Blog Post

Smart Grid Will Generate $200B of Global Investment

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Back in October during our smart grid webinar, we referenced a report on the smart grid from Pike Research that had some pretty massive global figures. Well, this morning Pike has officially launched that report which says the smart grid market will bring in $200 billion in worldwide investment between 2008 and 2015. Out of that total investment, annual smart grid global revenues will grow to $35 billion in 2013 from about $10 billion in 2009.

As we pointed out in October, Pike Research says that smart meters will play a pretty small percentage of that total investment while smarter grid infrastructure — including transmission upgrades, substation automation, and distribution automation — will generate the majority of those funds. Grid automation will generate 84 percent of the global investment, smart meters 14 percent, and electric vehicle management systems only 2 percent. In other words, despite the focus on smart meters by many governments, deeper in the grid (away from consumers) is where the real investment will happen.

Another thing interesting to remember about these figures is that total smart grid funding will actually peak in 2013, largely because these are infrastructure investments. Utilities only need to make these once every several decades. For entrepreneurs and investors, that means another thing entirely: There’s a very specific window opening up through which companies need to act fast to capitalize on.

Image courtesy of numstead’s Flickr photo stream Creative Commons.

14 Responses to “Smart Grid Will Generate $200B of Global Investment”

  1. Thank you waltinseattle,

    You are writing about a set of questions that I have dealt with in the last four years in the EWPC Blog. Right now there more than 235,000 views to the blog. If you go over the blog, you will also find nearly 200 blog articles and posts and interesting debates that run over 780 comments right now.

    There is no need to be paranoid. The Enron debacle was the result of an incomplete and dysfunctional market architecture that lacked demand elasticity. The EWPC-AF is complete and fully functional, in which short run and long run demand elasticity is the result of the job of competitive Second Generation Retailers.

    The power industry value creation has already been concentrated in customer investments for quite some time to avoid performance deficiencies of the grid. Instead of letting a monopoly snoop on customer users, they will use their choice to select the Second Generation Retailer that best satisfies their needs.

    Instead of customers having to shop with utilities for rates and independently and uncoordinated with other suppliers for their investments that result in additional operating costs, 2GRs will be one stop shopping that let them coordinate important savings by having an integrated offering.

    That way, instead of a customer being forced to buy and advanced meter under a one shot homogeneous smart grid architecture, customers are able to choose when and which system better fits their needs under the transition heterogeneous smart grid architecture of the EWPC-AF. It is clear that the Second Generation Retailers will have the incentive to educate that utilities lack.

  2. waltinseattle

    pardon, is it just my paranoia showing? Or do I smell a bunch of Enron players in the wings waiting to “create (the illusion of ) value and a lot of jobs? Second Generation Retailers? Newer, faster, less hardware infrastructure and more “info-system?”

    And what about selling this to the uned’cated masses who think its just a way to snoop on their )excessive) useage? Who will bring this to the local utilities as a pill not too bitter? And who really believes that a “free” market will send good borrowed cash to the dark dark far far future to create gains?

  3. Hi Katie,

    It is interesting to note that Pike’s smart grid forecast do not include investments beyond the meter in accordance with the obsolete Investor Owned Utilities Architecture Framework (IOUs-AF) and its incremental extensions, such as the homogeneous smart grid. As you will see below, “…the impact of new technologies will be minimal in generation, moderate in transmission, important in distribution, and revolutionary beyond the meter. That means that predictions need to be based on the migration of value creation from supply to demand.”

    Investment in the smart grid should include only transmission upgrades and distribution and substations automation. The Advanced Metering Infrastructure and the Electric Vehicle Management Systems, and not only Energy Information Displays, but all customer demand side investments, should belong to the competitive development of the resources of the demand side that should complement the regulated smart grid, which should be developed under a least cost expansion plan. Such regulated smart grid is one part of an emerging whole in which the power sector integrates demand to power system planning, operation and control. That is based on the Electricity Without Price Controls Architecture Framework (EWPC-AF).

    According to your post of December 10th, Report: Utilities Should “Be Realistic” About Partnering with Google, Microsoft, “A key takeaway for startups building home energy management tools is that the utility distribution channel will remain the dominant channel for the early years of the market. While Pike thinks that ‘the retail channel may become an important channel for these devices in 3 to 5 years, the early market will be driven by utilities.’ So companies looking to sell directly to consumers might struggle for a good long while unless they have a utility strategy.”

    State legislators need to look deep into Pike’s insight that the retail channel will be the mass market to shift the industry away from the IOUs-AF to the EWPC-AF sooner than later. One important writer disagrees on the smart grid approach. In his blog, Reinventing the U.S. Utility, Warren Causey posted the article “Some answers will emerge, probably soon: New Year’s predictions,” in which he claims that the power industry will go back to business as usual, based on his prediction of “the passing of the smart grid ‘hype wave’ from the utility industry.” This was my response:

    In the process of developing the regulated homogeneous smart grid, it became evident that the “100-year-old mandate–reliable electricity at relatively low prices” as you called it does not longer results economic. To explain why, this is one of the key conclusions that resulted from a recent debate with James Carson on the EWPC article “The Electricity Without Price Controls Architecture Framework (please hit the link ):”

    “The homogeneous grid is not longer able to meet the performance requirements of an increasingly share of demand. The apparently ‘ridiculous’ homogeneous grid disturbance costs, ‘of [r]oughly the same as the entire wholesale sector? Half the retail value???,’ are for real.”

    From another viewpoint, one consultant I met has written that the impact of new technologies will be minimal in generation, moderate in transmission, important in distribution, and revolutionary beyond the meter. That means that predictions need to be based on the migration of value creation from supply to demand.

    In conclusion, as can be seen in my tweet “Ray Bell Predicts The Birth of Retail Energy in 2010 #EWPC ” my prediction is that smart grid hype is here to stay, but with a new twist geared towards the heterogeneous grid and the development of the resources of the demand side by Second Generation Retailers, which is where most value creation and jobs will be generated.

  4. Is it just me, or does “generate investment” sound odd? I thought you generate revenue. Generate investment sounds like you are digging a big hole in the ground. For someone else to dump their money into.