The Memoori Blog

Will The Smart Grid be the Foundation for the Internet of Energy & "Other Things"?

noreply@blogger.com (Jim) — Mon, 13 Feb 2012 18:54:00 +0000

In the quintessential small English village of Chorleywood, the local health centre has placed its first patient on their Hydra network of smart electricity meters and is now monitoring the weight and blood pressure of the patient in their own home.

The system uses Zigbee wireless technology to send readings from the devices to the smart electricity meter. The meter then sends the reading through to the health centre for staff to review. The purpose-built surgery was opened in 1997 and provides comprehensive general medical services including treatment and prevention of illness, health promotion and screening services.

The Health Centre was selected to participate in 3 major research projects that will investigate how technology can be used to better manage patients with chronic diseases. The Hydra project investigates the concept of using smart electricity meters to act as a method of allowing patients to make simple measurements of blood pressure or weight and send them automatically so that they can be monitored by practice staff. The Reaction project is investigating advanced techniques to monitor and manage patients with diabetes. The inCasa project is investigating ways to assist elderly patients at home.

This example shows that Smart Grid deployments are not only delivering improved energy security, grid reliability, and consumer control but they are helping to bring the Internet of Things (IoT) closer to reality.

The concept of the IoT is a common global IT platform of seamless networks and networked "things”, that can be regarded as an extension of the existing interaction between humans and applications through the new dimension of “things”, communications and integration.

There are some 18 IoT application domains of which the Smart Grid is a specialized one related to energy and the environment. Within this, networks connect devices and use embedded intelligence in the forms of sensing and control to deliver and manage electricity, minimizing or eliminating the need for human interactions to achieve those same objectives.

Smart Grid will eventually be deployed across all utility networks, commercial, industrial and domestic buildings, covering all geographic areas of countries right across the world. It will become the major application domain of the IoT and perhaps even referred to as the Internet of Energy. That is if the utility industry can find the finance to invest in it.

Utilities are investing in wireless and wired communications technologies and services to build out their Smart Grid projects but spending is still only a quarter of their overall telecom budget and although it may double over the next 5 years, our report http://memoori.com/smart-grid-2012 shows that if it is to achieve completion by 2030 it needs an investment of at least one order of magnitude more than current expenditure over the next 20 years.

In 2010 networking giant Cisco estimated that the market for Smart Grid Communications would grow into a $20 billion a year opportunity by 2016. On the basis of this our report estimates that this would be around a 12% share of the expenditure required to produce the world’s Smart Grid.

In a recent blog post http://www.memooriblog.com/2012/01/future-investment-in-smart-grid-will.html we show that the utility industry in the US (also applies to other countries) cannot possibly find the investment funds to build a Smart Grid within a 20 year time frame, unless they are allowed to significantly increase their charges for electricity.

The expenditure just to maintain and modernise the grid together with replacing the fossil fueled generating plant is a daunting task and it seems that the regulators will be reluctant to allow the utilities to raise electricity prices sufficient to achieve a modest ROI.

It looks very much like this will cause serious delays with the utilities unable to finance a program that can realise Smart Grid and the subsequent 'Internet of Energy'. A solution may be found if the ICT companies are invited in to provide their expertise and cash. The utility industry will be reluctant to lose the potentially lucrative value add services and are therefore unlikely to pick up on this solution.

A similar anomaly applies to distributed energy; are the utilities prepared to accept clean and relatively clean power from micro power plants when their own facilities have surplus capacity?

The regulators of electrical power and its distribution will be forced to revise their policies and open up the market to other interested parties in order to foster and encourage the development of IoT and distributed power if we are to realise a Smart Grid in a satisfactory time frame and at the lowest investment cost possible.

Smart Grid New Energy Solutions: Korea sees Green Initiative as Future Growth Engine

noreply@blogger.com (Jim) — Thu, 02 Feb 2012 13:48:00 +0000

Article from The Korean TImes (By Kim Yoo-chul) quoting Memoori Business Intelligence;

http://www.koreatimes.co.kr/www/news/tech/2012/02/133_104042.html

Washing machines and refrigerators have joined the ranks of smart devices. This means computerization, improving efficiency and protecting the environment.

This focus is shifting to electricity, as experts tackle effective distribution from power plants to consumers.

The purpose of this smart revolution is to save costs and limit environmental impact. Cutting carbon dioxide emissions within electricity production is not just a new growth engine but also tied closely with future development.

The grid needs to incorporate renewable electricity production from a multitude of distributed sources and be capable of matching electricity supply with demand at the point of real-time usage.

``Smart grids are being found everywhere. Governments and firms are busy investing more on them. The key point is that the market is growing and Korea is taking on a bigger role,’’ said an expert on the area, Park Geun-min.

Park said smart grids are a means to modernize existing power networks, an alternative pursued by governments to address energy independence and global warming issues.

Public data says that if smart technology made the United States grid 5 percent more efficient, it would equate to eliminating the fuel and greenhouse gas emissions of 53 million cars.

In structure, the supply- and distribution-side are the utility companies including electricity, natural gas and water.

Current smart-grid activities focus on two major areas of improvement _ automating information delivery including real-time data, and standardizing networks so that all sectors can communicate with one other.

The cost-saving potential makes its business outlook bright.

By the end of 2018, the annual size of this business is expected to be $155 billion, 50 percent larger than the current yearly expenditure for all electrical transmission and distribution equipment.

Memoori Business Intelligence says this will require major restructuring for both the supply and demand side, if a truly ``smart grid’’ is to be realized.

``Our research estimates that $2 trillion will need to be invested globally by 2030. Sales of smart grid systems last year stood at just $16 billion, clearly showing the business still has a great deal of potential,’’ the research firm added.

In the space of five years, acquisitions have grown from $134 million in 2007 to $10.6 billion in 2011. Both the growth and scale indicate the supply side is gearing up to meet the requirements of the new technology.

``Investment in the market is also on the increase with venture capital companies committing some $1 billion per year in 2010 and 2011 to smart grid suppliers,’’ it said.

Korea's Aims
Smart grids offer a special attraction to Korea.

It imports most of its energy resources but smart grids will give the nation an edge because they save energy and make bulk imports unnecessary.

Korea imports all of its coal, oil and gas, so paying high prices for energy can have a ``chilling effect’’ on its global competitiveness.

Korea has signed a letter of intent (LOI) with the state government in Hawaii to collaborate on smart grid-related projects.

``Hawaii has been pushing `carbon free island’ policies by activating eco-friendly projects including more supplements of solar energy and electricity cars,’’ said an official from the Ministry of Knowledge Economy (MKE).

Korea plans to invest $1.8 billion by 2015 on smart grid technologies, giving utility customers the ability to monitor price and supply as an incentive to lower energy usage during high-demand periods.

Driven by a desire for energy security needs, sustained economic growth and even reduced environmental impact, the government _ together with the country’s leading technology companies _ have now embarked on a bold new strategy to transform ways in which electricity is generated, distributed and used.

A demonstration project on Jeju Island as part of Korea’s smart grid initiative is a comprehensive program that includes a focus on a smart power grid, smart consumers and smart electricity services.

This is an initial step toward its goal of a completely integrated smart grid by 2030, according to experts.

``Moving into this arena is enabling Korea to become a major player in the worldwide smart grid technology market, joining the United States and China at the forefront,’’ said the MKE official.

The government said it is planning to invest as much as $2.4 billion on smart grid technology by 2030. Korea is aiming to cut annual power consumption by up to 10 percent using smart grids.

Seoul previously said it would cut carbon emissions by 4 percent less than 2005 levels by 2020. Electricity makes up about 40 percent of the overall emissions generated in Korea, Asia’s No. 4 energy consumer.

Jeju is the test-bed for the nation. ``Phase Two’’ consists of taking the best outcomes from the test-bed and commercializing them, expanding the smart grid into selected urban areas.

This is expected to run through 2020. This expansion stage from this year to next year will mainly focus on smart renewables and electricity services. Its goals are to provide new power services and accommodate renewable energy into the power grid.

The final phase of the plan is the completion of the national smart grid, targeted for 2030.

``But these efforts are just the first steps. Korea still has a long way to go,’’ said Kim Maan-shik, a 35-year-old working on the government-organized smart grid project.

A Healthy Security Industry Will Confidently Ride Out the Economic Storm in 2012

noreply@blogger.com (Jim) — Fri, 27 Jan 2012 08:30:00 +0000

Traditionally this is the time for reflection on the past year and forecasting the trends over the next 12 months.

Memoori’s annual report on the world’s Physical Security industry showed that in 2011, despite a troubled economic climate, it increased revenues and profitability whilst merger and acquisition surged by more than double in the last 2 years to $9.847 billion.

So the security industry looks like a safe port in the storm with 2 main factors contributing to its robustness. The first being the continued growth in emerging markets particularly Asia where they shrugged off the global economic downturn and the second is the growth in network video surveillance solutions. The latter will certainly continue to increase its market share despite poor economic trading conditions in 2012 and the former likewise will increase their share. The question now on everyone’s mind is will the problem of sovereign debt in the Euro zone receive the political action necessary to solve it? The jury is still out on this one.

