Smart-grid companies feel growing pains


From CNET:

If you think utilities will swiftly adopt smart-grid technologies, consider the story of GridPoint.

Despite being only seven years old, the high-profile energy start-up has adjusted its strategy a few times and made a string of acquisitions. At first, it planned on selling home energy management systems and batteries to consumers, then shifted its focus to selling smart-grid equipment to utilities, such as software to manage home energy or charge electric cars.

Last week, GridPoint announced that it has signed a deal to supply energy management software and hardware to the United States Postal Service, which has set a goal of lowering energy use by 30 percent by 2015. It could bring in as much as $28.7 million over three years to GridPoint.

The deal is significant because GridPoint sees commercial and industrial energy management, which it entered through its acquisition of ADMMicro last November, as a business with better near-term potential than smart-grid gear, according to the company. Utilities are slow at buying IT-related technology, whereas businesses make quicker decisions based on a return on investment, the company has found.

“The fact of the matter is that the (smart-grid) marketplace is taking time to evolve from pilots to significant rollouts. As a business, we need to make sure we have an opportunity to generate business from multiple sources,” said GridPoint Executive Vice President John Clark, who joined the company after it acquired V2Green, which made utility software for managing electric vehicle charging.

GridPoint isn’t alone in noticing how slowly things are moving in certain areas of the smart grid.

Between the federal government and utilities, about $8 billion will be spent on modernizing the grid with two-way meters and other digital technologies. But for companies that aren’t directly linked to smart metering, that money, which has been slow in coming, may not be all that meaningful.

“There is some disappointment, or disillusionment, that the market did not materialize as fast as people thought, particularly for the tech start-ups and investors that targeted it,” said Rick Nicholson, an analyst at IDC’s Energy Insights service, which recently adjusted its forecasts for spending in North America. “It’s still going to materialize into a multibillion-dollar market, it’s just going to take longer.”

Finding a niche
Smart-grid technologies are designed to make the grid more reliable and efficient for utilities and give consumers more control over how they use energy. But the nature of doing business at a utility means the technology upgrade process is slow.

Utilities typically negotiate with public utility commissions on how they will recoup the costs of capital investment, such as smart meters, batteries, or in-home energy displays for consumers. That investment cycle, coupled with utilities focus on reliability, means they don’t have big incentives to move quickly, said Rob Day, an investor at Black Coral Capital.

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