Using GridPoint as an example, Martin LaMonica of CNET examines the hardships some smart-grid startup companies are experiencing as utilities take a discriminating approach to expenditures on technology upgrades.
Even though the general consensus holds that the smart grid eventually will fulfill its commercial promise — most of it, anyway — many market analysts and startup investors now concede that they were overly optimistic regarding their industry forecasts and commercial expectations.
Like a pop star trying to appeal to a fickle audience, GridPoint has reinvented itself on a number of occasions, with its transformations perhaps prompted as much by anxious investors as by customer demand. Depending on one’s perspective, GridPoint is a market visionary seeking to provide comprehensive grid-management software or an increasingly desperate company firing shotgun blasts in all directions.
As often is the case, however, it’s not that simple. In nascent markets, such as the smart-grid space, startup vendors often recalibrate their strategic plans as expectations meet reality. It isn’t unusual for companies to go through several metamorphoses before finding the right path to prosperity — or getting irredeemably lost in the wilderness (where there are no paying customers). It remains to be seen how it will end for GridPoint, but the company is leaving no stone unturned its quest for viability.
GridPoint has struggled as a purveyor of residential energy-management software, partly because consumers remain unconvinced they need such a product and partly because utilities are ambivalent about acting as a sales channel for such products. GridPoint also has tried, with varying degrees of success, to sell grid-management software, including vehicle-to-grid (V2G) solutions, directly to utilities. Now, the company believes it has worked the market oracle by offering energy-management software to commercial, industrial, and government customers, obviating utilities in the process.
There is an identifiable, well-contested market for demand-response software in the commercial and industrial sectors, but GridPoint’s play is a bit different. Through its acquisitions of Standard Renewable Energy and ADM Micro, GridPoint has put together a relatively comprehensive offering for businesses and government organizations pursuing “optimized energy consumption” — comprising reduced costs, longer equipment life cycles, and attainment of corporate-sustainability goals — as well as a greater integration of renewable energy (and, thus, lower emissions) into their consumption profile.
It’s true that organizations can derive efficiency gains and cost savings these sorts of solutions, but customers tend to be keener on adoption if they have a self-appointed or externally enforced “green mandate.” For that reason, large departments and agencies at governments of various levels, even in these straitened times, might be the low-hanging fruit for GridPoint’s latest near-term revenue focus.
As for what LaMonica’s interlocutors, including GridPoint, tell us about the state of the rest of the smart-grid space, I agree and disagree with some of their salient observations. Yes, I agree that it’s exceedingly difficult at this juncture to sell home-energy management solutions to consumers. Most consumers aren’t fully cognizant of the smart grid, and many whose homes have been equipped with smart meters aren’t much interested in the new devices. They typically don’t notice the smart meters until time-of-use (ToU) billing is activated, at which point they are as likely to react with indignation as with bemused curiosity.
It’s not clear to me that utilities know how to sell residential energy-managmeent systems, nor is it obvious that they want to sell them. At the same time, utilities are equally concerned, perhaps for good reason, about allowing third-party vendors, such as Google and Microsoft, to circumvent them and go directly to consumers with home-energy management offerings.
Another challenge, of course, is proving to consumers that the time and money they’ll spend on such systems will be rewarded with a compelling ROI, whether measured monetarily or in environmental gratification. Utilities haven’t worked it out, and neither — as far as I can see — have vendors of such products. For their part, regulators and public-utility commissions (PUCs) seem undecided about how to proceed.
So, yes, the smart-meter-connected consumer remains a tough nut to crack. Interests haven’t yet aligned to bring the consumer the type of value proposition that will persuade him or her to become an active market agent.
But, contrary to what the article seems to suggest, utilities are spending on smart-grid upgrades to their electricity generation, transmission, distribution, and substation infrastructure. Vendors are making money selling products and services to utilities in those areas. GridPoint might have missed that particular target, but others are hitting it. The spending occurs in phases — not all at once, and not in a huge wave — but it is proceeding in measurable increments that continue to grow.
The smart grid is an expansive, sprawling, heterogeneous mosaic of functions, products, technologies, interdependencies, and ecosystems. Depending on one’s particular vantage point, it will look different. What’s more, not all smart grids, in all parts of the world, are being created equally. Some utilities are ahead of others, and some have different priorities based on economic, environmental, financial, geographical, and policy considerations.
For vendors, as GridPoint will attest, the challenge is in determining who in the smart-grid constellation is wiling to spend now on urgent near-term priorities as well as on long-term strategic initiatives. For some vendors, that will mean reaching outside utilities, while others have found ready markets for their products and services inside utilities.