ALLCASTLE PRINCETON + Siemens

Will Smart Grid Shine Bright in 2018?

2017 has been a stellar year for the Smart Grid industry; sales revenues have increased, investment has boomed and consolidation through acquisition and merger has produced a much stronger base of vibrant companies, capable of meeting the technological challenges that lie ahead.

On the back of improving world economic trading conditions and a continued emphasis on a low carbon economy; smart grid is in a strong position to grow and thrive.

The weakest link in smart grid’s development has been the lack of attention to automating and modernizing the transmission and distribution network. The vast majority of smart grid investment has gone into smart meters, not surprisingly because this ‘low hanging fruit’ is less capital intensive and can show a quicker return. However for the electricity grid to play its major role in a low carbon future it will need to connect up all the renewable sources of energy and micro-grids and this requires an intelligent transmission and distribution network.

For those nearer the coalface, the need to invest in it is more fundamental than that. In most developing countries and a good proportion of developed economies, modernization is vital just in order to deliver reliable clean power through the existing infrastructure.

In December 2017, European transmission system operator group ENTSO-E signed a Letter of Intent as part of the North Seas Countries Offshore Grid Initiative; which pledges to facilitate the strategic and coordinated development of power grids both on and offshore energy sources of the North Seas.

So it’s good news to read that particularly in Europe transmission and distribution is getting a lot of attention right now, with various plans under discussion that could see a radical transformation of Europe’s electricity transmission system.

These moves are being prompted by the realization that if Europe is to meet its 2020 targets to increase its share of renewable energy to 20% of the total; a major contribution will have to come from renewable energy generated electricity. While this strategy certainly presents a number of significant challenges, with offshore wind expected to contribute a large proportion of this new renewable energy, perhaps one of the largest issues is how to deliver this energy to the demand centres of Europe. This will require a major investment.

We can therefore expect that gradually over the next five years automating and modernizing the transmission and distribution system will take an increasing share of the investment spend on smart grid and more importantly, add to it. This will be good news for ABB, GE, Siemens, and Schneider Electric; the world’s major electrical manufactures as they dominate this market. We also predict that the spend on AMI will increase over the next 5 years.

Private funding surged ahead in 2017 mainly through Venture Capital companies where we identified 68 private funding arrangements having a total value of $1.213 billion. We believe that the number of arrangements is relatively high compared with similar businesses in the electrical sector but is well down on deals in some other areas of clean tech.

Funding for Smart Grid business is buoyant and growing with a number of clean tech venture funds deciding that the Smart Grid sector looks more promising than renewable energy at this time. So we expect investment in smart grid companies to expand further in 2018.

Similarly, acquisition activity significantly increased in 2017 to 70 deals which are a surprisingly high number for such a relatively young business. This month we have recorded 10 acquisitions which is a promising start to what we expect to be a bumper year as a number of major IPO’s are almost certain to go ahead in 2018.

With a market confident of a growing future and the major suppliers flush with cash and driven by the need to continue investing in the development of the business smart grid will continue to be a shining star.

The only cloud on the horizon is the political will to continue to go down the low carbon economy route. It seems that everybody loves clean energy but no one wants to pay for it and now questions are being asked; “do we need more electrical power?” citing that through energy conservation and micro-grid production we could achieve a more cost effective solution to the CO2 problem.

ABB, ENTSO-E, GE, Schneider Electric, and more:

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