sgt 09 executive summary

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Jevan FoxResearch Analyst

Bob GohnSenior Analyst

Clint WheelockManaging Director

EXECUTIVE SUMMARY:Smart Grid TechnologiesNetworking and Communications, Energy Management,Grid Automation, and Advanced Metering Infrastructure

NOTE: This document is a free excerpt of a larger research report.If you are interested in purchasing the full report, please contactPike Research at [email protected].

Published 4Q 2009


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Smart Grid Technologies

2009 Pike Research LLC.All Rights Reserved. This publication may be used only as expressly permitted by license from Pike Research LLC and may not otherwise be accessed or used, without theexpress written permission of Pike Research LLC.

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Section 1

EXECUTIVE SUMMARY

The worldwide electrical grid is perhaps the greatest technical innovation of the 20thcentury, delivering the life blood for technical advances in computing and communicationsthat have occurred in recent decades. However, the days of taking the grid for granted arecoming to a close, as economic, technical, environmental, and political challenges call forfundamental changes in how electricity is generated, distributed, and used.

The key market issues driving change in the electric grid can be placed into fourcategories:

Improved reliability and security, as societys dependence on electricity has long passedthe critical mark;

Reducing waste incurred by operating inefficiencies, as costs and consumption increase;

Responding to the growing imbalances between worldwide supply and demand in powergeneration and distribution capacity, generation fuels, and the associated price volatility;

Reducing the overall electrical systems impact on climate change, while meeting thechallenge of increased demand as other infrastructures, most notably transportation, leanmore heavily on electricity as the energy source of choice.

Ironically, the electrical grid itself has not yet taken full advantage of the integratedintelligence of the computing and communications technologies that it enables. This is anenormous technical and economic gap, but also represents tremendous opportunity totransform the current infrastructure into a smart grid that can deliver more efficiency andcapacity using the existing system. The challenge is implementing such a large scaletransformation in an evolutionary manner by leveraging a wide range of new technologies,

which is analogous to switching engines on an airplane in mid-flight.

No doubt, barriers to this transformation exist, and go well beyond pure technical andeconomic issues including the lack of a common vision and/or standards, outdated andfragmented business and regulatory models, and the lack of awareness (and often trust) ofthe consuming public. However, government and industry bodies are coming together withnewfound urgency spurred in some regions by copious amounts of economic stimulusfunds to develop and articulate architectural frameworks and standards.

As so often happens, the term smart grid has come to mean many different things to thevarious constituencies involved. Pike Research has found it useful to consider the smartgrid in three key dimensions:

Functional characteristics: includes end-to-end integrated communications

infrastructure, providing real-time visibility to operators and users; integration ofdistributed, renewable generation resources; consumer-level energy managementenablement; and support for electric vehicles (EVs).

Component technologies: includes smart meters; application of existing and new widearea and home-based networking; new distributed sensors; a variety of demandresponse (DR) systems; automation of utility transmission, distribution, and substationsystems; and vehicle-to-grid (V2G) technologies.


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Application use cases: examples include consumer empowerment and incentivesthrough real-time information, time-based pricing, and utility-based demand controls; netmetering for consumer-based renewable (wind, solar) generation; utility operatingefficiency and fault management improvements; and support for home and mobile plug-inEVs.

An important goal of the smart grid is to enable informed choices by consumers regardingelectricity use. Such choices mean the economic realities of peak vs. off-peak generationcosts (for example) can be more accurately understood by the consumer. Pike Researchhas studied and surveyed consumers attitudes toward the technologies, services, andproviders associated with enabling these choices (and providing incentives for specificbehaviors). Our surveys have found that consumers willingness to participate in managingtheir energy use is quite high, within certain constraints, which is good news for utilities andpolicy makers.

The technologies included as part of the smart grid, which ultimately are included in PikeResearchs forecast, are wide ranging. The heart of the smart grid is the communicationstechnology that is required to link everything from high-voltage transmission systems andutility control centers to a consumers individual appliances. Existing industry-specific (and

often proprietary) communications silos need to be linked within a common, consistent,and flexible communications architecture. A wide range of different wired and wireless,private and public, general and purpose-built, and existing and new technologies will makeup this infrastructure. While integrated communications will make the grid smarter, it canalso make it more vulnerable to cyber attacks, unless the proper security technologies areincluded. Robust standards activities are underway to assure this new communicationsinfrastructure will meet the functional and security needs.

