Have you noticed that several major players are breaking out of the smart grid pack seeking to define the business models that make sense—and can make money? Both the timing of these giants and the scalability of their business model strategies will force the smart grid startups to learn their dance steps.
While much of the Federal stimulus spending is focused on smart meter deployment, there is more to smart grid than just digital meters. Now the question is what are we going to do to put them to work?
Like most new waves of investment in R&D cleantech and its smart grid start-ups have focused on inventing sensors, boxes, networks and gadgets to take advantage of smart metering potential but few are sufficient on their own. This sets up a consolidation stage of partnering and flipping these many startups to offer more scalable complete solutions. Cash in hand the process starts all over again on the next big thing or bigger positions in the still seductive cleantech space.
Smart Grid Segments
That is where we are today with many of the early cleantech start ups putting lipstick on their pigs and flipping their companies or doing deals to become part of a winning scalable team. This race to the smart grid future is also diverging as players target each segment of the smart grid value chain:
- The Smart Utility and its aftermarket need for solutions and services to actually deliver on the promises smart grid to satisfy regulators. The focus for utilities is reliability, integrating renewable energy and distributed generation into their system to meet RPS standards and reduce carbon emissions. Utilities in states with decoupled rates structures have high performance metrics to meet before regulators allow earnings sufficient to satisfy investors.
- Clean and Renewable Energy Producers developing projects, selling their output into the regional power markets and depending upon consistent regulation, sufficient prices and access to capital to deliver their contract obligations profitably and go on to the next deal.
- Commercial and Industrial Energy Management segment offering the most potential for sales and services growth to take advantage of demand response, energy efficiency, direct access to clean and renewable energy sources and new smart grid enabled technologies and dynamic pricing with assertive, proactive energy management.
- Home Area Network (HAN) market for end users providing solutions and services to extract the benefits of smart grid and mitigate the expected rising energy bills while feeling like we are doing something good for the environment by reducing our carbon footprint.
- Smart Grid Game Changers include technology and equipment players with the capabilities to shift the focus away from the utility driven smart grid launch toward the consumer-driven smart grid future. More than mischief makers these players seek to redefine the business models in fundamental ways using technology, changes in rules, standards setting processes, and consumer demand to take market share and wallet share from competitors. Much of the consolidation and partnering in the cleantech space is now focused on building these solutions. With such a fragmented, multi-player smart grid market evolving there is a compelling need for consistent standards, interoperability across devices, and software solutions that make integrating all these moving parts seamless. In a choice between fast, good and cheap—choose fast, then good and then try to get the best deal you can.
Smart Grid Enterprise Architecture
There is a compelling need to quickly define the smart grid architecture, equipment standards and the integration requirements of software, hardware and equipment and the services to make them work. While government and industry trade groups debate interoperability and NIST standards some of the biggest enterprise solutions players are not waiting. They are moving ahead to protect their franchises and enhance their product lines to meet the expected need of their utility and corporate clients to integrate smart grid solutions into their existing enterprise systems.
This is the realm of the big software and system integration players. There is a competition among them for solution dominance. You know these firms well:
- Accenture INDE Platform. (System Integration Architecture and Services)The big IT services giant was a key player in the Xcel Energy rollout of Smart Grid City and now seeks to leverage that technology and insight to create a common platform to organize, store, manage, view and analyze data collected from sensors to be connected through those smart meters and fed to the smart utility. Since Accenture clients use all flavors of enterprise software it plans to remain agnostic about vendor choice seeking the wallet share growth from services using its standardized business process approach to integration. Accenture is positioned to straddle the operations technology (OP) required by utilities to make smart grid work and the information technology (IT) every else needs to make sense of that meter data.
- IBM SAFE. (System Integration Architecture and Services) Solution Architecture for Energy & Utilities Framework (SAFE) is a software platform that provides network visibility and control, process automation and business collaboration for solutions across the energy and utility value chain. Big Blue hopes to license its software solutions for optimizing utility performance across the smart grid and sell services to keep it functioning smoothly in real-time. 
- Microsoft SERA. (Microsoft hardware and software) Smart Energy Reference Architecture” for the smart grid ecosystem, SERA is designed to leverage Microsoft hardware and software platforms to serve as the basis for the “integrated utility of the future.” It gives utilities a comfortable set of smart grid solutions that plug and play with the enterprise solutions already in place ubiquitously to protect the base business and grow MS wallet share to meet scalable smart grid needs.  Accenture endorsed SERA in the Microsoft press release referenced.