Our report showed that in the last quarter of 2011 growth in demand looked a little flaky with the dynamic companies delivering high tech products with a balanced exposure to emerging markets maintaining a solid performance and those with less innovative mainstream products being far less confident about the future. On the basis of this we forecast an annual growth of 2.4% down from an aggregate 4% in the previous 2 years. This time round the aftershock from the financial meltdown in 2008 has left us with less ammunition to fight off a recession and the public sector budget will be trimmed to help pay off the sovereign debt resulting in an almost certain decline or no growth in GDP in many developed countries. Even allowing for a decline in growth our forecast would be optimistic, if it were not for the fact that the industry is in a much healthier state with a product portfolio that can deliver more attractive opportunities for their clients to improve security and at the same time profit from it.

The only way to reduce the impact of poor economic trading conditions is to continue with the innovation programme of delivering more effective systems at lower prices. Now has to be the time to dig even deeper and increase all efforts in delivering against 5 developing and emerging technology trends that can drive up demand. Our report shows that this may be best achieved through merger and acquisition and alliance and these activities have in both volume and value terms increased significantly in the last 2 years.

Wireless technology is now getting traction with the highest penetration of wireless communication being in commercial and transportation verticals whilst banking & finance are still concerned that these security systems can be breached. Education and Health buildings look to be the next growth markets. The main drivers for the emergence of the wireless culture, staying mobile, reducing investment cost and improving productivity has got estate managers leveraging wireless throughout their organizations.

IP Network products whether for access control, intruder alarms but particularly for video surveillance grew rapidly in 2011 and they are believed to be on the verge of a long and strong run. Falling IP prices together with much easier to install products and improved performance have all conspired to increase the Return On Investment (ROI) and total cost of ownership of this fast growing technology.

MSaaS & VSaaS is becoming an attractive solution to the physical security industry for it delivers a lower point cost, because providers can host multiple customers on a shared infrastructure. The Cloud economies of scale and flexibility also offer both the user and supplier a better deal. The prevalence of broadband along with 3G and 4G connections is making video accessibility easier than ever. So we expect the market will be looking up to the cloud to provide further cover.

Video Analytics is the segment of the market that appears to be the laggard. In 2010 there was a distinct lack of new products coming to market. This year was more promising with more developments. It remains to be seen if the patience of the investors will continue long enough for them to succeed and / or if a new generation of companies enters the fray.

In the last 18 months there has been a rapid rise in demand for both Physical Security Information Management, (PSIM), and Physical Identity and Access Management, (PIAM), systems.

Both are examples of emerging software solutions that are designed to remove inefficiency and manual process within security operations. Physical Identity and Access Management (PIAM) enable common policy, workflow, approval, compliance automation and life cycle management of the identity / badge holder across disparate physical security systems. PIAM solutions offer operational cost reductions that can be delivered through this platform providing a bridge between the disparate systems without stripping out and starting again. PIAM is currently getting a lot of exposure. We are now seeing the emergence of PIAM to join together with PSIM to drive strategic and operational value for physical security departments in large operations.

All of these technologies embrace a wide divergence of skills and expertise and clearly it will require large research and development budgets to take them forward. It is unlikely that any one company in the security industry will master them all.

One thing is for sure, the security industry is going to ride out this turbulence because it is in a healthy state and has the confidence that in has overcome financial turbulence before.

Smart Grid M&A Activity & Value Forecast to Decrease in 2012.

noreply@blogger.com (Jim) — Mon, 23 Jan 2012 18:12:00 +0000

One of the most encouraging findings from Memoor’s annual report “The Smart Grid Business 2011 to 2016” is that in the space of 5 years M&A have grown from $134 million in 2007 to $10.6 billion in 2011. Both the growth and now scale indicate the supply side is gearing up to meet the requirements for new technology and forecast demand for pure Smart Grid products and systems that could be worth a cumulative $2,000 billion over the next 20 years.

However M&A activity slowed down in the last quarter of 2011 along with strategic alliance announcements. The decline in activity is hardly surprising given that the sovereign debt crisis in Europe started to hit financial markets in August and liquidity and confidence has since seriously deteriorated. M&A activity across virtually all manufacturing industries has yet to recover from its fall in 2008.

Analysis of the M&A statistics shows that both the volume and value grew rapidly reaching 68 deals in 2010 having an average value of $155 million, whilst in 2011 some 49 deals had an average value of $225m. It also shows that cash financed up to 90% of the purchase price up to 2009 but this has fallen to an average of 70% in the last 2 years. Private Equity and Venture Capital companies have contributed little; IPO’s that the experts forecast would burst onto the scene in 2011 have fizzled out as valuations fell.

Forecast of M&A Business to 2016

Whilst the factors driving the massive growth in this fledgling business require restructuring and consolidation, confidence in the future has taken a hit. This negative economic outlook is likely to counteract some otherwise strong drivers for deal making in the Smart Grid business. As a result we have forecast that the value of deals will fall over the next 3 years and will not return to 2011 levels until 2015, and will then continue its upward growth, being worth $12.23 billion by 2016.

IT & Communications Companies Move into the Smart Grid Space

Smart Grid badly needs the IT & Communications Companies technical expertise in collecting and analyzing the vast quantity of data that will be produced. In addition ICT companies have their eye on the Internet of Things (IoT) and this is why they have entered the Smart Grid space.

In 2010 the IT & Communications companies made their first forays into the Smart Grid space. In September 2010 Cisco completed its acquisition of privately held Arch Rock Corporation, a pioneer in IP based wireless network technology for Smart Grid applications. Based in San Francisco, Arch Rock should accelerate Cisco's ability to facilitate the utility industry's transition to an open and interoperable Smart Grid by enabling Cisco to offer a comprehensive and highly secure advanced metering infrastructure (AMI) solution that is fully IP and open standards based.

In September 2010 ESCO Technologies acquired Xtensible Solutions, the thought leader in Enterprise Information Management Strategy, and a leading provider of semantic based information management and integration solutions to the utility industry worldwide. Xtensible will be included as part of ESCO's Utility Solutions Group and will be closely aligned with Aclara Software in providing best-in-class software services and products. ECSO is a proven supplier of special purpose utility solutions for electric, gas and water utilities; including hardware and software to support advanced metering applications and fully automated intelligent instrumentation.

In 2011, the number of external strategic deals declined slightly to take an 18% share but it included several large deals. In January 2011 Qualcomm acquired Atheros for $3.1 billion. Atheros is a leader in innovative technologies for wireless and wired local area connectivity in the computing, networking and consumer electronics industries. The acquisition is intended to help accelerate the expansion of Qualcomm's technologies and platforms to new businesses beyond cellular and provide access to significant new growth opportunities including Smart Grid.

Alliance & Strategic Partnerships

One of the strong features of the Smart Grid supply business is the activity in forming alliances and partnerships. In 2010 we identified 115 as opposed to 97 in 2011.

All of the major Smart Grid suppliers have made a number of alliances with different companies; the main objective being inter-operability of their products and solutions.

These alliances involve some of the worlds’ leading suppliers of IT & Communications hardware and software companies with the worlds’ major Electrical Transmission and Distribution Suppliers to bring about a common operating platform to communicate information and make it actionable. These alliances will undoubtedly play a major part in the development of the Smart Grid business over the next 10 years. In addition it could bring about the forging of some major Mergers and Acquisitions between these partners.

Smart Grid in Smart Buildings Looking To Outperform Utility Smart Grid In Growth & ROI

noreply@blogger.com (Jim) — Mon, 16 Jan 2012 18:01:00 +0000

Memoori’s annual report The Smart Grid Business 2011 to 2016 shows that some 40% of the worlds annual spend on Electrical Transmission and Distribution Equipment goes to the Industrial and Commercial markets. It’s therefore not surprising that whilst the main body of the industry preoccupies itself with the utility market the traditional manufacturers are also targeting the industrial and commercial business.

Some 15 years ago they started to quietly investigate how they could meet the Industrial and Commercial client’s need for a more secure efficient and better quality electrical supply. This market was being badly served by the Utility companies in a number of countries through delivering “dirty power” which was causing outage problems to their internal electrical network.

In the case of commercial and industrial buildings such as hospitals, data centers, banks, pharmaceutical, general process and assembly plants; constant electrical power is absolutely critical to their operation. The solution was to overlay intelligent controls across the network to monitor and control it.

Since then these suppliers have interfaced the “internal smart grids” to the Building Management System (BMS) providing their clients further security and efficiency gains and a reduced energy bill. In the case where they generate their own power through a micro-grid they can balance out supply and demand and sell their surplus power. These operations are now installing VRS which they can deliver to the grid at very attractive feed in tariffs and gain significantly more revenue.

Some of the suppliers including Schneider Electric, Siemens, Honeywell and Johnson Controls are delivering these packages as part of a “Total Energy Management Solution”, whereby they invest their money in the controls and energy saving equipment, manage and maintain the plant and get paid from the guaranteed reduction in energy consumption. Recently they have taken the service a stage further by taking responsibility for buying the energy and to this end they have recently acquired companies that buy and sell energy.