With the advent of a robust grid communications infrastructure, additional intelligence canbe deployed throughout the grid. New transmission and distribution (T&D) technologiesaim to reduce the significant power lost due to distribution line and equipmentinefficiencies, and sub-optimal utilization of existing resources. High-voltage transmissionlines, enabled by new materials and voltage control technologies, promise to reduce line

losses, which become more critical as renewable generation plants are often far away fromconsuming population centers. New distribution automation (DA) technologies thatdynamically control local voltage levels can offer significant power consumption reductions,while providing improved power quality to consumers and faster outage detection,correction, and prevention. Smart meters are the fundamental building block for providingconsumers the information they need to make productive choices.

The companies providing products and services for the smart grid are as wide and diverseas the technologies and applications involved and include traditional industrial powerequipment suppliers, existing networking and telecommunications companies, existing andnew consumer electronics players, large and small software and IT systems houses, andthe utilities themselves. In many ways, the smart grid represents the melding of traditionalindustrial grid companies, communications equipment and services firms, and IT hardware,software, and services companies. The result will be no less transformative than theintegration of the voice, data, and video communications industries that rocked theprevious decade.

Pike Research forecasts that smart grid infrastructure, broken out into advanced metering,DA, substation automation (SA), transmission upgrades, and EV systems, represents alarge market opportunity, with worldwide revenues growing from approximately $10 billionin 2009, peaking at $35 billion in 2013. While much of the market attention has been onmetering infrastructure, transmission upgrades and DA systems actually represent the


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largest opportunities worldwide.

Chart 1.1 Smart Grid Revenue by Application, World Markets: 2008-2015

(Source: Pike Research)

The implications of this market growth will be significant, but not without risks. Thetransformation, and ultimately the success, of the smart grid is dependent on consumerbehaviors, government policies, financial stability of utilities and energy suppliers,cooperation between loosely linked industries, and the underlying technologies. But, aselectricity is the life blood of our modern world, the forces pushing for ultimate success arestrong.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

2008 2009 2010 2011 2012 2013 2014 2015

Advanced MeteringInfrastructure (AMI)

Electric VehicleManagement Systems

Distribution Automation

Substation Automation

Transmission Upgrades

(Millions)


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Section 9

TABLE OF CONTENTSSection 1 ...................................................................................................................................................... 1Executive Summary .................................................................................................................................... 1Section 2 ...................................................................................................................................................... 4Market Issues .............................................................................................................................................. 4

2.1 Introduction and Background ........................................................................................................ 42.2 Market Drivers ............................................................................................................................... 5

2.2.1 Electricity Reliability and Security ............................................................................................ 52.2.2 Operating Cost Reductions ..................................................................................................... 62.2.3 Electricity Supply Demand Gaps .......................................................................................... 62.2.4 Responding to Climate Change .............................................................................................. 7

2.3 Barriers to Smart Grid Deployment ............................................................................................... 72.4 American Recovery and Reinvestment Act .................................................................................. 72.5 Smart Grid Definition ..................................................................................................................... 8

2.5.1 Functional Characteristics of the Smart Grid .......................................................................... 82.5.2 Inventory of Smart Grid Technologies ..................................................................................... 9

2.5.2.1 Advanced Metering Infrastructure/Smart Meters ............................................................ 92.5.2.2 Wide Area Network Communications Technologies ...................................................... 92.5.2.3 Home Area Network Technologies ................................................................................. 92.5.2.4 Sensor Networking Technologies ................................................................................. 102.5.2.5 Demand Response Systems ........................................................................................ 102.5.2.6 Distribution Automation Systems .................................................................................. 102.5.2.7 Substation Automation Systems ................................................................................... 102.5.2.8 Advanced Transmission Systems ................................................................................ 112.5.2.9 Energy Storage ............................................................................................................. 112.5.2.10 Vehicle-to-Grid Charging Infrastructure for Plug-in Hybrid Electric Vehicles ............... 11

