Weekly Update

Opportunities in California’s smart grid deployment plans

Last week, California’s big three utilities — Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric — released in-depth smart grid deployment roadmaps that include about $5.6 billion in smart grid spending over the coming decade. For smart grid companies, it’s about the closest thing to a detailed plan of attack one could ask for.

Of course, much of that money is tied up in ongoing smart meter deployments, and another huge chunk is for transmission and distribution grid projects with a limited range of potential competitors. Still, that leaves plenty of opportunities for nimble companies with key software, networking or hardware technologies to fill the gaps that remain. Here are some of them:

1) Home energy management. No wonder Google and Microsoft dumped their home energy portals — utilities have that market sewn up. All three California utilities are under mandate to deliver energy and pricing information to customers, and plan beefed-up Web services to do it. SCE, for example, will spend $54.6 million by 2014 on SCE.com, and make the site’s energy and price data, rate signup options and efficiency and forecasting capabilities to its customers — all for free.

How can Google or Microsoft, let alone startups, compete with that? Helping utilities extend those portals’ functionalities, rather than trying to replace them, will be key. Whether that’s via the likes of OPower’s light-touch behavioral modification, EcoFactor’s automated thermostat tweaking, Tendril or Control4’s multi-channel, utility-to-customer connectivity or some other approach remains to be seen.

2) Smart grid standards still in progress. California’s utilities are in a bind when it comes to smart grid standards. PG&E, for example, has warned it can’t commit to the automated demand response standard known as OpenADR until it can judge the merits of supporting technology. The same goes for the home energy networking standard Smart Energy Profile 2.0, and another standard called Open Automated Data Exchange (OpenADE) for transmitting utility data to third-party systems. Vendors that can anticipate and build to these developing standards will have a big advantage.

3) Back-end software remains an under-the-radar market. The smart grid will need software to make it work. SCE’s roadmap, for example, plans $26.1 million for customer data warehouse expansion, $40.6 million for modernizing its current Excel and Access spreadsheet-driven CRM system and $42.2 million for updating its customer service system to accommodate smart meters. Likewise, utilities plan to spend tens of millions of dollars on grid control platforms like distribution management systems. While enterprise software players like IBM, Microsoft and Oracle and grid giants like Siemens, Schneider Electric, ABB and GE may well lead these markets, partners with complementary software offerings could reap commensurate rewards.

4) Distributed generation management is the next big thing. SCE’s roadmap says the most pressing near-term smart grid function will be to “safely and reliably integrate power from distributed and bulk renewable resources.” California’s mandate of one-third renewable energy by 2020 will force utilities to bring lots of intermittent wind and solar power onto grids that aren’t built to handle it. PG&E has connected 45,000 customer-owned solar systems, about one-third of the country’s total, but has no visibility into what those solar panels are doing.

Companies that can help solve this problem could reap big rewards. There are many paths to doing so, such as reading smart meters  to balance grid voltage, manipulating output from networked solar power inverters, building microgrids that shift off-grid during times of instability or finding cost-effective energy storage systems to store intermittent power to cover dips in generation.

This isn’t an exhaustive list of the opportunities laid out in these smart grid plans, of course — there’s plenty more to delve into in these lengthy reports, and I’ll be bringing more information to you shortly. But given California’s position on the cutting edge of smart grid developments, expect technologies tested and adopted here to find favor elsewhere. That makes developments here worth watching.

Question of the week

How can smart grid vendors fit into the smart grid deployment plans of California’s big three utilities?