What the Smart Grid Needs in 2011

2010 was a year of ups and downs for the smart grid industry. While the sector had one of the hottest acquisition records out of the greentech world (OK, that’s not saying much), most of the startups that were bought seemed to have gone for a small to modest price tag. While the stimulus funds funneled billions into smart grid deployments, some of the early smart meter installations faced a serious consumer backlash in 2010, which was bewildering to utilities like PG&E.

So, what does the smart grid sector need to hit a home run in 2011? Here are my thoughts:

1. Much more investment in consumer outreach. We’ve touched on this subject all year, but when end-of-the-year research finds that “79 percent of Americans claim to know little or nothing about the smart grid, while 76 percent lack knowledge or understanding of smart meters,” the problem is still clearly looming. The smart grid doesn’t necessarily need active consumer involvement, but as the case of consumer anger over PG&E’s smart meter installations showed, consumers can end up being a major barrier to getting smart meters installed.

Consumer advocacy groups, the media, local politicians and businesses are quick to jump on — and exploit — any apparent conflict. Just last month, the CPUC finally denied a petition from the city of San Francisco to halt PG&E’s smart meter deployment. This problem isn’t going away, and consumer outreach around smart meters needs serious investment in 2011.

2. Silver Spring Networks IPO. Smart grid software startups appeared to be one of the most heavily-acquired types of companies in the greentech sector in 2010, but the exits weren’t big enough to get very excited about. The smart grid industry needs a major exit to show startups, Wall Street, and the greater tech industry that the smart grid is a place to build companies and create innovation. That could be delivered by Silver Spring Networks’ IPO, which the industry thought was coming in 2010. Is 2011 the year for the smart grid network pioneers? The sector is hoping so, and probably so are Silver Spring Networks’ investors, like Foundation, who bet on the company big back in the day.

3. Cisco gets more aggressive. In terms of the smart grid, Cisco (s CSCO), has maintained a sort of schizophrenic posture. The networking giant has made some large announcements in 2010 (buying Arch Rock, and working with smart meter makers like Itron (s ITRI)), but how aggressive it will be in the future is still unclear. Will 2011 be the year Cisco reveals more competitive product strategies for smart grid networking? The more competition in the marketplace, the better for the industry. Cisco has moved far enough into the industry; it needs to deliver something.

4. Open source smart grid. While NIST and standards bodies have called for open standards for the smart grid, an open-source smart grid is rather different. But one open-source smart grid standard made real headway in 2010: Open ADR, the Berkeley Labs open-source system for automating the way utilities do demand response. It’s already being used to control some 70 MW of capacity for big industrial and commercial customers of California‚Äôs biggest utilities, and in 2010, Honeywell (s hon) bought Akuacom, maker of servers that use OpenADR.

The use of the standard is proof that open source can thrive in certain niches of any IT environment, despite this one being dominated by closed utility systems. Will more smart grid pieces get the open-source treatment in 2011?

5. Stimulus funds turn into infrastructure. The smart grid stimulus funds that were announced and deployed in 2010 are finally turning into construction jobs and hardware installations. There are a good $4 billion in smart meter projects in the pipeline from these funds, so expect more than just the California utilities to start putting feet on the street getting these things installed. Getting these smart grid projects under construction will be crucial to keeping the industry moving in the face of the recession and the consumer backlash.

6. Home energy management innovation. There have been a lot of startups that have tried to tackle the home energy management space in 2010, whether that’s using energy dashboards, automated systems, or smart plugs. But consumers just don’t seem to be too interested in most of these methods. What will it take to stimulate consumer interest in this space? I don’t know, but let’s get some more innovation in here and figure it out.

7. OPower gets acquired. Energy management and billing company OPower has been another of 2010’s smart grid success stories. The company has been growing rapidly, ramping up its revenues and scoring utility deals. A high-priced exit could go to a variety of players: a smart grid networking firm like Cisco or Silver Spring Networks, a power gear company like GE (s GE) or ABB, or a smart meter company like Itron (s ITRI). Who will it be?

8. Smart Algorithms are key. The hardware — from smart meters, to distribution automation equipment, to transmission lines — is being deployed and there’s only so much innovation that can happen in the gear itself. We need more innovation in the algorithms and software to deliver services and applications for utilities, consumers and third-party vendors.

9. Here comes weather data. More interest in sensing and forecasting weather data will be an important piece of the puzzle for utilities and startups power management systems. Utilities will increasingly turn to smarter weather forecasting systems, and startups will continue to weave weather data into their Internet-based demand response applications. In the power grid space, I think weather data is the next platform, like location-based data.

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Image courtesy of victoriaemeredith.