But the opportunity to expand this business does not stop there. For as the report shows they are now in a strong position to take advantage of aggregating the output from these contracts through Virtual Power Plants (VPP). They can join up these distributed generation plants through the Internet. Collectively they present a better commercial proposition for supplying electrical power to the Smart Grid and generate higher unit revenues.

This looks like a very attractive business model which offers a better return on investment and has fewer road blocks than Smart Grid for the utility market at this time. Unlike the utility market which so far is taking a step by step development, a holistic solution is both practical and affordable in the industrial and commercial markets. It provides the benefits of distributed generation, giving a more flexible power delivery and reduces energy consumption on the site. Through “cloud based” hosted services other value add services can and no doubt will be supplied

At this time the “Total Energy Management Solution” service is purchased purely on the basis of the building owner getting a satisfactory ROI, but in some countries CO2 reduction can now be traded, that provides an additional incentive to interface Building Energy Management Systems with the internal and external Smart Grid.

Smart Grid may have to Pay for its Limited Horizons

noreply@blogger.com (Jim) — Mon, 09 Jan 2012 09:45:00 +0000

Memoori’s new report The Smart Grid Business in 2011 to 2016 shows that the step by step approach to developing the Smart Grid applied in the last 5 years is flawed.

What would Leonardo Da Vinci Have Done?
When Leonardo Da Vinci was obliged to finish off his first version of “Virgin of the Rocks” some 25 after being first commissioned, forensic evidence now shows that he totally rebuilt the framework of the painting which then allowed him to incorporate all the technical improvements of light, shade, expression and beauty that he had since mastered. No simple refining of minor details which is all he was paid to do; but a complete retrofit that is now some 528 years later one of the world’s finest paintings.
We are now faced with restoring an outdated and inefficient electrical grid and a supreme challenge to provide a one that meets the needs for a low carbon economy. Do we now rebuild the framework in order to achieve this? Or do we play around at the edge and go for incremental improvement hoping that it can be seamlessly joined together later? Sadly we are going for the later option in most regions of the world.

We are investing where the quickest ROI can be achieved commensurate with lowest technical risk and that in most cases is putting maximum investment in Smart Meters.

We have the opportunity to rebuild the framework with the latest digital communications, control technology and analytical software; producing an Internet of Things (IOT) and test this out at full scale. Had the Da Vinci mindset been applied some 5 years ago we now would have been close to a total solution that could be transferred around the world. Yes we are working on it now, but its well behind where it should be today.
Should we be surprised that this solution was not adopted? Possibly not. Faced with a $2,000 billion investment this was always going to be influenced by eco-political matters, restricted by existing regulatory frameworks and a need to drastically change the architecture of the grid. These are formidable barriers to overcome in order to deliver a truly Smart Grid.

Our report The Smart Grid Business in 2011 to 2016 clearly shows that the breakdown of investment so far is heavily biased to Smart Meters, currently taking by far the largest single segment spend in the Smart Grid business in almost all countries in the world. The spend on Smart Meters over the next 20 year period will be approximately $194 billion representing approximately 9% of the total budget and will reach its maximum peak by 2014. The latent potential for AMI complete with Smart Meters amounts to approximately 9%; while current sales took almost 40% of the pure Smart Grid market in 2010.
The prime reason that smart meters have run away with the investment dollars is that they are considered by the utilities as a relatively safe bet to provide a return on their investment. However the basic grid topology was built on stand-alone facilities offering limited, if any, interactive networked intelligence and this is a more expensive and technically demanding challenge for Smart Grid and will require an investment of some $1,620 billion and is running some 10 years behind Smart Meter penetration.
This will mean that the full benefit of AMI will not be realized well after it has been installed, but more importantly it would appear that progress has been held back on other vitally important issues. Insufficient attention has been given to developing open communication standards and delivering a solution for protecting the grid from cyber attack.

About the Report
Memoori’s report The Smart Grid Business 2011 to 2016 is a definitive resource for Smart Grid market research, uniquely combining clearly defined market sizing statistics with financial analysis of M&A, investment and alliances.
At 182 pages with over 23 charts and tables, The Smart Grid Business 2011 to 2016 report filters out important conclusions, supported with facts, as to what is shaping the future of the Smart Grid industry. The report contains key information for all those managing, operating and investing in Smart Grid companies around the world. You can learn more at the reports website; http://memoori.com/smartgrid-2012

Future Investment In Smart Grid Will Dwarf Current Expenditure; But Where Will It Come From?

noreply@blogger.com (Jim) — Tue, 03 Jan 2012 16:16:00 +0000

Happy New Year and Welcome to the first 2012 message of the Memoori Blog. Later this week we publish our Annual Report “The Smart Grid Business 2011 to 2016” and during the next 2 months we shall produce a series of posts taken from this study on the major issues and challenges facing the industry over the next 5 years.

Vast Sums of Money will need to be Invested – Will it be Available?

We estimate that to achieve full penetration of the world’s existing grid together with future extensions to 2030, will require an investment of some $2,000 billion on pure Smart Grid equipment at installed prices. There is no question about demand for Smart Grid, in the long term it is inevitable. But we believe that investment funds are the weakest link in the chain and could cause a slowing down in growth. This can be overcome if the utilities are allowed to recoup the investment over time by increasing their charges for electricity. This will be the solution in Europe but is unlikely to be politically acceptable in North America, despite the fact that prices there are less than half that of most European countries.

In the US according to figures published by the Edison Electric Institute, the Electric Utilities in 2010 had revenues of $371 billion producing a net income of $68 billion and a net after tax profit of $27 billion, whilst retained profit after dividend payments was $10 billion. Of this transmission and distribution is unlikely to have contributed more than 30%. Pure Smart Grid average annual expenditure in the US will need to run at $22 billion and should peak at around $35 billion in 2021. This simply cannot be achieved without a significant hike in the tariff rate which the regulators will be reluctant to authorize.

Utility companies are not the most profitable operations and they are going to need significant help with financing the development of the Smart Grid. In most countries the electricity grid needs refurbishing in any case, so additional expenditure will have to be found, or the basic requirement of electricity supply and reliability will not be satisfied; let alone the pressing need to reduce CO2 levels.

Government Funding Will Be Required

Smart Grid is part of the “Clean Tech” business and so far it has only received a relatively small sum of investment from private and public sources; compared with the largess heaped on other parts of the business. However under government programs in the USA alone some $4.5 billion has been awarded for investment in Smart Grid projects in the electrical utilities business. In addition at least 27 American Recovery and Reinvestment Act (ARRA) projects are being funded from the almost $5 billion allocated to the U.S. Department of Energy (DOE) for grid modernization projects.

Our market sizing figures show that the United States is currently the global leader in investment in Smart Grid. In view of the size of its generating capacity and electrical transmission system this should not be a surprise, but the smart grid stimulus programs have pump primed investment and played a major part in taking the US forward.

In Europe, finance has been made available through EU programs and some demonstration projects are being financed within member state initiatives but nothing on the scale of that provided in the US. In China, the state has orchestrated the program for the nationalized utilities to carry out a major program of investment, directly and indirectly they will finance it.

This industry will still need stimulus funds for some years if it is to continue developing at a fast pace and play its proper role in assisting with the delivery of a comprehensive green energy solution. But with so many countries around the world now looking to reduce public expenditure, government funding for Smart Grid is unlikely to go unscathed. IT & Communications companies would almost certainly be interested in joint collaboration with the utility industry on all aspects of the Internet of Things (IoT) and they have the funds to invest.

Much Improved ROI Will Stimulate Investment

Smart Grid will deliver a better return on investment than is currently realized in the utility industry; but this has yet to be proven in most sectors of the business because full scale tests and demonstrations have not yet been completed. The exception to this is Smart Meters. In the UK a typical smart sub metering installation in the commercial / industrial market will provide a return on investment in 10 to 14 months subject to enhanced capital allowances, allowing offset of the total cost of installation against corporation tax in year one.

In most countries smart meter installations in the residential market are being financed directly and indirectly by the building owners / occupiers without so far placing too much burden on the utility companies. In the US Smart Meters save consumers $60 to $180 per year, according to the Energy Information Administration for an outlay of $500. A recent DOE study showed that when consumers can track their energy usage through smart meters, their usage declines by as much as 15%. For the utilities smart meters provide value through automatic billing reducing costs and better management of cash flow. Full AMI will provide real time data to help balance out supply and demand and reduce wastage. Every unit of electricity saved at the point of usage will save 3 units at the generator set. As the volume of equipment rises, prices will fall and ROI will increase, conversely energy prices are almost certain to rise.

The Physical Security Industry Delivered A Stellar Performance in 2011 - Can It Continue to Defy Gravity in 2012?

noreply@blogger.com (Jim) — Tue, 13 Dec 2011 14:49:00 +0000

Physical security business in 2012 will look to emerging markets, new technologies and M&A activity. In the last two years, the physical security industry has given nothing short of a stellar performance. While it will continue to defy gravity in 2012, its performance will decline in some important measures.

Future Growth From Bric CountriesThe aftershock from the 2008 financial meltdown resulted in sovereign debt problems in Europe that are now receiving corrective actions. These will dampen future demand for physical security equipment right Europe, particularly in the public sector.

