The smart grid might have launched into the mainstream lexicon recently with GE’s super bowl ad and funding included in the current stimulus package, but the budding industry could falter out of the gate in this economic climate. Smart grid companies are showing some concern over utilities slowing down smart grid rollout plans in the near term, and the stimulus package is actually just a drop in the bucket of the investment needed to launch a nationwide smart grid.
This morning, Echelon, which develops networking products to make the power grid smarter, reported a drop in earnings for the three month period ending December 31 — the company reported $36.8 million in revenues, with a loss of $6.26 million, down from $46.9 million in revenues, and a net income of $912,000 for the year earlier. The company’s CEO, Ken Oshman, also expressed slight concern over how the economic slowdown has hindered progress on utilities’ smart grid projects. Oshman added, though, that its utilities contacts in western Europe and North America will help Echelon deliver “modest growth” for its smart grid network products for the year.
Earlier this week, analysts at UBS downgraded Itron, a heavyweight smart meter maker, and said while the company: “may receive new [advanced metering infrastructure] awards at some point in 2009, we believe this is balanced with a risk that ‘09 guidance is revised downwards at some point due to utility capex cuts and/or AMI project delays.”
Itron, which reports earnings later this month, hinted last month that it might have some delays in its smart meter rollouts: “As is typical, some of the deployment schedules have changed. Some may move forward more quickly than expected and others may deploy somewhat later than their initial schedule.” Not a smoking gun, but that’s usually how financial releases sound.
And while the industry is pointing to the $4.5 billion boost in smart grid funding in the proposed stimulus package (both the House and Senate versions), those funds are actually a small percent of what a national smart grid network would need. Ed Legge, an analyst with the Edison Electric Institute, told us that at least $50 billion is needed for all the investor-owned utilities (which make up 70 percent of the U.S. utilities) to roll out smart grid networks. It would cost about $500 million for each utility, Legge said. That’s a substantial investment for a utility that is facing reduced their demand for energy from customers.
Still, “there is a lot of optimism” around smart grid rollouts these days, said Legge, adding that “the technology is moving forward, not backward.” Utilities like Pepco Holdings and CenterPoint announced smart grid plans just this week. Eric Miller, Chief Solutions Officer, for Trilliant, a company that makes hardware and software for smart meters, says while he’s heard his industry’s concern over a slower rollout, his company is still seeing “a high level of market activity.”
But it’s the sudden positivity and excitement over power grid 2.0, that actually makes the economic downturn particularly frustrating. Companies have waited for years for the smart grid to be hot enough to excite consumers, investors, utilities and policymakers — who thought in 2008 that smart grid would get a Super Bowl ad and repeated mentions from the president? Hopefully the current recession won’t pull the rug out from under the industry in one of its shining moments.