Mountain View, Calif., Dec. 1, 2011 — Investments in smart grid technologies peaked in 2010, exhibiting an annual growth rate of 59.7 percent over 2009, according to Frost & Sullivan research.
Despite the heavy investments, the industry is far from achieving its goal of deploying a true smart grid. Manufacturers promoting their smart grid technology to utilities have to contend with several issues such as securing financial backing, marketing in a highly cyclical and unpredictable market, and consumer backlash.
New analysis from Frost & Sullivan's Global Smart Grid Market research finds that the market earned revenues of $23.97 billion in 2010 and estimates this to reach $125.15 billion in 2017.
"Solution providers are realizing that the implementation of a smart grid requires a communal effort involving stakeholders from different entities to ensure a seamless integration," said Frost & Sullivan Principal Consultant Farah Saeed. "In the past two years to three years, the industry has experienced an increase in exclusive and nonexclusive partnerships and alliances across industries to guarantee a trouble-free implementation of the smart grid."
Utilities acknowledge that smart grids are the need of the hour, as the rising use of electric vehicles, distributed generation and inadequate investment in generation, transmission and distribution infrastructure elevates the risk of potential voltage fluctuations and power interruptions. Smart grids can mitigate these concerns to some extent by improving the control and visibility of the grid's activities.
Investments in smart grid are also partly driven by the need to integrate renewable power, including solar, biomass, wind and hydroelectric, on to the grid.
In the United States, 30 states have renewable portfolio standards, which require electric utilities to generate a certain amount of electricity from a renewable power source. In Europe, the European Commission has established a directive to cut greenhouse gas emissions by 20 percent from the 1990 levels, produce 20 percent of energy from renewable sources, and increase energy efficiency by 20 percent by 2020.
Although the need for smart girds is apparent, the decision making process is slow due to uncertain economic conditions. Following the 2008 to 2010 economic slowdown, many utilities are hard pressed to justify investments in smart grid to their stakeholders, regulatory bodies and consumer groups.
The high unemployment rate among residential customers is forcing regulators to carefully deliberate the merits of smart grids. In such a scenario, solution providers must work jointly with utilities to demonstrate and communicate the key benefits of investing in smart grids.
"In the United States, most capital equipment purchases and investments are supported by rate increases," said Saeed. "Utilities regulated by a public utility commission (PUC) are expected to file their construction plans, including a request for a hike in utility rates to support the investment, with their respective PUCs."
These efforts will go a long way in bolstering the global smart grid market.