GLOBE-Net, February 12, 2013 – Pike Research has published a free access White Paper that outlines key trends affecting the development of Smart Energy industries worldwide, the specific market impacts of these trends in 2013, and the longer-term impact of these emerging developments.
It notes that the Smart Energy paradigm is fast evolving from niche markets into a standardized part of the global energy portfolio. Oil majors, national governments, and technology developers have all reached the consensus that a more diversified energy mix is critical to sustainable economic growth in the future.
As a result of this development, combined with the almost inexorable shift toward an electron-based economy, a range of new energy sources and advanced energy technologies has entered the market and started to post healthy revenue.
This white paper identifies five emerging metratrends that will have an increasing impact in 2013 and beyond:
- Energy is becoming increasingly democratized
- The role of government innovation funds is changing
- Technologies are converging
- The Southern African Power Pool is becoming the new BRIC
- The role of utilities is changing
Pike Research’s observations on distributed generation are worth noting as they play a key part of the evolving smart energy sector. In the same fashion that the Internet has produced a democratization of information and knowledge, the availability of pico power producing technology, such as solar panels, small wind turbines, and residential combined heat and power (resCHP) systems, enables people to produce, and sell if desired, their own power.
With a basket of technology and size options available, homeowners worldwide are increasingly able to produce power and sell power – from tens of watts up to a few kilowatts. They are essentially transforming from passive consumers to active pico power plant producers.
Changing Role of Governments
Also of note are observations about the changing role of government innovation funds. Notes the White Paper, in the Western world, the role of the private equity markets has traditionally been to shoulder innovation-based risk. The assumption has been that for every certain amount of investment bets, a number of these would pay with large dollar returns.
In this context, the role of government has been to promote innovation in the broadest sense and support research and development (R&D)-based organizations with funding in somewhat general program streams.
What is emerging with respect to government innovation funds is a shift away from funding specific tailored R&D (or projects) to groups of companies. The funding comes with the strict caveat that it should be focused on moving the companies through the innovation chain. This is very different from providing funding for basic R&D research simply to reach point A. In Canada, SDTC funding programs tend to follow this model.
Pike Research forecasts that gaps left by private equity markets will continue to be filled by government-backed innovation funds in 2013 that are able to shoulder higher levels of risk at an earlier stage in the innovation process. Such funding programs are also able to focus on the societal good that some technologies could bring, rather than the potential short-term gain.
Utilities are Changing
The Pike White Paper also notes that the role of utilities is changing. Traditionally, it notes, electric utilities control two types of assets: power generation and grid control. Electricity production from coal, natural gas, nuclear, wind, solar, and other sources fall into the power generation category. Grid control is composed of transmission and distribution lines, transformers, voltage regulators, substations, and other associated equipment. Electric utilities tend to create natural monopolies because of economies of scale.
However, these monopolies are eroding, and new technologies and business models are poised to take advantage. When the emergence of independent power producers (IPPs), energy service companies (ESCOs), and cooperative energy companies is combined with the growth in feed-in-tariffs for individuals, utilities are (in some cases) transformed from being the central producer, distributor, and controller to being the purchaser and aggregator of power.
Notes the White paper, the electricity sector is currently at a junction where utilities will have to develop a strategy for ensuring stability of the grid, continued revenue, and the continued ability to serve their customer base.
Microgrids present an interesting situation for centralized utilities. On the one hand, they are dismantling the monopoly on which utilities have thrived for more than a half century. On the other hand, microgrids present a brand new type of flexibility to the central grid.
Since microgrids can island to reduce load, they can be treated as demand response (DR) resources in times of grid stress. Furthermore, because they have their own generation, they can divert some of their internal distributed energy resources (DER) to the central grid.
It is likely that electric utilities in North America and Europe will have much to learn from the utilities that mature in the developing world. In regions currently lacking a central grid, utilities will come to represent flexible and robust machines, instead of the slow-moving giants of the developed world.
Ultimately, the system that grants individuals and companies the most stable and least expensive source of electricity will lead the market. This model will likely come from a fresh perspective on how to generate and distribute the electricity that is currently evolving in the developing world.
The analysis and conclusions in the White Paper are drawn from the firm’s ongoing Smart Energy research coverage, with forecasts included for key market sectors.