Smart grid: How big is big?

By Elisa Wood

July 23, 2009

A Cisco executive attracted some eye rolling after commenting that smart grid could be “even bigger than the Internet.”http://www.cisco.com/web/strategy/energy/smart_grid_solutions.html

But the statement isn’t farfetched when you think about what smart grid encompasses: a convergence of three industry giants: information technology, telecommunications and the electric grid, the world’s biggest machine.

A report this week by Greentech Media made clear just how large an empire this triumvirate can create — and what it will mean to our society if it succeeds and if it fails.

The smart grid – which will cost an estimated $165 billion to build – may constitute the largest single information technology investment to reduce carbon dioxide emissions, according to “The Smart Grid in 2010: Market Segments, Applications and Industry Players” by David Leeds. http://www.greentechmedia.com/

It also represents one of the biggest business opportunities of the century, says the report. How big is big? “When you consider that the U.S. electric utility sector, with its annual revenues of roughly $300 billion, is 30% larger than the automobile industry and twice as large as the telecommunications industry, and then bring to mind the craze of dotcom investments and telecom merger & acquisition which occurred in the mid to late 1990s, a reasonable picture starts to emerge of what can be expected of in terms of smart grid investments and M&A in the next five to 10 years,” says the report.

Keep an eye on demand response because it’s likely the first smart grid “killer ap” to capture market penetration, even before smart meters, says Greentech Media. “The demand response market is now being referred to as a gold mine and industry analysts have called for this market to quadruple over the next five years,” says the report. The successful public offerings of demand response leaders, Comverge and EnerNoc, underscore the market’s maturity, according to the report. But what if society loses interest in smart grid? (It would not be the first time we’ve abandoned promising energy innovations.)

Without smart grid, forget about green energy, says the report. Renewables “will remain niche,” “a non-starter.” We need the smart grid to facilitate and integrate renewable energy because of its variable nature. After all, solar, wind and electric cars are nothing new. Photovoltaics have been around since the 1950s and wind and electric cars since the turn of the century. Smart grid offers to take them from “novelty to norm,” says the report. Green energy is “battle ready;” what it needs is smart grid infrastructure to support its introduction on a mass scale.

For all of smart grid’s benefits, it still faces uncertainty: If we build it will they come? Smart grid is premised on the idea that if consumers receive real-time information about their electricity usage, they will consume power more judiciously. That requires “re-imagining and re-engineering” our relationship with energy. “Changing North American consumption habits, especially those related to energy, which historically has been “dirt cheap,” cannot be assumed to be an easy assignment,” Greentech Media warns.

So whether the smart grid becomes an enormous business opportunity or an enormous bust may rest largely with human mindset. The question becomes not, how big is smart grid, but how big will we allow it to be.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.