2.5.3 Key Applications for Smart Grid Technologies ...................................................................... 112.5.3.1 Customer Monitoring and Control of Energy Usage ..................................................... 112.5.3.2 Time-of-Use Pricing ...................................................................................................... 112.5.3.3 Price Signaling to Customers ....................................................................................... 122.5.3.4 Peak Shaving via Remote Control of Customer Power Consumption ......................... 122.5.3.5 Net Metering for Solar and Wind Power ....................................................................... 132.5.3.6 Utility Grid Outage and Fault Management .................................................................. 132.5.3.7 Utility Operating Efficiency Improvements .................................................................... 142.5.3.8 Use of Plug-in Hybrid Electric Vehicles ........................................................................ 142.5.3.9 Mobile Workforce Management for Utility Technicians ................................................ 14

Section 3 .................................................................................................................................................... 15Consumer Attitudes .................................................................................................................................. 15

3.1 Introduction and Overview .......................................................................................................... 153.2 Survey Methodology ................................................................................................................... 153.3

Energy Information Displays ....................................................................................................... 15

3.3.1 Market Overview.................................................................................................................... 153.3.2 Consumer Interest in Energy Information Displays ............................................................... 163.3.3 EID Interest among Demographic and Behavioral Groups ................................................... 173.3.4 Energy Information User Profiles .......................................................................................... 193.3.5 Information Display Type Preferences .................................................................................. 213.3.6 EID Payment Preferences ..................................................................................................... 223.3.7 Energy Management Service Provider Preferences ............................................................. 23


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3.4 Demand Response ..................................................................................................................... 243.4.1 Market Overview.................................................................................................................... 243.4.2 Consumer Interest in Demand Response ............................................................................. 243.4.3 Demand Response Interest among Demographic and Behavioral Groups .......................... 253.4.4 Acceptable Electric Bill Savings ............................................................................................ 273.4.5 Reasons for Lack of Interest in Demand Response.............................................................. 283.5 Consumer Survey Conclusions ................................................................................................... 293.5.1 Energy Information Displays Conclusions ............................................................................. 293.5.2 Demand Response Plans Conclusions ................................................................................. 29

Section 4 .................................................................................................................................................... 30Technology Issues .................................................................................................................................... 30

4.1 Role of Communication Networks ............................................................................................... 304.2 Smart Grid Networking Technologies ......................................................................................... 31

4.2.1 Wide Area and Neighborhood Area Networking Technologies ............................................. 334.2.1.1 Leased Lines (TDM/SONET) ........................................................................................ 364.2.1.2 Broadband over Power Lines ....................................................................................... 364.2.1.3 Narrowband over Power Lines ..................................................................................... 364.2.1.4 Cellular Networks .......................................................................................................... 374.2.1.5 WiMAX .......................................................................................................................... 384.2.1.6 Metro Wi-Fi ................................................................................................................... 384.2.1.7 RF Mesh ....................................................................................................................... 39

4.2.2 Home Area Networking Technologies ................................................................................... 404.2.3 RF Home Area Networks ...................................................................................................... 40

4.2.3.1 ZigBee........................................................................................................................... 414.2.3.1.1. ZigBee Smart Energy Profile ................................................................................... 424.2.3.1.2. ZigBee Evolution ...................................................................................................... 42

4.2.3.2 Other RF HAN Technologies ........................................................................................ 424.2.4 Power Line Carrier ................................................................................................................ 43

4.2.4.1 HomePlug ..................................................................................................................... 434.2.4.2 HomeGrid/ITU G.hn ...................................................................................................... 44

4.2.5 Standards: IP vs. Proprietary Technologies .......................................................................... 444.2.6 Security .................................................................................................................................. 44

4.2.6.1 Inventory of Major Cyber Security Risks ...................................................................... 454.2.7 Smart Grid Interoperability Standards ................................................................................... 46

4.3 Transmission and Distribution Efficiency Technologies .............................................................. 474.4 Advanced Electrical Transmission Technologies ........................................................................ 474.5 Distribution Automation ............................................................................................................... 484.6 Substation Automation ................................................................................................................ 494.7 Smart Meters ............................................................................................................................... 494.8 Electric Vehicle Charging Systems ............................................................................................. 50

