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In a new white paper, Navigant Research has identified 10 key trends that the company says will shape global smart grid investment this year and beyond.

1. Smart Grid Technology Spending Remains Robust.
Smart grid technologies overall represent a large market, and one that is likely to continue growing throughout the decade. Navigant Research forecasts that smart grid technology revenue will reach a cumulative total of $494 billion during the period from 2012 to 2020, with a compound annual growth rate of 10%.

Within transmission upgrades, a cumulative $256 billion - or 51% of all smart grid investment - is forecast to be spent on high-voltage direct-current transmission upgrades. Meanwhile, distribution automation is expected to contribute $78 billion in revenue through the forecast period.

Smart metering, for all its hype, is anticipated to contribute approximately 10% of all smart grid revenue from 2012 to 2020, Navigant adds. While total revenue of $47 billion is nothing to sneeze at, the company sees the smart metering market as fiercely competitive and not the most promising for new market entrants.

2. Smart Meter Shipments Continue To Decline.
Smart meter shipments will continue to decline in North America this year as the end of American Recovery and Reinvestment Act of 2009 (ARRA) stimulus funding takes hold. The ARRA Smart Grid Investment Grant (SGIG) programs required most deployments to be completed by the end of 2012, and Navigant Research says the company’s tracking of deployments indicates most recipients hit those targets or came close.

The year-to-year drop from 2012 to the end of this year is expected to be almost 35%, and Navigant Research is forecasting another difficult year in 2014, when shipments are expected to decline another 3.3% year-to-year. For smart meter vendors, the short-term dismal picture will improve by 2015, when shipments are forecast to rise by 3.3% year-to-year. This increase will be followed by basically flat shipments for several years, with some recovery of growth at the end of the period.

Overall, the global smart meter market is expected to grow at a CAGR of just under 5% between 2010 and 2020.

3. Home Energy Management Gains Momentum.
The market for home energy management (HEM) products and services will gain momentum this year before long-anticipated growth kicks in mid-decade. Navigant says there are several key forces will help drive this growth: time-of-use (TOU) pricing, demand response (DR) programs, an eventual rebound in new home construction, and consumers looking for new ways that new technology can help hold down energy costs.

In addition, non-energy service providers, such as cable and telephone service providers, have entered the market and will help drive awareness and demand for HEM products and services.

Nevertheless, growth potential will be tempered by consumers willing to spend only so much on HEM products, as well as those unsure of the return on investment (ROI) in the face of unsubsidized systems that can cost $200 or more in some cases. Navigant Research expects many utilities to enter the HEM market cautiously.

HEM revenue is forecast to grow from a relatively low base of $93 million in 2011 to more than $2 billion in 2020 at a CAGR of 41%.

4. Demand Response Shifts To A Flexibility Market.
Navigant Research says the DR market is evolving from primarily serving a capacity market with a focus on curtailing electrical demand during peak periods (typically only a handful of hours per year) to continuously balancing supply and demand of power on the grid to participate in a flexibility market.

One of the major drivers is the need for ongoing adjustments to correct small, frequent changes in the power system on a second-by-second basis. Navigant says these adjustments become imperative as more and more utilities incorporate intermittent renewable resources like wind and solar power, which have variable and uncertain outputs, into the grid.

5. Adoption Of Automated Demand Response Picks Up.
Automated DR (ADR) is not a new concept in the DR market, Navigant notes. In the U.S., it has been used by utilities for many decades, especially for their commercial and industrial customers to address the need to stabilize the supply and demand of electric power on the grid. In fact, in many instances, automation has been the preferred approach in order to improve the reliability, predictability, and speed of load curtailment during peak periods.

The U.S. represents the largest ADR market, but other countries are gradually catching on, with pilots launched in Canada, the U.K., France, Israel, Australia, China and Hong Kong. Interest in automation will most likely spread across the globe, especially in countries that are grappling with increasing stress on the grid.

This year, Navigant Research estimates that 41,315 facilities in the world will be enabled for ADR. Because of a very robust CAGR of over 35% for 2012 to 2019, the total number of ADR sites will increase more than fivefold to 226,203 on a global basis by 2019.