However, the industry was faced with an even more dire economic situation in 2008, but innovative companies did not cut R&D. Instead, they applied new technologies and developed more attractive products for clients. The industry is stronger and we are optimistic that demand will edge forward at a CAGR of 3.7 percent over the next five years. This will depend upon the emerging markets, particularly China and Asia, delivering higher growth rates.

Figure 1 compares the product sales revenues per capita in four regions against the GDP per capita. This shows the penetration of physical security systems in China and Asia is more than one order of magnitude smaller, while economic growth is at least three times faster than the developed economies of North America and Europe. The BRIC countries - Brazil, India Russia and China - will play a major role in keeping demand growing and increase their market share.

New TechnologiesFive emerging technologies have created new business opportunities. They are wireless communicat ions , IP networking technology, video surveillance as a service (VSaaS), managed video, analytics software and security management software, including physical security information management (PSIM) and physical identity and access management (PIAM). The opportunity for these technologies to create new business opportunities is enormous, led by IP networking technology. There is a good number of medium-sized companies, particularly in video, that have developed cutting-edge products and gained market share.

Consolidation And Organic GrowthM&A activity has grown at a compound annual rate of 12.5 percent over the last 10 years. During this time it has peaked and declined twice, doubling value during the last three years to reach its historic peak in 2011 of US$9.847 billion. We forecast the value of deals will decline by 2.5 percent in 2012, despite the fact that the security market will grow by a similar amount, thanks to buoyant markets in the BRIC countries.

In the last three years, the volume of deals has only increased by 7 percent but the value has more than doubled, thanks to a few large deals worth more than $1 billion combined. The two trends in the exit valuation figures is that software and biometric suppliers, together with alarm monitoring companies, have achieved the highest valuations in 2011.

The Majors Review Future StrategiesThe major multinational leaders have used merger and acquisition as an important part of growing their business. It is therefore surprising that they have almost abandoned this policy in the last two years. There are a number of reasons why, but current exit valuations is not one of them, because they are still well below 2006-07 levels.

Most have positioned themselves toward the systems business. This has not required major investment and feeds off their heritage estate business, integrating from other parts of their organization such as fire detection, evacuation, mass notification and energy management. We expect them to extend their interest in PSIM and PIAM software to deliver system differentiation in the integration business. One potential market is outsourcing security services, as a result of reduced budgets in the public sector. Through PSIM, PIAM and MVaaS, they would have the ultimate service to offer, with little competition from the smart innovative product manufacturers.

Investment Business And SecurityAt the start of 2011, the investment business expected to return to normal. By September, confidence had drained. If the current volatility in world stock markets is short-lived, then the backlog of IPOs will go ahead. A repeat of 2008 when the IPO window closed down completely would have serious consequences for the venture capital industry and their recipients in security. In the first eight months of 2011, only seven announcements of capital injections were made in security, amounting to $85 million. Most of these involved investment in US companies by US venture capitalists.

Financing is available but there are plenty of high-tech businesses chasing it. In the present climate, it is unlikely the security industry will receive more than it did in the last two years. However, established companies renegotiated debt financing in 2010. This continued in the first seven months of 2011, with five lines of credit negotiated for $1.4 billion. All have been secured by alarm and home automation installation and monitoring companies in the U.S. Two confirmed the funds will be used for acquisition purposes. Goldman Sachs Specialty Lending Group made a $565 million line of credit to APX Alarm, now renamed Vivint.

Few venture capital companies specialize in physical security, as it is not the most attractive technology sector. However there are segments that are particularly attractive: information security, identity and security solutions, and analytical software.

Despite economic problems, the market will continue to grow in 2012. Growth will depend on geographic regions and IP networking. Financing will become harder to obtain, causing hardships to small- and medium-sized companies unable to deliver ROI that clients demand.

3rd Annual Smart Grid Summit 2012

noreply@blogger.com (Jim) — Mon, 05 Dec 2011 11:58:00 +0000

The 3rd Annual Smart Grid Summit 2012 will bring together Europe’s leading electricity grid distribution specialists, investors and regulators to share insights into the immediate challenges and projects now started to realise the Smart Grid vision.

www.thesmartgridsummit.com

Dates: 24 – 25 January 2012

Location: Grand Hôtel Stockholm, Sweden

With the Energy 2020 strategy driving the move towards competitive, sustainable and secure energy throughout Europe, the Smart Grid Summit 2012 provides invaluable insights into the most important projects, research and developments making Europe a world leader in energy technology and innovation.

Now in its third year Smart Grids Summit 2012 features case studies and key note conference sessions over two days on areas including:

* Realising all the smart grid and smart home concepts in one city
* Advanced metering rollout and the benefits of customer energy management
* Utilising excessive data with real time data management software
* Building a more reliable grid by integration of decentralised renewable energy
* Boosting technological leadership
* Photovoltaic proliferation and grid connection issues
* Electric Vehicles and linking them to the grid
* Investing in smart grids - reducing costs and risks associated with smart grid implementation using effective data analysis.

Highlights from the Programme include:

Stockholm Royal Seaport Case Study

Thomas Wall, Head of R&D, Fortum will provide a full profile and analysis of the Stockholm Royal Seaport project. He will describe the lifecycle of the smart project as well as how to achieve effective leadership and successful partnerships to realise a smart grid for a smart city.

The Importance of International Partnerships to the Smart Grid
Lord Stephen Green, Minister of State for Trade and Investment, UK Government, will be identifying the challenges that utilities throughout Europe are facing as they look for the right partners to build, maintain and supply their grids. He will reveal how utilities, smart companies and government can work together to forward grid development in order to move towards the 20-20-20 targets and a pan-European integrated energy market and infrastructure.

Interoperability – Developing the Common Technical Standards that will Connect the Grid
Richard Schomberg, Vice-president of Research EDF International, EDF Group, will reveal the urgency of the development of consensus build standards as utilities, equipment manufacturers and others try to integrate all of the different pieces of the smart grid puzzle into a common architecture.

The Virtual Power Plant

Jonas Maltha Rasmussen, Head of Distribution & Commercial Ventures, DONG Energy will conduct a technical presentation on integrating demand response, distributed generation and energy storage. He will provide insights into his current work which focuses on replacing the classic linear structure of power with a mix of generation, transmission and distribution connections that make up the virtual power plant

"A total overview of all the changes we have in the next ten years."

Senior Advisor CR, Enexis

"Useful introduction to issues / challenges facing Smart Grid innovation and development." Operations Systems Support Manager, ESB Networks

"A clear snapshot of Smart Grid Technology."

Project Manager, ENDESA

Smart Grid Investment Strategy Needs Better Balance and a Rethink on Priorities

noreply@blogger.com (Jim) — Tue, 15 Nov 2011 11:54:00 +0000

This has been a quiet month for positive Smart Grid news, no sensational announcements on the financial and M&A front that promise to unleash more funds or technological developments.

Sadly the slow drip of unnerving news about sovereign debt in Europe and double dip recession has continued. The politicians are making ominous noises that the effort to reduce CO2 reductions may have to be reigned back.

George Osborne, Britain’s Chancellor of the Exchequer, in a potentially explosive intervention, insisted the government will only cut emissions in line with its neighbours in order to ensure British businesses are not put at a disadvantage. The Chancellor accused environmental regulations of “piling costs on the energy bills of households and companies” and argued that the government should not adopt green targets that damage the business sector.

The finger is being pointed at the high cost of electricity produced from renewable sources such as wind and solar power. There is no question that the programs to increase the share of electrical generation from these sources will not continue, but in the short term expect more power from high efficiency gas turbines to replace old coal fired power stations.

So what impact will this have on the world market for Smart Grid? One school of thought is a lot; because you would not need to make the Grid so smart because it would not have to accommodate so much variable power. So let’s dumb it down and save some money! That would be a disastrous move because you would lose all the benefit of major efficiency gains and the added value through the Internet of Things (IoT). Eventually we will still be faced with getting the majority of our electrical power from renewable sources and the only way that can be achieved is through Smart Grid.

In our report “World market for Smart Grid & Forecast to 2030” due to be published in January 2012, we have extended the time it will take for the major countries to achieve full penetration of their electrical grid to the year 2030.

The graph above shows our forecast of how the investment of $2,000 billion will progress over the 20 years from 2010. This shows that expenditure will peak at $155 billion in 2021.

The programmes for the different product categories of plant will not run in synch. For example AMI expenditure will peak in 2014 and will be completed in many countries before 2020. Whilst this is good news, if there is to be a cut back on investment programs it would be sensible to hold back on AMI and invest more in automatic demand response. This way we get a joined up system sooner that will produce a much higher ROI than that from any of the individual parts.

Growth in Physical Security Can Only Come Through Innovation & The Application Of New Technology

noreply@blogger.com (Jim) — Tue, 25 Oct 2011 10:27:00 +0000

Memoori’s 3rd annual report The Physical Security Business in 2011 shows that growth in this market can only come about during the next 3 years from a stream of more innovative products and systems that deliver on meeting the customers need to drive more ROI out of its investment.

Physical security needs to move, as far as is possible, from a cost centre to a profit centre status, if it’s to overcome the anticipated aftershock from the 2008 financial meltdown which now looks inevitable.