Section 5 .................................................................................................................................................... 51Key Industry Players ................................................................................................................................. 51

5.1 Smart Grid Ecosystem ................................................................................................................ 515.2 Electric Utilities ............................................................................................................................ 52

5.2.1 American Electric Power ....................................................................................................... 525.2.2 Austin Energy ........................................................................................................................ 535.2.3 CenterPoint Energy ............................................................................................................... 545.2.4 Duke Energy .......................................................................................................................... 545.2.5 National Grid USA ................................................................................................................. 545.2.6 Pacific Gas & Electric Company ............................................................................................ 555.2.7 San Diego Gas & Electric ...................................................................................................... 555.2.8 Southern California Edison .................................................................................................... 555.2.9 Xcel Energy ........................................................................................................................... 56


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5.3 Grid Infrastructure Vendors ......................................................................................................... 565.3.1 ABB Group ............................................................................................................................ 565.3.2 American Superconductor ..................................................................................................... 565.3.3 Cooper Power Systems ......................................................................................................... 575.3.4 GE Energy ............................................................................................................................. 575.3.5 Schweitzer Engineering Laboratories ................................................................................... 575.3.6 Siemens Energy .................................................................................................................... 57

5.4 Smart Meter Vendors .................................................................................................................. 585.4.1 Echelon Corporation .............................................................................................................. 585.4.2 Elster Group .......................................................................................................................... 595.4.3 Holley Metering Ltd ............................................................................................................... 595.4.4 Iskraemeco ............................................................................................................................ 595.4.5 Itron ....................................................................................................................................... 605.4.6 Landis+Gyr ............................................................................................................................ 615.4.7 PRI Ltd ................................................................................................................................... 625.4.8 Sensus ................................................................................................................................... 625.4.9 SmartSynch ........................................................................................................................... 63

5.5 Networking and Software & Systems Vendors ........................................................................... 635.5.1 AT&T ..................................................................................................................................... 635.5.2 Aclara (ESCO Technologies) ................................................................................................ 645.5.3 Ambient Corporation ............................................................................................................. 655.5.4 Arch Rock Corporation .......................................................................................................... 655.5.5 BPL Global Ltd ...................................................................................................................... 665.5.6 Cisco Systems ....................................................................................................................... 665.5.7 Current Group........................................................................................................................ 675.5.8 Eka Systems .......................................................................................................................... 685.5.9 eMeter ................................................................................................................................... 695.5.10 Grid Net ............................................................................................................................. 695.5.11 Infotility Inc ........................................................................................................................ 695.5.12 Nuri Telecom ..................................................................................................................... 705.5.13 Oracle ................................................................................................................................ 705.5.14 OSIsoft LLC ....................................................................................................................... 705.5.15 Plextek Ltd ........................................................................................................................ 715.5.16 RuggedCom ...................................................................................................................... 715.5.17 Silver Spring Networks ...................................................................................................... 725.5.18 Tantalus Systems Corp ..................................................................................................... 735.5.19 Trilliant Incorporated ......................................................................................................... 735.5.20 Tropos Networks Inc ......................................................................................................... 745.5.21 Ventyx ............................................................................................................................... 74

5.6 Energy Information Displays and Devices .................................................................................. 745.6.1 Agilewaves Inc....................................................................................................................... 745.6.2 Control4 ................................................................................................................................. 755.6.3 Energate Inc .......................................................................................................................... 755.6.4 Google ................................................................................................................................... 765.6.5 Microsoft ................................................................................................................................ 765.6.6 Onzo Ltd ................................................................................................................................ 765.6.7 OpenPeak Inc ........................................................................................................................ 775.6.8 Tendril Networks Inc .............................................................................................................. 77

5.7 Semiconductors and Components .............................................................................................. 775.7.1 Certicom ................................................................................................................................ 775.7.2 Digi International Inc .............................................................................................................. 785.7.3 Ember Corporation ................................................................................................................ 785.7.4 Texas Instruments ................................................................................................................. 78


