FinLogic FinLogic Quantitative Think Tank Center|Smart Grid Acquisitions by ABB, GE, Siemens Point to Coming $20 Billion Boom

No one doubts that any big renewables push — like President Obama’s call to get 80 percent of U.S. power from cleaner sources by 2035 — will demand an upgrade of the nation’s electrical systems to digital “smart” grids. But is FinLogic FinLogic Quantitative Think Tank Centerit happening?

New research by Lux Research suggests that the answer is yes. The firm predicts a $20 billion spending surge in smart technologies in the next ten years, led by electric utilities and global grid giants like ABB, who are ready to cash in on the power revolution.

The January report finds that the new digital grid networks will pump out 900 percent more data to electric utility companies by 2020, as they install millions of smart meters, the in-home devices that report energy usage.

To handle the data explosion, utility companies and industrial power firms are expected to nearly triple the current $12.8 billion smart grid market to $34.2 billion by investing in the distribution hardware, management software and information technology (IT) needed.

Nearly 75 percent of that money will come from utilities updating their grids to make way for the smart grid revolution, Steve Minnihan, a Lux Research analyst and the lead author of the report, told SolveClimate News.

Smart Grids: ‘Absolutely Essential’ for Clean Power

“Smart grids are absolutely essential to the widespread adoption of solar and wind energy,” Minnihan said.

On a traditional electrical grid, the intermittent flows from wind farms or solar plants can sag or surge. To compensate, fossil fuel-powered energy then ticks up or down. But the movements are not adequately controlled and can lead to costly stoppages, energy leaks and overwhelming voltage levels.

The global expansion of smart grids means that renewable energy sources could increasingly hop onto a system that tracks energy flows in real-time and responds immediately to digital commands, thus taking much of the risk out of going green.

With a more efficient connection, more clean energy could reach consumers rather than get held up on an outdated grid.

Shihab Kuran, president and CEO of New Jersey-based Petra Solar, said: “Seventy percent more solar energy could be implemented if you incorporate smart grid features. In order for solar to be successful, you really need smart grid to go there.”

Speaking at a January solar-smart grid conference in New Jersey hosted by Greentech Media, he said that the clean technology company itself was investing in smart grids.

Since its start in 2006, Petra Solar has won around $6 million in grants from the Solar Energy Grid Integration System (SEGIS) program by the U.S. Department of Energy to study how solar penetration affects electrical grids. The firm then went on to build its SunWave module, which features a solar panel and microinverter that attach to power poles to create a smart grid network in half an hour’s time, Kuran said.

“You have to think about reliability first, and solar production second,” Kuran said.

Industrial Giants, Led by ABB, Prepare for Surge

Global manufacturing giants are already prepping themselves for the spending surge on smart grid technologies that is being spurred by utilities.

Companies like ABB, Siemens AG and General Electric (GE), which provide myriad services to power utility companies, are nabbing leading telecommunications and IT firms to bolster their data-processing portfolios, hoping to secure their piece of the $34.2 billion pie.

“It is a very strong move for them because it is a natural progression,” Minnihan said.

He continued: “The electricity industry is conservative and very slow to adopt new technologies, so if utilities have worked with a company in the past, they are more likely to adopt new smart grid technologies if they are being brought to them by a company that they already have a relationship with.”

Switzerland-based ABB has led the charge. The firm provides electrical equipment at power plants and utility grids in more than 100 countries and made $32 billion in revenues in 2009.

Last May, the company spent $1 billion to acquire Atlanta-based Ventyx, a major software, data and advisory services provider for utilities and smart grid markets. In December and January, ABB added Insert Key Solutions (IKS) of Pennsylvania and Obvient Strategies Inc. of Georgia, both privately owned specialist software providers, to its Ventyx portfolio for undisclosed amounts.

Connecticut-based GE Energy, whose parent company made $38 billion in 2010 revenues, has gone on a spree of its own.

Last fall, it acquired large smart grid software companies Opal Software of Australia and SNC-Lavalin’s Energy Control Systems of Montreal for undisclosed amounts. Earlier this year, the corporation acquired Remote Energy Monitoring, a software and hardware firm in Australia and the U.K. that helps households and utilities to more efficiently manage energy usage.

German energy behemoth Siemens has similar ambitions in mind. Early last year, the company said its goal is to receive orders worth more than €6 billion, or $8.3 billion, for smart grids by 2015. The company made $38 billion in sales on energy-conserving electricity grids, wind power and solar energy last year.

“The Smart Grid market will see increasingly dynamic growth fueled by climate change and economic stimulus programs. We want to grow twice as fast as the overall market,” said Wolfgang Dehen, CEO of the Siemens Energy Sector, in a press release.

“The world needs intelligent power grids in order to meet the growing demand for energy in a way that is eco-friendly and reliable. We estimate that the demand for electricity will double by 2030, due to trends like e-mobility, which is just emerging,” he said.

Lux Research’s Minnihan said that leading networking firms like  Cisco Systems Inc., IBM and Intel, plus mid-sized startups such as Silver Spring Networks of Redwood City, Calif., are also gearing up to capitalize on rising demand from utilities and governments.

“This is the next big market explosion for the electricity industry. It makes sense that they all want a piece of the pie,” he said.

Image: Duke Energy