This will dampen future demand but we are optimistic that as it can now deliver more attractive opportunities for clients to improve security and profit from it, demand will edge forward at a CAGR of 3.7% over the next 5 year period.

The report identifies 5 emerging technologies that are already creating new business opportunities and also discusses advances in their development that will further impact on the business in the future, The former include:

Wireless Technology.
IP Networking Technology.
Video Surveillance as a Service (VSaaS) and Managed Video.
Video Management and Analytics Software.
Security Management Software, PSIM and PIAM.

They all have one thing in common and that is they improve productivity and help edge security systems move towards profit centre status and in some cases reduce the cost of installation.

IP Network products whether for access control, intruder alarms but particularly for video surveillance grew rapidly in 2011 and they are believed to be on the verge of a long and strong run.

Falling IP prices together with much easier to install products and improved performance have all conspired to increase the Return On Investment (ROI) and total cost of ownership of this fast growing technology.

Video Analytics is the segment of the market that appears to be the laggard. In 2010 there was a distinct lack of new products coming to market. This year looks more promising with expectations of more developments. It remains to be seen if the patience of the investors will continue long enough for them to succeed and / or if a new generation of companies enter the fray.

In the last 18 months there has been a rapid rise in demand for both Physical Security Information Management,(PSIM), and Physical Identity and Access Management, (PIAM), systems.

PIAM solutions offer operational cost reductions that can be delivered through this platform providing a bridge between the disparate systems without stripping out and starting again. PIAM is currently getting a lot of exposure. We are now seeing the emergence of PIAM to join together with PSIM to drive strategic and operational value for physical security departments in large operations.

The traditional market leader’s shares have stagnated and the average share is less than 10%. Financing these developments will not in the short term improve their competitive positioning. However they have the cash to buy this expertise through acquiring companies; but seem reluctant to take the initiative at this time.

Defense & IT Companies Buy into Physical Security and Strengthen the Market

noreply@blogger.com (Jim) — Wed, 19 Oct 2011 15:27:00 +0000

Memoori’s 3rd annual report The Physical Security Business in 2011 shows that some $1.178 billion accounting for 12% of total investment in acquisitions in the last 12 was made by companies from the Defense and IT related industries.

In addition Venture Capital and Private Equity Groups acquired 6 companies investing some $3.605 billion; including Bain Capital’s purchase of Securitas for $3.26 billion This follows on from an active campaign in 2010 of companies external to the business seeking to become a part of it. So what is it that attracts them and conversely why are not more existing players grasping the opportunity to rapidly build up growth through acquisition? Or are they not so sure about the future of their industry?

The security industry has performed well during the last 2 years despite poor economic trading conditions and it has proven to be a robust and agile business. This has attracted companies from the Defense and IT related industries, (much larger, profitable high growth businesses) to enter the security business where they can see opportunities to leverage their technical expertise.

Defense companies already have some products that can be applied to the industrial and commercial security market such as thermal cameras, night vision and specialist software for command and control centers. They see an opportunity to leverage their expertise as there is a heightened global awareness of the need for more sophisticated security from terrorist attacks almost everywhere in the world.

Defense companies clearly see it as a growth opportunity for they have in the last 12 months acquired at least 7 security companies. These included BAE Systems (2 deals), ManTech International (3 deals), and Kratos Defense Security Systems (2 deals). For the full year of 2010, we recorded 8 acquisitions made by Defense companies including Flir, L3 Communications, General Dynamics, BAE Systems, Safran and ManTech International.

The last deal recorded was in February 2011. It is too early to draw any conclusions from this lull in activity, but we expect that these companies and others will extend their exposure to the security market over the next 5 years.

They have so far acquired companies that can make a contribution to applying their thermal cameras and night vision technology and see a growing market for their command and control systems in the public sector. We expect them over the next few years to turn their attention to systems integrators that are service focused, such as the Kratos purchase of Henry Brothers.

Cisco was the first company from an IT background to buy into the security product manufacturing business but they have yet to make an impression on it. Their entry into the IP Camera market 4 years ago sent shock waves through the industry with most of the pundits fuelling the belief that this company was about to take over the IP Video market.

It now appears that the motivation for entering the business with this special unit is to generate sales for network infrastructure products. Video surveillance's ability to drive networking demand and network sales is seen as very valuable. For every $1 in surveillance sales, Cisco estimates ~$5 in total network infrastructure sales (switches, routers, firewalls, etc.). The unit now offers network video surveillance products that work on their networking devices and will expand their core business.

From September 2010 to August 2011 we have identified 4 transactions where players from the IT industry have acquired security companies whilst in 2010 we identified 6 acquisitions with IT / Communications and Security companies involved in acquisition deals.

The last transaction was made in November 2010 so yet again the passion for security companies from those outside the industry could to be declining. The main driver for IT related companies is the growing demand for convergence of security and the business enterprise.

IT Convergence with many technical infrastructures in buildings does present an opportunity to deliver total solutions and this gives them product differentiation. This is where their interest lies. Security in all its guises is increasing being handled by the CIO in most large companies and that again gives them an opportunity to get involved if they so wish. The second driver is the growing need to integrate physical security with logical security to mitigate the risk of cyber and physical security attacks.

The physical security industry will benefit from both the technical expertise that these new players will bringing to the business and their strong finances.

Difficult Times Ahead for Physical Security But Growth Opportunities Are Still Available For Those With The Right Products and Services.

noreply@blogger.com (Jim) — Wed, 12 Oct 2011 10:48:00 +0000

One of the most encouraging conclusions from Memoori’s 3rd annual report The Physical Security Business in 2011 is that the Physical Security Industry has outperformed most of its peers; and despite a troubled economic climate it has increased revenues and profitability whilst merger and acquisition has surged by more than double in the last 2 years to $9.847 billion. This business looks like a very safe port in a storm.

The total value of world production at factory gate prices was $19.17 billion. Of this Video Surveillance products at $9.1 billion take a share of 47%, access control at $4.41 billion took a 23% share and intruder alarms at $5.65 billion has a 30% share. The developed markets of North America and Europe are losing market share to Asia and particularly China which will be the largest single market by the end of this decade.

The anticipated aftershock from the 2008 financial meltdown now looks inevitable irrespective of whether the right corrective actions are taken now. This will dampen future demand but we are optimistic that as it can now deliver more attractive opportunities for clients to improve security and profit from it, demand will edge forward at a CAGR of 3.7% over the next 5 year period whilst we forecast a much more modest growth in M&A well down in single figures.

Delving into the details in the report, which is a comprehensive assessment of all the factors that influence this industries future; including technology, funding and consolidation, it's capability to produce a constant stream of new products that meet the customers need to drive more ROI out of investment; that is its ONLY salvation in these difficult trading times.

We expect that the next 2 years will be difficult times for many suppliers that have not kept pace with new developments but for those that have invested in IP Network products and wireless communications, just to single out two areas that the report throws up, offering high growth prospects, then demand will continue to grow. What the report does emphasise is that the successful companies do not need to be big. There is now a good cross section of medium sized companies, particularly in the video surveillance sector that have developed leading edge products that have resulted in them gaining a significant market share and exposure to world markets.

The major multinational traditional market leaders are both product manufacturers and system suppliers and cover almost all aspects of physical security. Most in the last two years have positioned themselves more towards the systems business and have been successful in growing this business during the last three troubled years. One of the major reasons for this is they have fed off their heritage estate business and at the same time have integrated activities from other parts of their organisation such as fire detection and extinguishing, evacuation control, mass notification and energy management into holistic solutions for their clients.

We expect them to continue prioritising their efforts here and on the products front extend their interest in PSIM and PIAM software to deliver system differentiation in the integration business. One other potential market that will open up as a result of reduced budgets through austerity measures in the public sector is outsourcing security services. Honeywell, Johnson Controls, Schneider, Siemens and UTC Technologies have for many years carried out estate management and this has extended to full responsibility for all the services particularly energy management and it has been a very successful strategy. Through PSIM and PIAM and MVaas they would have the ultimate service to offer with no competition from the smart innovative product manufacturers.

Analysts are Slashing Their Forecasts; But Smart Grid Will Weather The Economic Storm Better Than Most

noreply@blogger.com (Jim) — Thu, 06 Oct 2011 11:34:00 +0000

This is a very scary time for the world economy as it makes little progress to overcome the aftershock from the 2008 financial meltdown. The future for just about everything is being heavily marked down, so it’s hardly surprising that analysts are giving the thumbs down to the market valuation of Smart Grid players. They are forecasting a sharp decline in utility demand for Smart Grid as they defer spending until the economy picks up.

You cannot argue that present economic woes will have a negative impact on the business and will reduce demand but the extent of this will be decided by the ROI on Smart Grid investments and the cash than can be generated from improved productivity and reduction of wasted energy. This is not a 'nice to have' but a 'must have' product.

The US could become one of the more difficult markets to trade in because utilities and regulators focus really hard on minimising customer bills during difficult economic times. However this has already been the case during the last 2 years; fortunately the stimulus programmes compensated. A significant proportion of these funds are still in the pipeline, sufficient to keep the investment programme rolling for up to a year but then its impact on investment will rapidly fall off.