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5.8 Systems Integrators and Services .............................................................................................. 795.8.1 Accenture .............................................................................................................................. 795.8.2 EnerNex Corporation ............................................................................................................. 795.8.3 EnerNOC Inc ......................................................................................................................... 795.8.4 IBM ........................................................................................................................................ 805.8.5 IBM Venture Capital Group ................................................................................................... 805.8.6 PowerSecure International .................................................................................................... 815.8.7 SAP ....................................................................................................................................... 815.8.8 Sentec ................................................................................................................................... 82

5.9 Industry Associations and Advocacy Groups .............................................................................. 825.9.1 Edison Electric Institute ......................................................................................................... 825.9.2 Electric Power Research Institute ......................................................................................... 825.9.3 Galvin Electricity Initiative ...................................................................................................... 835.9.4 The Demand Response and Smart Grid Coalition ................................................................ 835.9.5 ZigBee Alliance...................................................................................................................... 84

Section 6 .................................................................................................................................................... 85Market Forecasts ....................................................................................................................................... 85

6.1 Worldwide Smart Grid Market ..................................................................................................... 856.2 North American Smart Grid Market ............................................................................................. 906.2.1 United States ......................................................................................................................... 90

6.2.2 Canada .................................................................................................................................. 916.3 European Smart Grid Market ...................................................................................................... 926.4 Latin America, Asia-Pacific, and Middle East/Africa Smart Grid Markets ................................... 93

Section 7 .................................................................................................................................................... 96Company Directory ................................................................................................................................... 96Section 8 .................................................................................................................................................. 100Acronym and Abbreviation List ............................................................................................................. 100Section 9 .................................................................................................................................................. 105Table of Contents .................................................................................................................................... 105Section 10 ................................................................................................................................................ 109Table of Charts and Figures................................................................................................................... 109Section 11 ................................................................................................................................................ 110Scope of Study ........................................................................................................................................ 110Sources and Methodology ..................................................................................................................... 110Notes ........................................................................................................................................................ 111


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Section 10

TABLE OF CHARTS AND FIGURESChart 1.1 Smart Grid Revenue by Application, World Markets: 2008-2015 .......................................... 3Chart 3.1 Interest in Energy Information Displays: All Respondents ................................................... 16Chart 3.2 Interest in Energy Information Displays by Respondent Profiles and Demographics ........... 18Chart 3.3 Energy Information User Profiles among EID Intenders ....................................................... 20Chart 3.4 Information Display Type Preferences among EID Intenders ............................................... 21Chart 3.5 Payment Preferences among EID Intenders ......................................................................... 22Chart 3.6 Energy Management Service Provider Preferences among EID Intenders .......................... 23Chart 3.7 Interest in DR Service Plans: All Respondents .................................................................... 24Chart 3.8 Interest in Demand Response Plans by Respondent Profiles and Demographics ............... 26Chart 3.9 Lowest Acceptable Electric Bill Savings among Demand Response Intenders ................... 27Chart 3.10 Reasons for Lack of Interest in Demand Response.............................................................. 28Chart 6.1 Smart Grid Revenue by Region, World Markets: 2008-2015 ............................................... 85Chart 6.2 Smart Grid Revenue by Application, World Markets: 2008-2015 ........................................ 87Chart 6.3 Smart Grid Application Revenue Comparisons, World Markets: 2008-2015 ....................... 87Chart 6.4 Cumulative Smart Grid Revenue by Region, World Markets: 2008-2015 ........................... 88Chart 6.5 Cumulative Smart Grid Revenue by Application (by 2015) ................................................... 89Chart 6.6 Smart Grid Revenue by Application, United States: 2008-2015 .......................................... 90Chart 6.7 Smart Grid Revenue by Application, Canada: 2008-2015 ................................................... 91Chart 6.8 Smart Grid Revenue by Application, Europe: 2008-2015 .................................................... 92Chart 6.9 Smart Grid Revenue by Application Category, Latin America: 2008-2015 .......................... 93Chart 6.10 Smart Grid Revenue by Application Category, Asia-Pacific: 2008-2015 ............................. 94Chart 6.11 Smart Grid Revenue by Application Category, Middle East/Africa: 2008-2015 ................... 95Figure 2.1 Real-Time Pricing by State, United States: 2003 ................................................................. 12Figure 2.2 Net Metering by State, United States: 2009 ......................................................................... 13Figure 2.3 Smart Grid Components ........................................................................................................ 14Figure 4.1 EPRI Intelligrid Model ............................................................................................................ 30Figure 4.2 Characteristics of Communication Technologies in Legacy Grids and Smart Grids ............ 31Figure 4.3 Smart Grid Networks ............................................................................................................. 33Figure 4.4 WAN/NAN Technology Comparison Chart ........................................................................... 34Figure 4.5 Applications, Pros and Cons of Various WAN Technologies ................................................ 35Figure 4.6 Metro Wi-Fi Architecture for a Smart Grid Deployment......................................................... 39Figure 4.7 Home Area Networking Diagram........................................................................................... 40Figure 4.8 ZigBee Smart Energy Profile ................................................................................................. 41Figure 4.9 Opportunity for Volt-VAR Control Technologies .................................................................... 49Figure 5.1 Smart Grid Ecosystem .......................................................................................................... 52Figure 6.1 Smart Grid Application Growth Rates ................................................................................... 86


