220090622

    are we to expect that in two months you’ll report, via word from another VC, that management software is over invested too?

    I think we have a long road ahead of us. Innovation is key, and not a burden.

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  5. Thanks Mike, Back in June I reported that some people thought there is a smart grid bubble growing and that I thought specifically home energy management was in a bubble, but that other areas are not. In this article I tried to look at infrastructure versus applications. I agree with you that any comments from VCs are often self-serving for their invesmtents, but I think his perspective is interesting none the less.

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  6. when is the silver bullet not a silver bullet? When everybody gets to shoot their own, competitive, lead or copper bullet, but they still want to use the word silver bullet for the exact opposite of what the word means. Please stick to trying to make cash.

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    1. Alternate view, taken from Wikipedia:

      No Silver Bullet — Essence and Accidents of Software Engineering is a widely discussed paper on software engineering written by Fred Brooks in 1986. Brooks argues that “there is no single development, in either technology or management technique, which by itself promises even one order of magnitude [tenfold] improvement within a decade in productivity, in reliability, in simplicity.” He also states that “we cannot expect ever to see two-fold gains every two years” in software development, like there is in hardware development.

      Brooks makes a distinction between accidental complexity and essential complexity, and asserts that most of what software engineers now do is devoted to the essential, so shrinking all the accidental activities to zero will not give an order-of-magnitude improvement. Brooks advocates addressing the essential parts of the software process. While Brooks insists that there is no one silver bullet, he believes that a series of innovations attacking essential complexity could lead to significant (perhaps greater than tenfold in a ten-year period)

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    2. The EWPC Architecture Framework is a basic organizational innovation that emerged by concentrating on essential complexity. Please take a look at “EWPC as a Timely Basic Innovation,” at http://bit.ly/STji

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  7. In fact, far from a bubble, the Home Energy Management sector of SmartGrid-related companies offer consumers just the sort of Freedom of Choice referenced in the comments. While a number of companies have entered this space, they offer consumers a wide range of choices on how to address the introduction of SmartGrid technology. These choices are not mutually exclusive. From inexpensive, user installed devices to sophisticated, automated systems; from those with user-controlled parameters to others that allow utility control of end-user loads – there’s something for everyone. Rather than seeing this as a bubble, it could be viewed as a great benefit to enable consumers to choose the best option for their lifestyle.

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