The North American electrical utility market spent something like $23 billion on Electrical Transmission and Distribution equipment in 2010. The vast majority of this was spent on retrofit and refurbishment of existing systems and much of this was replaced with Smart Grid ready equipment, ensuring a steady base load of business. Judging by the creaky state of the network if they reduce expenditure here then blackouts will increase leading to a further deterioration year on year. We suspect that the customers would prefer to pay a little more for a reliable electrical supply.

The priority will be spending on automating the transmission and distribution network to achieve balance and voltage optimisation. However integration programmes that bring together information to enable more efficient overall control of the grid will take lower priority despite the fact that they can help reduce outages and protect revenues and payback on their investment.

Northern Europe has a much more reliable grid system but customers pay a lot more for having one. However the politicians are now realising that they can’t take this for granted much longer and it may not be possible for a Smart Grid to finance itself from increasing utility revenues. If the low carbon economy is to be realised in the planned time span, then governments will have to engage in some serious stimulus programmes along the lines of the US model.

In Europe the drive to reduce dependence on nuclear and conventional power at the same time as increasing renewable electrical generation cannot be achieved without a massive investment in Smart Grid.

... within 2 years China will be largest single market for electrical transmission and distribution equipment in the world.

In Germany the decision to rapidly close down all nuclear power stations requires a doubling of effort in Smart Grid deployment. The question now is do they have much choice but to slow down the nuclear closure and CO2 reduction programme and spend more on getting the economy back on track.

We suspect that both in Europe and North America compromises on the low carbon economy agenda will have to be made. One solution here is for more use of natural gas to be allowed to generate power from the latest advanced gas turbines that are 60% fuel efficient; a 15% increase in efficiency on existing systems.

They have the capability to rapidly increase and shut down load giving the kind of flexibility to compensate for the downside of renewable power. This would put less strain on the grid and allow more time for Smart Grid to be introduced in a much more integrated and balanced way rather than spending the lion’s share of investment on smart meters when they can’t deliver their full potential until all aspects of smart grid are in place.

Investment in smart grid may lack growth in the next 2 years in the developed economies of the world but the present programmes in China and Asia will press on and within 2 years China will be largest single market for electrical transmission and distribution equipment in the world.

Acquisitions Have Doubled In The Last 2 Years; But The Major Suppliers Elect Not To Join In

noreply@blogger.com (Jim) — Wed, 05 Oct 2011 07:59:00 +0000

One of the more baffling and intriguing findings of our 3rd annual report The Physical Security Business in 2011 is that despite a surge in acquisition activity, which has doubled in the last 2 years, most of the traditional market leaders have not participated and watched this going off from the sidelines.

It is not easy to fathom out why... because like all multinational companies, up to 2008 / 9 they had an active policy of growth through acquisition and they all have strong cash reserves. By 2010 the security industry had got itself back to profitable growth and the industry had proved itself to be an attractive robust business, as our report shows. Although company valuations have gone up they are still below 2008 levels. So what could be the reason or reasons for this change of attitude to this business? They have the money and attractive companies are available to buy at realistic prices. This has been proven when outsiders (some with deep pockets) are taking their share of the market, through acquisition without any 'retaliation' (so far).

In the report we delve into the details of the structure and shape of the market showing that most of the relatively medium to small companies are focused on one product area; specialise in introducing innovative technologies. Those that backed IP Networking products 10 years ago now hold the strong ground.

The multinational companies such as Bosch, Honeywell, Johnson Controls, Schneider Electric, Siemens and UTC Technologies are both product manufacturers and system suppliers and cover almost all aspects of physical security. When you take account of this and review market share on the basis of product sales (which our report does), then it shows that average market share figures are little more than 3% with the highest around 12%. If you then start to look at market share in some of the segments, say the fast growing IP Video networking camera market (not inconsequential at $1.3 billion) then the leading supplier Axis Communications has a share around 35% with no other supplier in reach.

You then have to wonder if some of the major traditional suppliers are spreading themselves thin on the physical security front and need to refocus on either the product or systems business or combine these to focus on particular product areas for specific vertical markets.

Most have been successful in growing their systems business during the last 3 troubled years. One of the major reasons for this is they have fed off their heritage estate business and at the same time have integrated activities from other parts of their organisation such as fire detection and extinguishing, evacuation control, mass notification and energy management into holistic solutions for their clients. Siemens have shown an acquisition appetite for specialists in verticals such as transportation; last year they acquired Republic Intelligent Transportation Services to expand their reach in the traffic solutions and services business. A combined portfolio of Siemens' products and solutions and Republic's services and maintenance provides an opportunity to leverage their expertise.

It has been quite clear since the beginning of this decade that in order to grow the business some fundamental changes had to be made to attract buyers. The new business model had to be built around "How through IP technology, do we move the clients security operations from a cost centre to a cash generator and converge with the business enterprise?" Because growth will get little benefit from marginally better economic trading conditions in the future but from new products and systems that deliver a better return on investment.

Our report shows that much of the investment in acquiring security companies in the last 2 years has come from outside the security business particularly Defense and IT / Communications companies. They are able to leverage their expertise to join up solutions with the business enterprise and we think they see this business as much more than a safe port in a storm.

So the traditional majors of the physical security business now have a growing number of new competitors from outside the industry and a stronger competition from product specialists in the middle ground. The recent manouverings of Tyco to split in to 3 separate companies with 2 based on security and safety is very likely to open up the opportunity for at least 1 "mega merger" in 2012 and our betting is that the traditional major players in our industry will not sit it out this time around.

Venture Capital Funding is Gaining Traction in the Smart Grid Industry

noreply@blogger.com (Jim) — Sat, 10 Sep 2011 17:51:00 +0000

This time last year our blog ran the title “Will Smart Grid Outperform its Clean Tech Cousins and Become the Jewel in the Crown?” We cited a number of reasons why the financial community found it the rather unattractive dull member of the Clean Tech family but noted that more investors were giving it a second look with some now of the belief that it is a more attractive business proposition than renewables. We explored the reasons why they were changing their minds and these included;

* The Renewable Energy business is taking longer to deliver against its promises and needs more funds before it will generate profit. Most systems are capital intensive and rely on “old technology” that has a strong element of empirical science which has not always scaled up too well.
* The vast majority require large subsidies to compete against traditional energy sources. Whilst it is a given that these subsidies are necessary and will stay in place for some years, they have in some countries been drastically scaled back. It is the fact that they are dependent upon them that in the present economic climate makes investors nervous.
* The major factor that seals the attractiveness of Smart Grid’s investment potential is that unless we have a Smart Grid, renewable electricity power will not be able to deliver. It is the only solution of matching the supply of electricity with demand at the point of usage given the highly variable electrical output received from renewable sources.

Investment in Smart Grid technology is not immune to risk but it does offer some antidotes to these concerns. The first is that the technology is for the most part is well proven and the solution is not so capital intensive and could offer many profitable add on services.

The major part of the business will be retrofitting existing transmission and distribution systems and therefore major cost savings will be gained for minimum capital outlay. That will definitely make the investment proposition more attract for both the electrical utility suppliers and major property and industrial users with the latter installing micro grids.

Currently the Achilles’ heel for Smart Grid is the security issue and closely allied to this is the lack of a common communication protocol. However the world’s major IT and Communications companies are clamouring at the gate to enter this business and we should not doubt that they have the technical and financial strengths to solve these problems. At the same time this would relieve the Utility Companies of the major responsibility of finding the investment funds in this area of the business in which they also have little expertise. Unfortunately the utility companies want to hang on to this value add business and are in many cases intent on stalling progress here.

We are in the final stages of completing a report entitled “Smart Grid – Analysing Global Opportunities” which has the objective of establishing the state of the world Smart Grid industry in 2011, the factors that will shape the business over the next 5 years and then identifying business opportunities, particularly those that can be realised through acquisition, mergers, alliance and investment. This has shown that Venture Capital companies are now more attracted to investing in the Smart Grid Industry.

Mercom Capital Group in their report on smart grid funding in the Second Quarter 2011, shows that venture capital (VC) funding in Smart Grid in Q2 came in at $104 million in 15 deals, compared to $76 million in 13 deals in Q1 of 2011.

Our figures show Venture Funding to be significantly higher with $270million in the first quarter of 2011 and $191million in the second quarter, giving a total of $461 million for the first half of the year. This compared with $506m in the first half of 2010 and $675 million in the second half.These are substantial figures and show that whilst VC funding was down in the first half of this year if the trend for the second half to improve continues, funding could reach $1 billion.

At the same time we have recorded merger and acquisition activity in the Smart Grid sector amounting to a huge $4.734 billion in 12 transactions in Q2 compared to 16 deals at $772 million in Q1 of 2011.

The most significant M&A transactions were Toshiba Corporation’s acquisition of Landis+Gyr for $2.3 billion and Schneider Electric's acquisition of Telvent for $2 billion. Golden Gate Capital also pitched in with the acquisition of Tollgrade Communications for $137 million. At the same time the traditional electrical power transmission and distribution industry has reported significant growth in revenues in 2009 and 2010 and the first 6 months of this year the rate of growth in revenues and profitability has increased.

