Everyone who experienced the Great Blackout of 2003 remembers where they were when it happened that summer day. The blackout, which cut power to much of the Northeastern and Midwestern United States, as well as parts of Canada, brought home the reality that the electrical grid in the United States was outdated.
Updating the grid will not be cheap -- estimates range as high as $2 trillion -- but the massive effort will also present huge opportunities for U.S. manufacturers, with a market that could reach $1 trillion. The race is on to capitalize on smart-grid technologies.
But finding the best way to make the smart grid happen is still something the United States must figure out. New companies are coming online every day trying to find those answers. For many, this realization spurred a rush to update the demand side of the electrical equation. With all the focus on the demand, the supply side is often lost.
Manufacturers now are focusing far more on supplying the smart grid, in part because the market is much more lucrative. Sensors and devices will be an $85.5 billion market by 2014, according to a Zpryme Research & Consulting LLC report. To capitalize on this shift, many smart-grid manufacturers are gearing up by adding people and ramping up their product development. While working on building the demand side is still important, supply presents increased opportunities for manufacturers.
Where We Are Now
To properly assess the smart-grid market, both the demand and supply side must be evaluated. The demand portion includes how to control energy inside the consumer space: smart meters on buildings, smart thermostats and smart appliances, to name a few. Included in the supply side lie the utilities, which have to spend money to upgrade their transformers, transmitters and plants to receive the information from the consumer and change their distribution according to real-time feedback. Together, the consumer and utility stakeholders, working in concert through sophisticated two-way communications, comprise the smart grid.
Chet Geschickter, smart-grid senior analyst for GTM Research, says the first thing people need to understand about the development of the smart grid is where the United States is now.
"We're a far cry from the digital, two-way communications systems that will be necessary to have a truly smart grid," he adds. "That's one of the reasons it will take a while for us to get there."
The hype is still outpacing the reality, even for those who are trying to build smart-grid components. Mike Zimmerman, founder of Building IQ, a Sydney, Australia-based manufacturer of software that helps commercial buildings communicate with the grid, says the United States has a long way to go before it can truly say it has a smart grid.
"Right now, we have a dumb grid," Zimmerman says. "We need to build a not-so-dumb grid, and then maybe in 10 years, we'll have an average intelligence grid. Then 10 years after that, it will really be the smart grid."
The investments necessary to make the jump Zimmerman talks about are many. First, utility companies have to equip their infrastructure with sensors and devices capable of gathering the information being collected by the consumer-side meters and appliances. There also needs to be a boost on the consumer end of installing devices that give that information to the utilities.
Second, the utilities will need to install software at the plants themselves that can process the information into useful, actionable information so the companies can make intelligent decisions about how they need to deliver electricity and to whom. Up to now, that infrastructure has been largely ignored by manufacturers, so there's a lot of catching up to do.
Internal Expansion
In the initial stages of smart-grid development, companies, governments and consumers have focused on changing attitudes on the demand side, Geschickter says. The focus is on building the infrastructure that will be capable of the two-way communication so critical to making the smart grid work.
"There are the first-line meters, submeters -- all of those pieces of equipment extend the periphery of the grid and get us ready for the next step," Geschickter says.
That's where companies such as QuadLogic Controls Corp., a Long Island City, N.Y.-based manufacturer of smart meters, come in. Phil Fram, vice president of sales and marketing, says his company is gearing up to take advantage of the market.
"We are focused on multi-tenant buildings with our meters," Fram says. "We allow building owners and superintendents to charge for electricity use in a much more precise fashion."
To meet the coming need, Fram says his company is focusing on upgrading its hardware in 2011, with the anticipation of expanding its software features in 2012. The upgrade in hardware will allow QuadLogic's meters to be prepared for two-way communication capabilities that will be critical moving forward as the smart grid develops. Then comes the next step: Upgrading the software inside the meters to allow them to be even more functional in the future.