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Section 11

SCOPE OF STUDYPike Research has prepared this report to provide participants in the emerging smart grid market(equipment and hardware vendors, utilities, software companies, installation and service providers, andother system component manufacturers) with a study of the global market potential for smart gridtechnologies including AMI, transmission upgrades, SA, DA, EV management systems, energymanagement systems, and other categories.

The reports purpose is not to provide an exhaustive technical assessment of all of the technologies andindustries that may be related to smart grid deployments, but rather a strategic examination of the smartgrid market focusing on business models, key technology issues, regulatory factors, customer demanddynamics, and the competitive landscape. Pike Research strives to identify and examine new marketsegments to aid readers in the development of their business models. All major global regions areincluded. The forecast period extends through 2015.

SOURCES AND METHODOLOGYPike Researchs industry analysts utilize a variety of research sources in preparing Research Reports.The key component of Pike Researchs analysis is primary research gained from phone and in-personinterviews with industry leaders including executives, engineers, and marketing professionals. Analystsare diligent in ensuring that they speak with representatives from every part of the value chain, includingbut not limited to technology companies, utilities and other service providers, industry associations,government agencies, and the investment community.

Additional analysis includes secondary research conducted by Pike Researchs analysts and the firmsstaff of research assistants. Where applicable, all secondary research sources are appropriately citedwithin this report.

These primary and secondary research sources, combined with the analysts industry expertise, aresynthesized into the qualitative and quantitative analysis presented in Pike Researchs reports. Greatcare is taken in making sure that all analysis is well-supported by facts, but where the facts are unknownand assumptions must be made, analysts document their assumptions and are prepared to explain theirmethodology, both within the body of a report and in direct conversations with clients.

Pike Research is an independent market research firm whose goal is to present an objective, unbiasedview of market opportunities within its coverage areas. The firm is not beholden to any special interestsand is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered bytechnology hype, political agendas, or emotional factors that are inherent in cleantech markets.


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NOTESCAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value Start Year Value)(1/steps) 1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years aregiven, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may begiven as well.

Figures are based on the best estimates available at the time of calculation. Annual revenues,shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressedin year 2009 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding


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Published 4Q 2009

2009 Pike Research LLC1320 Pearl Street, Suite 300

Boulder, CO 80302 USATel: +1 303-997-7609

http://www.pikeresearch.com

This publication is provided by Pike Research LLC (Pike). This publication may be used only asexpressly permitted by license from Pike and may not otherwise be reproduced, recorded, photocopied,distributed, displayed, modified, extracted, accessed or used without the express written permission of

Pike. Notwithstanding the foregoing, Pike makes no claim to any Government data and other dataobtained from public sources found in this publication (whether or not the owners of such data are notedin this publication). If you do not have a license from Pike covering this publication, please refrain fromaccessing or using this publication. Please contact Pike to obtain a license to this publication.

sgt 09 executive summary

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