These facts show that Smart Grid is in a buoyant state and that manufacturers and systems suppliers are confident of its future. It seems that this is now rubbing off onto the VC companies.

At the beginning of this year we expected that many of the VC backed pure smart grid companies would go for an IPO in 2011. Silver Spring Networks announced in July that they would be going public through an IPO but there appears to be a delay.

In May Landis + Gyr, was acquired by Toshiba after it had announced that it would go public some 6 months earlier by owners Australian investment group Bayard Capital. Their timing could not have been better as demand for smart meters is expected to peak in 2013 after a tremendous run of growth and has been a major recipient of stimulus funding over the last 4 years.

So Venture Capitalists are making a good return on some of their Smart Grid investments and this will be the main driver for continuing to invest in Smart Grids future.

Video Surveillance will Maximise its Opportunity when it attends to Social & Ethical Challenges

noreply@blogger.com (Jim) — Thu, 01 Sep 2011 09:21:00 +0000

In Europe there has been a steadily growing campaign during the last five years to restrict the use of Video Surveillance in public areas. It has been based on the assumption that it infringes on the privacy and liberties of citizens.

Since the August Riots in major cities in the UK, "Big Brother Watch" has been silent because many of the million plus CCTV cameras in the UK played a pivotal role in bringing about swift justice to the perpetrators; this will act as a strong deterrent to others.

The Metropolitan Police has confirmed that nearly 3,300 notifiable offences have been reported so far following the outbreaks of disorder across London, and that 1,875 people have been charged in London alone. The Force had around 20,000 hours of CCTV footage to trawl through and it is expected that this will increase as the investigation progresses.

Not even the most die-hard supporter of Video Surveillance lays claim that it will stop terrorist attacks, riots and murder on our streets but it can prevent and mitigate its impact as recent events have proven.

In the UK support for the use of CCTV appeared to be falling off but we now expect a resurgence of interest in how its application can be improved through the latest technology.

Members of the British Security Industry Association (BSIA) have already reported an increase in requests for security as a result of the riots that have affected the country this week. They claim that “CCTV systems, already a popular security measure to assist before, during and after attacks and intrusions, are also becoming an essential tool in the identification of the culprits of this week's violence”.

However we should not ignore the social and ethical challenges facing the surveillance industry; they are real. So it was interesting to read this week that Reading University has unveiled plans to lead a new €5.3m European Union funded research centre that will examine the social and ethical challenges the surveillance industry faces.

One of the key areas it will look at is the possibility of integrating video analysis and context information to provide privacy-awareness filtering at the camera end. The cameras would be taught to spot and record only people or events of potential interest to organisations such as the police. It would make it particularly useful when having to examine footage from a large number of cameras during live situations, such as the recent riots.

In the USA, as our soon to be released study, ”The Physical Security Business in 2011” shows in the last 3 years there has been a rapid increase in Video Surveillance based on the latest IP Networking technologies.

At this time the major obstacle to its implementation is limited funding but this is being overcome through Public-Private Partnerships funding. In the last 18 months, hundreds of communities have installed Video Surveillance schemes. To ensure that this momentum continues, attention needs to be given to ensure that privacy awareness filtering is provided for. Otherwise this precious high growth application will not reach its zenith.

Securing New Ground™ Conference Gathers Executives, Investors and Users of Security Technology for Information, Strategy and Insights.

noreply@blogger.com (Allan) — Sun, 21 Aug 2011 17:21:00 +0000

These are uncertain times for all industries, including security. Businesses, investors and customers demand effective, efficient security and life safety technology solutions and business models.

The 16th annual Securing New Ground™ conference provides insights and expertise on these issues from market thought leaders. Held this year Nov.1-2 at the Roosevelt Hotel in New York City, the conference focuses on the business of security and on identifying business trends and opportunities for the coming year.

For example, the View from the Top session on day two is a unique and vital discussion where industry leaders share their vision for successful business strategy and execution in 2012 as well as reflect on their successes and surprises during 2011.

In addition to revealing their hopes and fears for the year, they will share their economic outlook and offer a bold prediction on the year ahead. Another session, Wall Street Perspectives, will provide attendees with a macro-economic outlook on debt markets and their implications for security company transactions.

Securing New Ground™ attendees actively participate in these and other insightful presentations and discussions. Productive sessions and networking opportunities also allow interaction with attendees of the Security 500, The Business Conference for Security Executives.

The Security 500 conference, held concurrently and open to all SNG attendees, focuses on the business impact of security leaders. The 5th Annual Security 500 will bring together security leaders from the Security 500 and other organizations. The sessions at the Security 500 are a great way to meet and interact with end users.

Securing New Ground’s robust program delivers critical business intelligence. It is the conference for finding new opportunities, doing business and seeing the future of our industry. All attendees receive a copy of the Securing New Ground annual report, a document that features Memoori’s report Survey of the Security Business 2011: Shape, Structure & Consolidation.

To register for the conference visit the SNG website or contact Rebecca Hall at +1 (703) 647-8492. Investors should contact Ms. Hall for special pricing options.

A Financial Storm Ahead? The Physical Security Industry Will Sail Through It!

noreply@blogger.com (Jim) — Thu, 04 Aug 2011 14:04:00 +0000

The Physical Security industry has performed well for the first 6 months of this year and we are bullish about the prospects of continued growth for the full year.

However a financial cloud is gathering which is affecting confidence for world economic trading conditions. Debt problems in Europe look to be more serious than first thought 6 months ago, and now the impending cap on the US Federal budget deficit will probably constrain world growth prospects in 2012.

These factors will affect buyer’s budgets in Europe and North America but it is anticipated that they will have less impact in Brazil, Russia, India and China where growth in demand for security products is currently much higher.

There is only one solution to reducing the impact of these events or even nullify them; and that is continue with the innovation programme of delivering more effective security systems at lower prices.

This is the reason for the security industry coming out of the recession in 2009; in a much better shape than most other industries. It has consistently delivered more for less and more importantly provided much higher rates of return on security investments.

Now has to be the time to dig even deeper and increase all efforts in developing wireless technology, IP networking cameras, HDcctv, managed video as a service, analytics and convergence with the business enterprise.

This may be best achieved through merger, acquisition and alliance. These activities have in both volume and value terms increased significantly in the 1st half of this year and this has continued into July.

In January this year we forecast that 2011 would be a bumper year for acquisition and merger activity and in the first 6 months of this year the industry is well on track to achieve this.

We identified 45 deals having a value of $6.506 billion and for the same period in 2010 we noted 43 deals having a value of $2.9 billion.

In June this year two major deals accounted for almost 70% of this. We have recorded 6 acquisitions in July compared with only one in the same period of 2010. The most significant of these transactions was Xtralis’s acquisition of Germany's HeiTel Digital Video, bringing Xtralis into the remote video market; Identive Group’s acquisition of Polyright SA, a provider of identity management solutions for the education and healthcare markets based in Sion, Switzerland and Verint System’s acquisition of Vovici, an industry leader in enterprise feedback management (EFM) solutions. All of these were strategic buys and were paid for in cash.

Investment in the industry was particularly buoyant in July. Devcon Security, a super-regional alarm company that has rapidly expanded into a national US player in the past year, announced a new $215 million credit facility that includes $110 million in new financing. Vector announced on July 28 the completion of a new $225 million credit facility that includes $75 million in new financing and the GEO Group announced that its Board of Directors has approved a stock repurchase program of up to $100.0 million of GEO's common stock.

The most encouraging feature of the business is reflected in the financial performance of security players. The 4th Quarter 2010 and 1st Quarter 2011 financial announcements showed for the most part revenues and profitability well up on the same quarter of 2010 and this has continued with the 2nd quarter announcements that have just been released.

The traditional players active in most segments of the market such as Ingersoll Rand, Johnson Controls, UTC, Nice and Honeywell have announced growth in revenues and profitability in the 2nd quarter as have the specialist smaller niche players such as Vivotek, Video IQ, 3VR and Mobotix.

One thing is for sure the security industry is going to ride out this anticipated financial turbulence because it is in a healthy state and has confidence that it has been through worse before.

Supply Security has to be the Main Driver for Modernising the US Grid; Not just Reducing Customers Energy Bills

noreply@blogger.com (Jim) — Tue, 02 Aug 2011 16:18:00 +0000

Most European electrical professionals find it rather surprising that given the US grid has a poor outage performance its first priority has not been to prioritise smart grid investment towards automating demand response, which would make a much bigger impact on improving robustness.

Smart meters appear to have hogged stimulus and other investment funds. Although they will improve energy efficiency and help balance demand, apart from remote billing they have limited capability until the full infrastructure is in place, operating on a common communication protocol.

The European perspective on the US approach to the implementation of smart grid and particularly smart meters is that there is far too much concern about consumers, what they want and how much they are prepared to pay. If smart grid is to become a key enabler of a worldwide low-carbon economy then all of the stakeholders will have to contribute in order to benefit.

The Europeans have reluctantly accepted that this can’t be achieved without massive investment, which will inevitable increase electricity prices in the short to medium term, which are already way above US levels.

