Smart Cities

The Smart Grid Industry Continues to get itself into Shape but some Major Obstacles Remain

The Smart Grid business through acquisitions, alliances and funding continues to develop at a hectic pace and surprisingly, has not slowed down in July despite the fact that the holiday season has now got into full swing. All the evidence shows that the business continues to be very upbeat and confident about its future growth and prosperity, but there are some major obstacles that have to be solved soon. This month we have identified 5 acquisitions by companies actively involved in the smart grid business. This is down on 8 recorded last month but that was so far the largest number recorded in any single month since we started reporting 7 months ago. Since our first published edition in March we have identified 31 deals to the end of July. In the first two months of this year we noted 13 bring the total to 44. Honeywell purchased E-Mon LLC a US manufacturer of smart […]

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The Smart Grid business through acquisitions, alliances and funding continues to develop at a hectic pace and surprisingly, has not slowed down in July despite the fact that the holiday season has now got into full swing. All the evidence shows that the business continues to be very upbeat and confident about its future growth and prosperity, but there are some major obstacles that have to be solved soon.

This month we have identified 5 acquisitions by companies actively involved in the smart grid business. This is down on 8 recorded last month but that was so far the largest number recorded in any single month since we started reporting 7 months ago. Since our first published edition in March we have identified 31 deals to the end of July. In the first two months of this year we noted 13 bring the total to 44.

Honeywell purchased E-Mon LLC a US manufacturer of smart energy meters. E-MON manufactures sub-meters and interval data recorders and also provides automated meter-reading and analysis software. This is the 3rd consecutive month that Honeywell have acquired a smart grid related company with Akuacom in May and Matricon in June. They appear to be building up an expertise that fits well in their automated controls division and can deliver end to end solutions in the industrial microgrid business.

GE purchased SNC-Lavalin for its Energy Control Systems (ECS) business and smart grid network management software products, which simplify the integration of renewable energy. This is the 1st smart grid acquisition that we have seen recorded for GE over the last 2 to 3 years. Given that acquisition forms a major plank in GE’s growth strategy, this is somewhat surprising. They are one of the world’s major players in the power generation and electrical transmission and distribution business and operate in all aspects of smart grid. However they have been criticised of late for not producing the glue to bring these businesses together to provide end to end solutions.

Although not a pure smart grid acquisition Nokia Siemens Networks purchase of the majority of Motorola’s wireless network infrastructure assets for US $1.2 billion in cash, will certainly in the medium to long term have a significant impact on the smart grid business. Both companies have been active in promoting and developing their products for the smart grid communications business.

This month we have identified 10 alliance arrangements, the highest for any single month so far and this brings the total arrangements confirmed for the last four months to 38. For the first three months of the year we identified 21 arrangements bringing the total to 59 for the first 6 months of the year. These numbers are higher than most other areas of the electrical business and show that this method of maximising business opportunities in smart grid is well practised.

We have identified 55 private funding arrangements in the first 7 months of this year, with almost 40% of this taking place in the last two months. The pace of activity, measured by both volume and value has accelerated over the last three months and shows little sign of slacking off despite the intervention of the holiday season. Some notable alliances announced this month include Landis + Gyr with Current Group, Spectrum Bridge with GE, and GridNet with Oracle. Yet another sign that this business is laying strong foundations for the future.

But what about the financial performance of major players; are they growing and profitable? The news here is generally less exciting but all the players are forecasting a much improved 2010 and beyond with much fuller order books than this time last year. So here again it is pretty good news with the cycle about to go into an upturn this year and smart grid will also benefit in the USA from the additional flow of business from the smart grid stimulus funding program.

However if this business is to continue its upward trend it has got to come up with some real actions in implementing solutions to the potential security problem. Last month Jon Wellinghoff, chairman of the US Federal Energy Regulatory Commission presented the Obama Administration's vision statement for smart power grids. He discussed regulations, markets and the environment but unfortunately ignored security of systems and customer account information. It is only a couple of months since the US Department of Energy played down reports published in the Wall Street Journal that Chinese hackers had managed to compromise the US electricity supply grid. Some strong leadership is required here. Whilst the electrical industry continues to pour money into smart meters arguably one of the major Achilles heels in the smart grid security chain we could be storing up problems for the future.

The bad news about major cost overruns on SmartGridCity has been damaging. However the reasons coming out of the investigation for the demise would suggest that bad management is to blame and not short comings in the technology and its application. Good project management will ensure that all parties involved in major projects like this one work together to deliver and complete complex projects on time and to budget.

This industry will still need stimulus funds for some years if it is to continue developing at a fast pace and play its proper role in assisting with the delivery a comprehensive green energy solution. Without it, renewable energy will not be able to perform. But with so many countries around the world now looking to reduce public expenditure, government funding is unlikely to go unscathed.

This abstract has been taken from Memoori’s Executive Brief – Business Opportunities in the Smart Grid Industry. It is a monthly world review of the issues that will determine and identify business opportunities in the smart grid industry, particularly focusing on merger, acquisition, investment and alliance. Subscription costs $599 per year.

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