ALLCASTLE PRINCETON + Smart Grid

Good News / Bad News - Smart Grid Needs a Big Push to Achieve its Potential

The first 4 months of this year has seen momentum slow down in some important aspects of the development of the Smart Grid business. Memoori’s Executive Brief over the last 4 months shows that following a rapid growth in the consolidation of the smart grid business in 2017, momentum has not been maintained.

Deals are marginally down on the same period as last year but one major deal (Landis+Gyr, reported to be in-play), could make a major boost to acquisition activity. Similarly investment in the business for the first 4 months of this year is running at the same level as 2017 and that is more concerning given the need to develop new products and pay for their installation. The financial performance of the major players has improved with both revenues and profits well up on 2017 and continuing into the 1st quarter of this year; but whilst trading conditions look very promising for this year there is no certainty that the public sector will stump up the funds to continue priming the smart grid machine. The private sector is no less enthusiastic with new products being brought fast to market and major alliances being cemented to ensure they reach it and deliver solutions. So the conclusion here is “trying hard, but could do better”.

This month has brought in some bad news that was not unexpected. Articles running titles like
“A Spring Deluge of Smart Grid-Related Security Incidents”, “Britain's utility companies 'wide open' to cyber attack” and “Most power companies admit to IT security breaches” have brought our attention to a real problem yet to be resolved and unless it is, there will be no comprehensive Smart Grid.

If we just look at the 2nd of these articles it claimed that “privatised utility companies are woefully unprepared for a terrorist cyber attack similar to that which crippled Iran's nuclear programme, leaving essential services of water, electricity, and gas extremely vulnerable”. The studies, by the US Center for International and Strategic Studies and the UK's Cyber Security Research Institute, warn that equipment used to control the critical national infrastructure in the US and the UK is lagging behind the IT world in terms of computer security, and that connecting those systems to the Internet has left them wide open to a cyber attack.

In the recent Defence Review the British Government set aside GBP £650 million to deal with cyber issues including improving the CNI. But one expert quoted in the CSRI report said: "The pot of money that the Government has allocated to this is not big enough to protect its own critical infrastructure let alone research the national critical infrastructure to find out what needs to be done." According to the CSRI study, the electricity industry is particularly prone to a cyber attack. In this report the UK lagged at the bottom of the table for government security audits.
http://it.tmcnet.com/news/2011/04/21/5461648.htm

Security leaks of confidential information is another area that will need to be tidied up, but whilst these matters can be resolved, if serious money is not spent and quickly it will hold back the horizontal growth of the Smart Grid business, which is the very area that can provide the value add to more than justify the vast sums that need to be invested.

Whilst Smart Grid has the backing and support of the governments and the low carbon energy industry around the world it needs a colossal investment and that cannot come solely from the operators of the electrical grid.

The political will to quickly enact measures to ensure that the barriers to investment are swept away have yet to overcome the inertia - let us hope that Fukushima galvanizes action here. Smart grid is a key enabler of a worldwide low-carbon economy. However we must be concerned that utilities are struggling to create the business case for smart grids as regulatory incentives often fail to provide the right incentives and reflect the low-carbon agenda.

Landis Gyr, and more:

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