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Summary:

Smart meters get all the attention, but smart distribution grid and substation projects are actually taking the lead in smart grid spending across the nation, and corporate giants are reaping the benefit. That’s the gist of a Cleantech Group report released by the DOE Thursday.

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Updated: Smart meters get all the attention, but smart distribution grid and substation projects are actually taking the lead in smart grid spending across the nation — and corporate giants are reaping the benefit.

That’s the gist of a Cleantech Group report (pdf) released by the Department of Energy Thursday that calculated 2010 U.S. smart grid product spending at $2.75 billion dollars. A nearly equal amount is being spent on smart grid services, the report found, adding up to a $5 billion-plus smart grid market, which is in line with other recent estimates.

As for sectors’ product sales, the report put smart metering — or AMI — at $1.1 billion, distribution grid management at $1.5 billion, and demand response at a mere $150,000 million, although the last category was boosted by $1.1 billion in service revenues, the report noted.

It may be surprising to see distribution grid management — grid control gear and the communications and software to run them — outpace smart meters in terms of revenues. But report author Greg Neilchin said it makes sense, given the scale and cost of the equipment involved in grid-side projects (in the tens of thousands of dollars and up) compared to smart meters, which are meant to cost less than $100 each.

The report also put the role of smart grid startups into perspective against the role of corporate giants in the field. While $1.7 billion in venture capital has been invested into smart grid companies between 2007 and 2010, most of that has gone to suppliers of smart meter-enabling technology — where startups are assumed to make a fraction of the total product spend on meters supplied by the industry’s Big 5 incumbents — and home and building energy management products, where markets are limited to pilot projects.

As for distribution grid management, “you can assume the vast majority of that’s accruing to legacy vendors,” Neichin said, referring to companies like ABB, Siemens and General Electric. That legacy turf is being crowded in turn by would-be smart grid giants like Cisco, IBM, Google, Lockheed Martin and others. All are partnering with startups, as well as with each other, to land smart grid projects. Mergers and acquisitions have boomed in the smart grid space: from 10 in 2007 to 30 in 2009, a figure already matched by this year’s M&A tally. Further acquisitions are “just completely reasonable and realistic to expect,” Neichin said.

Demand response — turning down big power loads to help utilities manage peak demands — is a different market altogether. Big demand response aggregators such as EnerNoc, Comverge  and CPower (recently acquired by competitor Constellation Energy) make most of their money in service revenues, with relatively little spent on the underlying technology, Neichin said. That could begin to shift, as demand response providers acquire or develop technology offerings — smart meter-home energy control from Comverge, or commercial and industrial building energy efficiency software from EnerNoc, for example — to sell as add-ons for existing demand response customers, or perhaps in their own right, he said.

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Image courtesy of Vaxomatic.

  1. Jeff – nice piece! One point of clarification – it was actually $150M in technology spending in the demand response market (not $150K – that would truly be low!)

    For those interested more in why these numbers seem to break in the counter-intuitive direction toward grid projects vs. meters, it’s important to note that the report is just focused on product sales and doesn’t include the cost of installation, maintenance, etc. These services are big dollars especially for metering projects. If you were to account for these services in a total number, I’d expect to see metering back on top in terms of overall spend for 2010.

    Nonetheless, I think that there are more dollars being spent on grid automation applications than many people might think!

  2. Katie Fehrenbacher Friday, September 24, 2010

    Thanks for pointing that out Greg, I made that correction.

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