6. Utilities Rely More Upon Real-Time Grid Analytics
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In the distribution control center of the future, Navigant says the operator has complete and current situational awareness of tens, hundreds, or thousands of feeders, facilitated by stackable monitors, color-coded visualization, and the capability to quickly zoom in and out of hot spots and alarms.

Like a pilot in the cockpit, the grid operator will rely on a system that utilizes weather forecasts, measures wind speeds and insolation data, and uses a network model peppered with real-time supervisory control and data acquisition (SCADA) points, asset information and geographic information system (GIS) data.

These systems will allow state estimation and simulations supporting decisions in real time at the distribution level. While centralized control and decentralized actuators are automated for optimal fuel economy and high quality of service, the operator can focus on keeping line crew safe and the customers’ lights on. The utility control centers will rely on a distribution management system as a graphical interface and a platform to integrate modular advanced analytics applications. Some pioneering utilities, Navigant Research notes, are already using such systems.

7. Disaster Recovery And Service Restoration Become More Efficient.
In the event of outages, utilities rely on operational systems to notify customers of causes and estimated restoration times. Next-generation outage management systems (OMS) will be integrated with distribution management systems (DMS) to provide additional inputs for visualization and decision support that can be beneficial, particularly when addressing large outages and major events.

Disaster plans are being revised and improved, and utilities are looking to IT/OT integration and increased mobility to assist with outages. Advanced workforce management (WFM) solutions that enable utilities to forecast, schedule, dispatch, and monitor the progress of outage crews have gained increased interest.

In addition, some utilities are reporting that the integration of advanced metering infrastructure (AMI) provides the capability reduce outage time by being able to confirm if meters have power.

8. Distributed Energy Generation Poses More Issues.
As distributed energy generation (DEG) becomes more prevalent in the U.S. and
across the world, Navigant Research says these small power generation sites (typically less than 100 MW in size) are requiring utilities to do more legwork. While DEG sites can technically consist of small-scale fossil fuel, biomass, or even nuclear power, the vast majority are solar and wind plants.

Because of the nature of solar irradiation and wind, the energy DEG plants generate can be variable and unreliable. As a result of this variable electricity production, utilities have to work even harder to balance their electricity supply, demand and reserves over the distribution areas that they service. No longer can utilities simply rely on predictable baseload and peaking power plants.

Navigant Research expects nearly 208 GW of new renewable DEG capacity to be installed worldwide between this year and 2017, resulting in $367 billion in revenue from deploying these technologies. Distributed solar PV installations will continue to make up the majority of the renewable DEG market.

9. Meter Data Management Struggles But Survives.
Meter data management (MDM) predates smart metering at some utilities, where MDM was a method to manage and process energy usage data collected from manual sources or automated meter reading (AMR) systems. Traditionally, MDM was the basis for producing more accurate energy bills to residential, commercial and industrial clients. That requirement remains, but the application of MDM has exploded during the past three years.

Nonethless, Navigant says, MDM risks becoming nothing more than middleware that efficiently delivers data into analytics engines. Whether MDM survives as a viable business on its own rests upon two key factors:

1) MDM vendors have aggressively expanded into related back-office applications, especially customer-facing portals. To the degree that MDM can provide pre-built solutions for key utility business problems and reduce the complexity of their integration, MDM vendors can increase their probability of their continued relevance.

2) The data analytics market itself remains in a state of flux. Some vendors believe that utilities want highly flexible analytics engines, in which each utility effectively defines its own analytics in-house. Other vendors believe that utilities will want a prepackaged analytics solution, with little need for customization by each utility. Navigant Research says it believes the latter scenario is more likely, given utilities’ frequent refrain, “Just give me the answer,” especially from OT teams, which may be more concerned with energy reliability than with developing new IT skills.

10. Cybersecurity Market Offers Limited Promise.
Navigant Research says smart grid cybersecurity remains top of mind but bottom of budget for many utilities. Annual cybersecurity revenue is expected to increase from $370 million to $607 million over the forecast period - a relatively modest market with a relatively modest 6% CAGR, according to the research firm.

This article is adapted from Navigant Research’s white paper “Smart Grid: 10 Trends to Watch in 2013 and Beyond.” For more information about the white paper, click here.





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