Is the smart grid industry stalled? Or accelerating?

[Jesse Berst]

We're getting mixed signals about the vitality of the smart grid market.

On the one hand, the recent DistribuTECH conference was one of the most successful ever. Attendees universally commented on the higher degree of activity and buying interest.

On the other hand, a well-known Wall Street analyst recently told his clients that the smart metering sector is "facing several headwinds, including weak regulatory support in the United States, delays in European adoption, and increased standardization." What's more, he found "little evidence at DistribuTECH that they were easing."

It's true that smart meters are just one piece of the total smart grid pie, but the subsector has always been a bellwether for the rest of the market.

What do you think? Is the smart grid industry stalled ... or do you see signs of acceleration?

[Sean Dempsey]

A few quick thoughts on the topic:
1. There is no more federal stimulus in the US providing a 50% coupon on Smart Grid deployments, so more robust business cases must be met.
2. As you mentioned, Smart Grid is a lot more than just Smart Metering. There is still a lot going on in feeder automation, substation automation, telecommunications, data integration, data analysis, asset management, and demand response. There were a lot more sensing and measurement devices on display at Distributech that weren't smart watthour meters.
3. There are still plenty of startup companies out there that would suggest entrepreneurs still see opportunity for above average growth.

The industry seems to be plugging along just fine.

[David O'Brien]

Jesse

I think there is a legitimate threat of a stall for the reasons you cite. The issue is how smart grid investments will be put into retail electric rates post stimulus. Some regulatory commissions struggled to approve projects that did have 50% stimulus funding. Now that we are looking at justifying 100% of the investment in rates the bar has been raised dramatically.

I am attending the NARUC winter meeting and at this point Smart Grid is not on the agenda of the main conference. Yesterday when the notion of grid modernization came up, regulators said that while innovation is critical, they (regulators) have to look out for ratepayers who shoulder all the risk. That says to me that it is a very tepid view of smart grid related investment.

As an industry we have work to do. In my personal view technology is not the issue, and even consumer engagement is not THE issue. It is engaging the regulatory community. They make the decisions. Historically regulators have stepped out on issues such as demand side management/energy efficiency, renewables and carbon in the past. Also our friends and clients in the electric utility business that they have to show their regulators that smart grid technology will make
ratepayers and society's life better, in terms of dollars and cents and the environment. The traditional utility business model will not do.

In my recent editorial in your newsletter regarding the Smart Grid Inflection Point I talked about these issues if folks are interested.

David O'Brien
Director of Regulatory Strategy
Bridge Energy Group

[Spencer Zirkelbach]

The original push with the Smart Grid was AMI, but I agree that there is much more than just meters in the Smart Grid and that has continued to push the Smart Grid journey along. Distribution automation, energy storage, renewable integration, and self-healing power systems have all made great strides in the past 2 - 3 years. I believe that things are not moving as fast as something like the telecommunications industry in 20+ years ago because we are still in the stages of proving how these systems will work and how they will be economically viable. We also have a hard time communicating the value of these new technologies and design criteria to the people they effect, power consumers. That has caused latency in adoption, but not a stop in it.

Overall, the Smart Grid is a journey and I believe we have an idea for where we want to be. I don't think we are sprinting to the finish line, but that may be because we don't know what path (or paths) will be fastest to get to our final destination.

[Mani Vadari]

I don't bellieve that the Smart Grid has stalled. I think (if anything) it is accelerating. I agree with some of the respondents before me who pointed to the stimulus as a key reason for the massive investments in this area. One could argue that much of the focus on Smart Meters came from that. Now that the ARRA investment is not there, it is difficut to justify the investment on Smart Meters alone. Also - we DO need to move this area from an innovation play to a businss-as-usual play.

Utilities, under their business-as-usual approach, are doing a lot of work in the Smart Grid arena - the grid side of the meter. This was actually quite evident at the Distributech Conference last month where I thought there were several vendors who were talking a lot more than just Smart Meters. Moving to business-as-usual for utilities is what they are good at - they know how to justify investments and run it through a rate-case and get it approved. I thknk it is fair to say that almost every capital investment by utilities has some smart grid component in it.

Mani

[John McDermott]

I was really impressed by the variety of utility case studies at Distributech all reporting that DA technologies, e.g. IVVC, provided 2-4% energy reduction and outage response in seconds rather than hours. The engineers working on these technologies are thrilled by the performance improvements they get, and the bottom line cost savings. The challenge they face is to move from pilot projects to mass deployment. Vendors will push hard for deployment, but with cyber-security and communication issues in the background, there seems to be caution to do the right thing that will last for many years.

[samuel sciacca]

I think drawing a one-to-one correlation of AMI activity to global Smart Grid activity is not valid. There are many reasons why AMI is stalling, which have no relationship to other Smart Grid activity. For example...the primary reason that AMI is not being embraced globally is that usage in homes globally is dramatically varied, and payback of AMI not acceptable in all parts of the world. In Brazil, where average per household electric energy usage is 10% of a US household, the Brazilian regulatory body estimates that smart meters would have to approach a cost of $20 (USD) to be economically feasible. Similarly, Europe, at an average electric household usage of 40% of US household usage, does not see the same economic benefit of AMI projected for the US market.

However, both of these markets have active Smart Grid programs in Green/Renewable Energy, distribution reliability, and distributed resources.

While Smart Grid is uniformly defined and understood around the globe, in any given locale, the elements of Smart Grid that will be most beneficial will differ based on local factors.

[Dean Musser]

It might just be the economy. The question is whether the smart grid is poised to accelerate once the economy picks up.

The answer lies in customer adoption which depends on industry support for companies that help large energy users optimize behind the meter resources needed by the smart grid. Resources like on-site distributed generation, load management measures, economic demand response and storage.

Monetizing these resources in a significant way will add a “pull” side tension behind the meter, to industry efforts to “push” the smart grid toward customers. Once that happens, acceleration won’t be a strong enough word to describe the pace of growth.

[Paul Molitor]

Jesse,

I am going to agree with the other commenters in this thread and note that we are likely seeing a return to the well-established, normal rate of change for the grid. As we went through the bidding process two years ago, a number of utilities openly stated that the ARRA provided a means for them to accelerate their plans for Smart Grid. Upgrades that were already in the pipeline were moved up to accomodate the funding that suddenly became available from DOE.

As part of our work on a Dept. of Commerce grant, NEMA has been having a series of conversations with utilities of all stripes in Canada, Mexico, and the U.S. A trend that is emerging from this work appears to be a shift in focus from smart meters to distribution automation and outage management. The benefits of this shift can already be seen in the reports that came from the utilities that were hit by Hurricane Irene last fall. Going forward, it appears that DR and DER will be the applications that start to move toward the front of the pack as utilities pursue rate schemes for TOU, CPP, and PTR programs with their customers.

If you look at a single grid technology (like smart meters) it would be easy to identify ebbs and flows and come to the conclusion that smart grid is stalling. However, if you take a step back and look at the overall effort across a variety of product areas and applications there continues to be measurable forward progress.