Analyst Report: How Investors Can Avoid the Smart Grid Bubble


Bubbles — they’re something Silicon Valley likes to debate at length. Was there an Internet infrastructure bubble in the late 90’s? (Yes.) Has there been a bubble for Web 2.0 startups in recent years? (Looked like it.) Well, now more and more people have recently been asking if there’s a smart grid bubble going on, garnering copycat startups and misplaced investments from venture capitalists.

At the AlwaysOn Going Green conference this week executives from smart grid firms indicated that they’ve been watching a bubble growing dangerously large. “We’re falling into a classic trap: a bubble,” said Adrian Tuck, CEO of home energy management firm Tendril, explaining that everyday he sees a new unknown smart grid company get funding. He also predicted a difficult time for some of these firms, estimating that “there will be huge consolidation over the next 24 months.”

Tuck isn’t the first to raise the question. CNET reporter Martin LaMonica raised the issue back in June. In his report, LaMonica quoted Diana Propper, a cleantech investor with Expansion Capital Partners as saying, “I worry that there’s so much money being sloshed around, whether it’s venture capital or corporate or government money, that it will be spent inefficiently.”

In a way, she’s right. When the Department of Energy allocates close to $4 billion from the stimulus funds for the build out of the smart grid later this year, that’s leaving the largest investment into smart grid technology up to policymakers to decide how best to allocate those funds — something that they’re likely ill-equipped and understaffed to do. And with so many utilities and firms applying for funds — here’s a list we’ve been compiling — the task is just that much more difficult.

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