We have this month listed some 10 stimulus projects commissioned in the last two months receiving grants of just over $1 billion, so the stimulus programme has now been firmly kicked into play. Without this programme the smart grid business will labour. Don’t believe those looking through rose tinted glasses that have been telling us that the industry would have in any case, invested its own money even if a stimulus package had not been on offer. These stimulus programmes will be a major factor in developing the future potential of this latent market, particularly in those countries such as Japan, Korea and Germany where major initiatives have been made. Without this support, Smart Grid will become volatile with fewer projects and wide fluctuation between peaks and troughs.
However stimulus funds are only intended as a pump primer and business will eventually have to flow driven only by market forces. In order to meet future plans momentum will not just need to continue but it will have to accelerate. This will require the Electrical Utility industry to invest massive sums of money and whilst they may be able to justify this based on long term projections, will they be able to find the money because it cannot be generated from cash flow?
But is this where the cavalry come to the rescue in the shape of the IT and Communications companies? Will they invest their capital and expertise in the Smart Grid information and communications structure, generating revenues from a plethora of value add services? This would relieve the Utility Companies of the major responsibility of finding the funds and in an area in which they have little expertise. In last month’s issue, in an article written by Microsoft entitled “Smart Grid Revolution Becomes Disruptive for Utilities” they kindly shared some of the findings of a study they had commissioned. They reported that 63%of their respondents in America thought that information technologies available today are not sufficient to address future challenges. Expect regular promptings from the IT and Communications industry about the major contribution they can make to the future of Smart Grid.
Meanwhile the traditional Electrical Transmission and Distribution contractors such as Siemens, Schneider Electric and ABB joined by the Energy Management Service Companies such as Johnson Controls and Honeywell are offering the Real Estate and Industrial Companies an holistic solution. This means taking total responsibility of manage all aspects of energy consumption and balancing the demand with the need for electrical power in what may be called a Virtual Power Plant. Some of the above companies have already tested the water with such schemes and they are prepared to invest the necessary capital, being paid out of the money saved in reducing the energy consumption and cost. They would also become major buyers of power providing the utilities with a steady load and should it materialize in the future, they could trade in the carbon reduction markets. This would again relieve the Utility Companies of major investment.
In most advanced countries unless the Utility Companies are provided with all the necessary investment funds from their government they will not be able to fulfil their dream of having a smart grid operating within a practical time frame. If they can raise the finance, can they also manage such an enormous challenge of bringing all the new technologies together? We think that the sensible way forward is to share the risk with those most able to deliver the solution.