Petra Solar manufactures photovoltaic panels that are mounted on electrical poles and are used to increase the amount of renewable energy that can be added to the smart grid. Steven Gillespie, program manager for Petra Solar, says the biggest investment his company has made internally is in Omnify's PLM software. The increase in productivity for the Plainfield, N.J.-based manufacturer has dramatically accelerated the speed with which the company produces its products.
"We have cut down the amount of time it takes to make an engineering change to our products by 75%," Gillespie says. "We've cut down our product development time from 18 months to 9.5 months. It's been revolutionary to the way we do business."
The company is also working to create a distributed system of solar energy, says Mary Grinkas, vice president of communications for the company. Instead of building a solar farm, a distributed system will rely on easier two-way communications, leading to real-time pricing -- a hallmark of the advances the smart grid will allow.
Building IQ's Zimmerman says his company is preparing for the smart-grid build-out by hiring more software developers and sales people in the United States. He believes the automation of building energy control will take off once people understand how much human error software can eliminate.
"Nearly 20% of all energy use in this country comes from commercial buildings," Zimmerman says. "We need to be more conscious about what we're using, and our software helps building managers do that. We're gearing up to take advantage of that market as it continues to grow."
Outward Focus
Jesse Berst, chief analyst for SmartGridNews.com, wrote an article discussing the future of the smart grid. He says all of the focus on metering thus far has ignored the market where the real money exists: on the supply side.
"The area where there will be the growth will be on the sensors and devices that help utilities deliver electricity more effectively," Berst says. "There will be sensors everywhere, from distributor generation throughout the entire grid."
Tony Paine, president of Kepware Technologies Inc., which is focused on communications for automation, including the power management industry, says his company is focused on helping develop standards for two-way communications devices. He says he believes such a focus is instrumental in bringing the smart grid from fantasy to reality.
"We believe the smart grid will really take off once there are standards for all aspects of the grid," Paine says. "We want to be involved in the standards-making process so there are no surprises. That's how we plan to shape our part of the grid in the future."
The standards are currently being put together by the various subcommittees of the National Institute of Standards and Technology, of which Paine is a member. Though no standards have yet been formally agreed upon, they are working their way toward approval, Paine says.
The key to having a sound smart grid in the future will be building a strong foundation, especially on the utility side of the equation, says Gary Rackliffe, vice president of smart grids for ABB. His company is gearing up for the smart-grid market by creating systems for utility companies to manage their hard assets, including transformers and substations.
"There has to be a way to take all of the information utilities are getting from meters and the like and translate it into useable information," Rackliffe says. "We see a shift from a focus on meters to distribution grid management, and that's the space where we plan on being a part."
Jeremy Eaton, vice president of Honeywell Energy Solutions, says his company is focused on putting together a suite of products that will help utilities be more load responsive. "Nothing on the demand side has to change for our technology to be effective," Eaton says. "We're the head-in communications software that allows various systems to talk to the buildings and get real-time information."
Honeywell is embedding communications devices into its thermostats and other utility-grade equipment. "We want our utility customers to have precise control over the loads they're carrying," Eaton says.
Some companies are even producing monitors for the transformers themselves. Vivek Joshi, president of LumaSense Technologies Inc., a Santa Clara, Calif.-based manufacturer of sensors for transformers and other transmission-side technology, says his company will have an advantage over others in the realm of dissolved gas sensors. Those sensors will allow utilities to monitor the performance of their transformers. "The market for these sensors on existing transformers is growing exponentially both domestically and overseas," Joshi says. "Our attention is on asset optimization for people around the world. That's where our company sees the largest opportunities for growth."
As the focus for the smart grid continues shifting, many companies are turning their attention to building the utility infrastructure that will be needed to make the smart grid a reality. "We're in a transition," says Honeywell's Eaton. "Just building the consumer infrastructure doesn't solve the problem, and if we're not careful, there will be a backlash against the smart grid if the suppliers can't do what consumers expect them to do. We can't allow that to happen because there's too much at stake.
"If we do it correctly, we can be the leaders of this worldwide revolution," he adds. "But we need to start thinking more seriously about it now if that's going to happen."
