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Tuesday, January 27, 2009

Smart Grid: Everything You Need to Know

( -- President Obama has called for the installation of 40 million smart meters and 3,000 miles of transmission lines. That means 2009 could be the year that we finally start seeing real attention being paid to “Power Grid 2.0” — basically turning the electrical grid of the 60s and 70s into a modern network that uses microprocessors and software to work efficiently and to connect to renewable energy generation.

A build-out of the smart grid could also be one of the largest creators of wealth in the decade. As smart grid analyst Jesse Berst said recently, the smart grid will “spawn new Googles and Microsofts,” and is “akin to the transcontinental railroad, the phone system, the interstate highway system and the Internet.” Still confused? Here are the key players, the background and the latest innovative technology:

What is smart grid technology?:

As Foundation Capital put it recently in a note on the market: “A true Smart Grid enables multiple applications to operate over a shared, interoperable network, similar in concept to the way the Internet works today.” That means turning the current electrical network that has 14,000 transmission substations, 4,500 large substations for distribution, and 3,000 public and private owners into a network that communicates intelligently and works efficiently.

The new smart grid will utilize wireless sensor networks, software, and computing to enable utilities to see how much and where energy is being consumed, and if there are problems or blackouts in the network. Homeowners will be able to see how much energy they’ve consumed and adjust their consumption habits accordingly. Two-way connected smart meters will be installed in every home — Obama is calling for 40 million, but as of 2006 less than 6 percent of the U.S. population had a smart meter.

Smart meters will pave the way for real-time pricing, where energy is priced at different rates depending on the time of day and much demand there is for the electricity. Utilities can use real-time pricing to better manage the loads on the grid, while home owners can use it to cut their monthly energy bills.

The smart grid will deliver clean power from areas of the country that have an abundance of sun or wind, which is why Obama has called for building out transmission lines. The smart grid will also be able to pull energy from distributed clean power projects, like solar panels and small wind turbines on rooftops, feed it back into the grid and compensate the power generators accordingly.

Ultimately we need smart grid technology because as the population grows the demand for electricity will only increase, but we need to cut our electricity consumption to fight global warming. As Foundation Capital puts it: “The world consumes 14 terawatts of energy every day. In another 50 years, we’re going to need 28 terawatts. Where are we going to find another 14? We would have to turn on a new 1,000-megawatt power plant tomorrow, another the next day, and on and on, one a day for the next 40 years to get another 14 terawatts.”

Key Players:

Smart Meter Firms:

GE (GE): GE makes a variety of hardware and software for smart meters, and the conglomerate has won several large utilities deals for smart meter deployments as of late. Northern California utility PG&E (PCG) is installing 3.3 million GE smart meters in California, and American Electric Power (AEP) plans to install an initial 200,000 smart meters, with an end goal of 5 million users by 2015.

Itron (ITRI): Itron and GE have been battling it out for the large utility deployments. Itron scored a 5.3 million smart meter deployment with Southern California utility Southern California Edison, and is working with Connecticut Light and Power (CL&P), San Diego Gas and Electric, and Tucson Electric Power, among others. The 30-year-old Washington state-based company is also aggressively partnering with innovative startups.

Landis+Gyr: Century-old Landis+Gyr has 5,000 employees and is a forerunner in the advanced meter infrastructure market. The company announced in October that it will provide a portion of the 5 million smart meters set to roll out to PG&E (those that GE isn’t providing). Earlier, it inked a four-year, $360 million contract with Texas utility Oncor, a $10 million deal with Idaho Power, and a $52 million deal with Arizona utility Salt River Power. The company says it has annual sales of more than $1.25 billion in 30 countries worldwide.

Sensus Metering Systems: Raleigh, N.C.-based Sensus announced last month that Hawaiian Electric, which provides electricity for 95 percent of Hawaii’s residents, plans to install Sensus FlexNet smart meters for 430,000 residential and commercial electric customers, subject to approval of the Hawaii Public Utilities Commission. The technology provides automated meter reading, data collection, voltage monitoring, notification of outages and remote control of customer loads.

SmartSynch: One of the smaller innovative startups in the smart meter space, SmartSynch makes smart meters that communicate via IP networks like GPRS and Wi-Fi. The company founded in 1998 says it works with 75 power providers in the U.S. SmartSynch is backed by $80 million from Credit Suisse, Battelle Ventures, Beacon Group, JP Morgan Partners, Nth Power, Siemens Venture Capital and Duke Ventures.

