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 (s ABB), Siemens (s SI) and General Electric (s GE). That legacy turf is being crowded in turn by would-be smart grid giants like Cisco (s CSCO), IBM (s IBM), Google (s GOOG), Lockheed Martin (s LMT) 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 (s enoc), Comverge (s comv) and CPower (recently acquired by competitor Constellation Energy (s ceg)) 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.
For more research on smart grid check out GigaOM Pro (subscription required):
- Smart Algorithms: The Future of the Energy Industry
- New Opportunities in the Smart Grid
- The Developer’s Guide to Home Energy Management Apps
Image courtesy of Vaxomatic.