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Utilities worldwide spent $13.9 billion in 2012 - up 7% from the previous year - on smart grid technologies such as advanced metering and fault management, according a new report from Bloomberg New Energy Finance (BNEF).

Roughly half of the total - $7.1 billion - was spent on smart metering and related infrastructure and services. The next-biggest category was distribution automation, followed by integrated demonstration projects in areas such as demand response, home energy management and smart electric vehicle charging, the report says.

The largest regional market for smart grid technologies and services remains the U.S., where utilities spent $4.3 billion in 2012, down from $5.1 billion in 2011. However, the report notes that China is closing the gap, last year raising its investment from $2.8 billion to $3.2 billion, largely on the back of major smart metering procurement by the national State Grid company. BNEF expects China to overtake the U.S. as the largest smart grid market in 2013, as stimulus-funded projects in the U.S. conclude and Chinese investment continues to grow. Asia, as a whole, grew its investment to $5.6 billion in 2012, with new digital energy initiatives getting under way in Japan, India, Korea and various Southeast Asian nations, the report adds.

Smart grid spending in Europe was a relatively modest $1.4 billion, up from $1.1 billion in 2011, as progress on the European smart metering directive remains mixed at the member state level. However, the report says investments are expected to pick up rapidly after 2014 as a number of countries such as the U.K. and France begin major deployments, and investments in smarter distribution networks also accelerate.

Latin America remains a nascent market for smart grid technology, though regulatory progress has been made in Brazil in the last year. Just $400 million was spent in the region in 2012, but BNEF expects it to grow as national grid modernization and metering programs gain pace.

The report says global smart grid spending will reach $25.2 billion by 2018, corresponding to a compound annual growth rate of 10.4%. This represents a slight downward adjustment on previous forecasts, due to delays in the rollout of existing smart metering and smart grid programs in a number of regions, the report adds.

Albert Cheung, practice head for energy smart technologies at BNEF, says that growth in the smart grid industry remains strong.

“Asia and Europe will be responsible for the greatest spending increases between 2013 and 2018,” says Cheung. “Utilities, policymakers and regulators are increasingly aware of the economic, environmental and reliability benefits of smart grid technologies. These enable consumers to make better-informed choices about how they use energy. They also improve the reliability of the grid and allow it to integrate larger amounts of intermittent and distributed renewable power.”

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