ALLCASTLE PRINCETON + Smart Grid

How Big is the Smart Grid: Can it Deliver on its Forecasted Exponential Growth

Smart Grid is blessed by have two of the most formidable drivers in the world today; the need to reduce CO2 emissions through the use of renewable power and the efficient use and control of energy. Smart Grid is directly positioned on the critical path to delivering these requirements. It is a must have, not simply a nice to have.

However Smart Grid is still transforming from it's embryonic stage to it's infancy; so why are we confident that it is capable of meeting these challenges? Is the technology robust and in place? Have the security and safety issues been satisfied and is it big and smart enough to attract sufficient finance from private as well as public funds? Well this is where you have to dig a little deeper to find the
answers.

Estimates on Market Size
A small number of announcements on market size forecast some very big numbers but there seems to be little in the way of confirmed definitions and the methodology of how the sizing was reached. A year ago networking giant Cisco estimated that the market for smart grid communications will grow into a $20 billion a year opportunity as the infrastructure is built out over the next 5 years, and a new report from researchers at Specialists in Business Information (SBI) forecasts the market will grow to $17 billion per year by 2018 from today’s $6 billion. That’s a compound annual growth rate (CAGR) of almost 21% through to 2018 for technology that will provide better sensing and control systems and help integrate more renewable energy into the U.S. power supply. Globally, SBI expects the market for Smart Grid technologies to grow to about $171 billion by 2018 (with a CAGR of nearly 20%), up from approximately $70 billion in 2017. Similar figures have been reported by other research organisations but we should not take this as a confirmation of the accuracy of the numbers.

Our March Executive Brief on Smart Grid reported a number of stimulus awards now being implemented on projects ranging from $100 to $200m; This from total awards granted for investment in Smart Grid projects in the US of $3.5 billion. Whilst Japan, South Korea and China are investing about $9 billion this year in I.T. to make electricity networks more efficient. So the ball park figure of $70 billion for the world market for all smart grid expenditure could actually be conservative, particularly if you include Smart Grid technology being applied to private major industrial and commercial sites.

Structural Change is Being Addressed
Forecast growth of 21% compound can be achieved by the supply industry. Last month we identified some $92 million invested in 9 smart grid suppliers the majority based in North America. In addition, 9 significant acquisitions were announced whilst Landis & Gyr advised that they would make an IPO within the next 3 years and Silver Springs are rumoured to go for a $3bn IPO any time now. So the consolidation process is moving ahead at a healthy pace which it needs to do because some areas of the business are rather fragmented and the structure of the supply business needs strengthening in order to take on major projects.

Can Current Technology Deliver a Smart Grid?
The technology to create a Smart Grid has been available for some years and in fact on a micro level has been operating in industrial premises and very large commercial buildings for at least 10 years. The need now is to scale this up to regional and national grid levels and this is not a simple matter. Demonstration projects carried out on the electricity grid have proven that information can be managed and transferred from both the supply and the demand sides but these have been restricted to thousands of usage points. However they have proven that current technology can deliver. In addition the major IT Companies that have entered the business such as Cisco, IBM, Oracle and SAP, to name just a few, are confident that the information flows can be handled. No doubt there are still some major hurdles to cross but everything tells us these are not insurmountable. But the jury is out on the question of security and much work needs to be done here.

Cisco, IBM, Landis Gyr, Oracle, SAP, Silver Springs, and more:

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