Network Players:

Silver Spring Networks: Billed as the Cisco of the smart grid, Silver Spring Networks, sells IP-based software and hardware to connect utilities and customers across the power grid. Founded in 2002 the company has raised $75 million, led by the green VC folks at Kleiner Perkins Caufield & Byers.

eMeter: The San Mateo, Calif.-based company makes software to help utilities manage the grid connected to smart meters in homes and businesses. It claims 20 million meters under contract and has raised $12.5 million in a round led by German electronics heavyweight Siemens that included Foundation Capital and DBL Investors.

IBM (IBM): The computing giant has developed a variety of software to make the power grid smarter, giving utilities more intelligence on the network. In 2007 IBM created the Intelligent Utility Network Coalition, which includes a group of utilities that are interested in bringing computing to the electricity network.

GridPoint: GridPoint helps utilities balance energy loads through hardware and software on the power grid. The company has raised over $200 million from Goldman Sachs Group (GS), Susquehanna Private Equity Investments, David Gelbaum’s The Quercus Trust, the Altira Group and Standard Renewable Energy Group. It also boasts a long list of advisers, which include R. James Woolsey, former director of the CIA, and Pulitzer Prize-winner Daniel Yergin.

Comverge (COMV): Comverge provides demand response services to utilities and boasts over 500 utility clients and 4.5 million devices installed. The company was one of the first cleantech firms to go public.

EnerNOC (ENOC): EnerNOC also provides demand response services and has created a system whereby industrial and commercial building owners can reduce their energy consumption over a peak-demand time period for compensation.

Greenbox Technologies: The startup was founded by the team that developed Flash technology for the web, and is using its experience to build a dashboard to help energy consumers cut consumption. The company is working with Silver Spring on a pilot with an Oklahoma utility.

Trilliant: The Redwood City-based company founded in 1985 makes hardware and software to allow for time-of-use metering and two-way communication. The company uses open standards and raised $40 million from Mission Point Capital Partners and Zouk Ventures.

Tendril: The Boulder, Colo.-based company makes home energy management software and hardware from smart plugs, to energy displays to software for utilities. The company raised $12 million from RRE Ventures, Vista Ventures, Access Venture Partners, and Appian Ventures.

Positive Energy: The software and research startup develops research reports that utilities can offer to customers to help them reduce their energy consumption and receive more transparent energy bills. Positive Energy recently raised a $14 million round from New Enterprise Associates.


  • Southern California Edison
  • PG&E
  • XCel Energy
  • Austin Energy
  • Sempra
  • Oncor
  • San Diego Gas and Electric

Venture Firms:

  • Nth Power
  • Foundation Capital
  • New Enterprise Associates
  • Kleiner Perkins Caulfield and Byers
  • Siemens venture arm
  • Quercus Trust
  • Battelle Ventures
  • DBL Investors
  • Altira Group
  • Mission Point Capital Partners

What the Smart Grid Needs: Smart grid analyst Jesse Berst has three rules for what the smart grid needs to make it work:

  • 1) Open and interoperable standards, ike the Internet.
  • 2) Dynamic pricing correct pricing models.
  • 3) The right government policies.

How Big Is the Market?:

According to some reports, utilities will need to add an aggregate of nearly 40 gigawatts of clean energy generation by 2030, and to get all that power to customers, a total investment of as much as $2 trillion into transmission and distribution networks will be required. And that’s just the additional clean power — there will be even more investment in the software, hardware, and wireless networks to enable the power grid to intelligently manage all the additional capacity.

Smart meters can cost anywhere from $100 to $300 per meter to install depending on the sophistication of the meter. So, say there’s 40 million smart meters installed, that could costs a minimum of $4 billion.

Historically the investment into smart grid technology has been minimal, but venture capitalists have recently started to pump money into the sector. According to the Cleantech Group, smart grid startups brought in a record $202 million in the third quarter of 2008, which included $120 million for Gridpoint, $40 million for Trilliant, $23 million for BPL Global, and $18.5 million for Eka Systems.

By Katie Fehrenbacher
January 27, 2009: 12:00 AM ET

We know this FAQ hasn’t covered all the firms involved in the smart grid, but if you have particular favorites, please add them in the comment section.