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Smart Grid 101: It's About Relationships, Not Technology

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Sure, your company’s smart grid tech might be the slickest on the market, but don’t expect that to guarantee success in the industry. According to a report out this morning from Lux Research, which predicts the smart grid market will be a $16 billion opportunity by 2015, getting ahead in the smart grid market is more about who you know , rather than how advanced your technology is. “Few smart grid companies are differentiated by the technologies they’re fielding,” writes Jacob Grose, a Senior Analyst at Lux Research.

That’s likely because the smart grid is made up of technology that’s already well-established: wireless networks, software applications, computing. Being fairly mature, this tech leaves less room for differentiation than say next-gen biofuels. Instead the key to moving ahead or falling behind in the market has to do largely with getting utility customers and being able to scale your technology. “Competitors unable to establish early commercial relationships with utilities will likely get squeezed out of the market before long,” says Lux.

For a new startup, scoring that utility deal can often be about partnering with one of the bigger industry players (IBM (s IBM), Cisco (s CSCO), Accenture, Silver Spring Networks) for a utility project. Utilities would prefer to do deals with larger companies, given that they’re pretty risk averse, slow-moving and need “mission-critical” electrical gear. As Warren Weiss, partner at Foundation Capital, put it during our smart grid bunker event last week, the next generation of smart grid startups will be wise to stand on the backs of giants in this industry. Pulse Energy, a Vancouver-based startup we profiled this morning, has followed that strategy closely.

And Lux points out, it will be a big ol’ race to grab those utility deals. “The most successful players will be those who can navigate a shifting landscape of market segments, and partner with companies able to capitalize on opportunities before their competition,” says Grose. That’s particularly true with the injection of $4 billion in smart grid stimulus funds. Utilities that were allocated funding under the stimulus package will soon have to spend it on projects and that means there is currently an uptick in utility deals that will quickly die down.

This week a variety of smart grid firms announced deals with utilities, including that the Tennessee Valley Authority will be working with SmartSynch, and Tantalus Systems has done a deal with small Tennessee utility Johnson City Power Board for a smart grid network.

Image courtesy of ogimogi’s photostream Flickr Creative Commons.

4 Responses to “Smart Grid 101: It's About Relationships, Not Technology”

  1. Rex Arul

    @katie – That makes sense. Because of the huge opportunity and the wide domain it encompasses, the last thing Utilities want is a Babel full of disparate technologies and solutions that do not or cannot cohabit well with other SG solutions. Naturally, the way to reduce the risk then, is to look forward to different consortia for wider solutions in the SG space.

    A question though: Although you cite a $16 billion SG opportunity by 2015 in this article (probably by Lux Research???), elsewhere you quote a $21 billion figure by 2015 (probably by Pike Research???). I am just curious as to which figure has a wider acceptance.

    Although the difference is a paltry (??) $5 billion, that is still more than what the US Government currently funds out of ARRA for the entire Smart Grid related investments :-)