- Oracle Smart Grid Solution. (Oracle software and hardware) Oracle says its smart grid software unifies data across the Smart Grid network, using its Fusion Middleware to integrate and manage large meter data batch files with Oracle Data Integrator or automate meter and sensor data filtering and front-end processing using Oracle Complex Event Processing. Oracle is also partnering with firms like S&C to add distribution system automation to its offering. The oracle solution is protecting its franchise just as Microsoft is doing by providing standards-based integration with a technology infrastructure that includes Oracle Database, and software for project management and enterprise analytics. It also seeks to leverage its Sun Microsystems hardware to gain traction in the growing needs of players in the smart grid space and not be left behind in the race for the next generation of enterprise software systems. 
No one who has invested blood, sweat and tears in installing an enterprise software system wants to go through that torture and expense again before its time. So these established players have a very high probability of retaining their existing clients and growing wallet share from services to help them get their smart grid act together. Adding features and functionality by partnering with other point solution providers to deliver their software through the enterprise solution makes sense for all and adds ‘stickiness’ to the the platform. But they must not fall behind or they risk losing out to a competitor the next time a system purchase, major overhaul is required, or a merger pits competing systems against each other for the business.
Smart Grid Ecosystem Wildcards
There are several issues and firms I call wildcards that could prove to be game changers in the evolving smart grid ecosystem. They bring the potential for mischief in enabling disruptive technologies to shift the smart grid growth focus from utilities to customers. While they will get plenty of business from the utility segment of the industry they offer solutions that enable the new players to be faster, more nimble and more targeted in building market share and still dance with the giants.
Some of their potential for mischief and growth depends upon events beyond their control such as the introduction of dynamic pricing, expansion of direct access enabling especially commercial and industrial customers to buy energy resources from someone other than they local utility provider, and the pace of the economic recovery. These wildcards include:
Smart Grid Broadband Network communications. The FCC recently released a proposed National Broadband Plan (NBP). The report covers a range of issues and recommendations for the smart grid in Chapter 12, which is titled, Energy and the Environment. Read it here. All of these recommendations and the “promise of the smart grid” you so often hear discussed requires a bigger pipe to carry all that data. So my first candidate for smart grid wildcard is:
- CISCO (CSCO) and the CRS-3 Carrier Routing System which CISCO spent $1.6 billion to create and will sell this super-router for $90,000 per unit to carry 322 terabits of data per second. A terabit is 1 trillion digits, or 1,000,000,000,000. At that speed CISCO boasts the CRS-3 could deliver every movie ever made in 4 minutes; transfer more than 4 billion MP3s in a minute; let everyone in China make a video call at once, send the entire King James Bible in 0.000000014 seconds, transmit the DNA sequence of 56,000 people in one second or deliver 1G to nearly every household in San Francisco. CISCO expects the router to be used by large carriers like AT&T (T) to make your iPhone work faster.
Virtual Power Plants (VPP) is the smart grid name for integrated energy management solutions which combine distributed energy resources like solar rooftops and micro grids with demand response, energy efficiency, energy storage and other solutions to stand together in the market as if they were one “virtual” power plant. Broadband capacity such as the NBP and CISCO super-router opens the doors to many vendors seeking to use smart meter data to deliver meter data management and energy management solutions by aggregating customers to deliver the goods to utilities at the highest price. My candidates for VPP wildcard players include (but the list grows daily):
- Bloom Energy (storage batteries)
- Comverge (energy management/demand response/ Energy Efficiency)
- Control4 (EM/DR/EE)
- EnerNOC (EM/DR/EE)
- Honeywell (EM/DR/EE))
- Lockheed-Martin/Itron (EM/DR/EE)
Mobility (Vehicle2Grid or Grid4Vehicle) Services include the growth business of serving the needs of plug in electric vehicles for recharging and extracting the value of the stored energy in those car batteries to make money from demand response and peaking power. As market penetration for PHEVs grows this segment offers real potential for applications of this constructive but disruptive technology. Some players to watch include:
- Better Place (recharging stations)
- Coulomb (USA) (recharging and DR)
- ZipCar and other Fleet Managers who are VPP wannabes.
The biggest players are not waiting for the rules of the smart grid road to be defined for them. They are leveraging their existing technology and market share to define the rules de facto and let other adapt to fit their solutions.
The startups are busy finding dates or getting married as the cleantech consolidation frenzy continues the quest for more complete solutions and NIST-approved interoperability standards accelerates the process of choosing winners and losers.
Entrepreneurs are busy building the next generation of better mousetraps (or super routers) to redefine the smart grid game and shift the BIG MO from utilities to end users where there are more customers.
This is almost as good as the Sweet Sixteen—and like this year’s tournament likely just as many upsets.