The immediate crisis in the US over a threatened debt default seems to have been averted by an 11th hour deal between the White House and Congress. But this drama has left behind crucial questions about the American political process, and the viability of economic policy options and implications to major issues like Smart Grid and the future of efficient energy systems.

Less government aid will be made available to stimulate the business and more will have to come from all of the stakeholders. When this happens better decisions on how to implement policy are more likely to come to the forefront.

However behind the scenes possibly more has been going off than has been reported by the media. The heat wave that has melted much of the US this month, setting new records of electricity consumption, has for the most part not caused the outages that would normally have been expected. So the investment that has been made on demand response (DR) is now delivering results.

We are currently carrying out a world market sizing exercise on the various components of pure smart grid and this confirms that the US utilities in 2010 have significantly increased their investments in equipment to improve the quality and reliability of transmission and distribution equipment.

Purely from anecdotal evidence it would appear that most of this has been spent on individual projects to optimise voltage and correct power factor rather than investing in joined up fully automated network programmes.

However one area where the US is ahead of Europe is in the ongoing consolidation process of the electrical equipment and smart grid industry. This is absolutely vital if the industry is going to avoid problems. We have been charting the merger & acquisition market for the last 4 years and in the last 12 months it has forged ahead with some 80 deals being completed; the majority in the US, and as a result the US industry is now much stronger and healthier and capable of delivering smart grid solutions.

In addition venture capital is far more prominent in investing in innovative new start companies in the US than in Europe and over the last year smart grid has started to increase its share of the clean tech funds.

These 2 factors plus an improved financial performance of US smart grid suppliers in 2010 and the first 6 months of 2011 would suggest that the industry is in good health and has the capacity and capability to deliver a smart grid capable of meeting the demands of the 21st century.

SMi Group’s Inaugural Distribution Automation conference, 10th & 11th October 2011

noreply@blogger.com (Jim) — Wed, 27 Jul 2011 19:19:00 +0000

SMi Group are delighted to announce their inaugural Distribution Automation conference taking place on the 10th and 11th October 2011 in London. Critical to the efficient and reliable operation of the Grid, Distribution Automation could create a self healing grid with real-time monitoring adjustments to changing loads, generation, and intelligent control that would reduce potential outages without operator intervention.

This conference will bring together European utilities and technology leaders for an in-depth review of this key component set to transform the Smart Grid network. With presentations and case studies focussing on the benefits of investing in Distribution Automation; the challenges and business case, this conference promises to be an unmissable European opportunity to learn and network with other leaders in this field.

This high level conference programme will be delivered by some of the industry’s senior professionals including:
* Teresa Fallon, Manager, Smart Networks, ESB
* Matthias Grandel, Head of Technology & Solutions, E.ON
* Mike Edgar, Strategy Development Manager, Future Transmission Networks, National Grid
* Jesus Carrillo Martinez, Head of Real Time Systems and Infrastructure, Union Fenosa
* Maarten Van Riet, Research and Development Manager, Alliander
* Ville Maksimainen, Manager, Operation Planning, Vattenfall
* Osmo Siirto, Unit Manager, Distribution Network, Helen Energy
* Simon Noon, Business Development Manager, Tait Radio
* Terje Gjengedal, Senior Vice President, Research and Development, Statnett
* Wim Kerstens, Expert Asset Management, Stedin
* Ruth Martin Soria, Innovation Project Manager, Endesa
* Goran Strbac, Professor of Electrical Energy Systems, Imperial College
* Mark Ossel, Vice President, ESNA
* Eric Woods, Senior Analyst, Pike Research

For more information and to book your place at this unmissable event visit http://www.smi-online.co.uk/distributionautomation31.asp or alternatively contact Jamison Nesbitt on +44 (0) 207 827 6164 or jnesbitt@smi-online.co.uk

About SMi Group
The SMi Group is a world leader in business to business information. With nearly two decades in the business, thousands of senior executives from blue chip companies have already benefited from SMi's highly targeted conferences, workshops and publications. For more information visit http://www.smi-online.co.uk

The Security Industry Is Not For Turning.

noreply@blogger.com (Jim) — Mon, 04 Jul 2011 20:29:00 +0000

The physical security industry in the first half of 2011 has well outperformed what most stakeholders had forecast; despite setbacks in economic fortunes.

Towards the end of last year optimism had returned to the market as economic trading conditions started to improve; but in the last 3 months indebtedness has come back to haunt the financial markets and the mood of optimism for world trade has been seriously set back.

Despite this the physical security business has in the last 3 years proved to be very robust and now that growth has returned to the market it is not for turning. The drivers that have made the difference to our industry are still fortunately well in place.

Terrorism, safety, and shrinkage issues have not gone away, but it is the adoption and application of new technologies that is playing the major part in driving the industry forward. The emerging markets have for the most part shrugged off the world economic ills and this has also been a bonus to the security industry. China and Brazil in particular are increasing their investment year on year and for the foreseeable future.

But what is so encouraging about our industry is that it has not sat back and just taken what it has been given. The industry has been innovative both technically and commercially and has produced better products at lower prices that deliver on ROI; and this is why buyers are investing in new systems.

This is why IP Networking products have pushed ahead with a forecast growth of 35% this year. Those companies that have focused on IP network products have increased their market share and at the same time have increased their profitability.

In January this year we forecast that 2011 would be a bumper year for acquisition and merger activity, and in the first 6 months of this year the industry is well on track to achieve this. We have identified 45 deals having a value of $6.5 billion and for the same period in 2010 we noted 43 deals having a value of $2.9 billion. In June this year 2 major deals accounted for almost 70% of this.

EQT owners of Swedish alarm company Securitas Direct sold out to Bain Capital and Hellman & Friedman for almost €2.3bn ($3.26bn) in what has become a rare case of a private equity groups outflanking a strategic buyer.

Stanley Black & Decker, along with the buyout giants Carlyle and Clayton Dubilier & Rice, also made an offer. However Stanley Black & Decker Inc. was successful in outbidding Securtas for the acquisition of Niscayah. It offered to buy all of the outstanding common stock and warrants for SEK18.00 a share in cash, valuing the deal at $1.2 billion including debt. Securitas has not yet conceded defeat but neither at the moment is it prepared to up its offer.

It is interesting that private equity groups are taking a liking to the security industry; will this drive up values?

With the exception of Tyco all the other major security manufacturers are keeping a low profile on the merger / acquisition front so far this year. This is surprising given that most made public last year that they would be active buyers in 2011.

Although this month there has been no further comment published on the Schneider Tyco merger rumors, we believe that this is not the end.

Where Should We Start When Developing A Smart Grid?

noreply@blogger.com (Jim) — Sun, 03 Jul 2011 18:10:00 +0000

Where ever we are going we start from where we are now and that point in the Smart Grid industry is very different across the world. Surprisingly, no where more than in the world’s developed countries. In Northern Europe the electrical transmission network is robust and reliable, as much of it, for some years has been regularly refurbished and fitted with automatic controls. In Germany this has allowed electricity from renewable energy sources, which now account for some 15% of the total generating capacity, to be accommodated without any problems.

In some quarters they are confident that this figure can probably be doubled before they need a fully digitized network in place. They are now initiating smart metering projects and no doubt the whole communication and information structure will fall in place with time.

At the other extreme is the US, the premier source of innovation and entrepreneurship in IT and Communications and the application of this technology to produce a fully digitized electrical network. But before it can become smart and efficient enough to accommodate this brave new low carbon renewable energy world, the US electricity grid needs a lot of work. The average annual outage in the US can be as high as just over 200 minutes, which is costing them dearly. It is not surprising therefore that electrical generation and transmission infrastructure in the US is receiving so much attention from the President’s desk, with much support from stimulus funds and generous tax hand outs.

It is no surprise therefore as to where technology advances and investment will be made during the next 5 years. Smart meters have taken the majority of investment but the move now (and not before time) is to attend to and spend on the aging T&D network.

So far the largest spend for any single segment in the Smart Grid business has gone to smart meters. The reason for this is that the basic network grid topology was built on stand-alone facilities offering limited if any interactive networked intelligence from the substation, distribution and transmission side with even fewer capabilities on the user-demand side.

With limited network capabilities in place, the US power companies pushed to offer end-user network intelligence for every user on the demand side of the grid and this was thought necessary to quickly show Smart Grid utility ROI and power generation savings. The basic demand-side theory was that if you could gather intelligence from the power grid demand side first, you could immediately reduce peak load consumption offering tremendous capital and raw material recurring savings.

This approach is now being questioned because it is not being built on a firm foundation of a reliable, robust and flexible T&D network. As explained in last month’s blog and it now seems more likely, that demand response and pricing signals to homes and businesses could be better achieved via the internet through a combination of Home Area Networks and Energy Management software.

However Electrical Utilities would much prefer having an AMI infrastructure which they control. Developed countries have elected to adopt different strategies when bringing their transmission and distribution networks into the Smart Grid age and time will tell which strategy has been most successful.

Most developing countries seem to be going for the US model. However in China the majority of their investment is going into constructing new facilities and here they are incorporating digitized systems into their transmission and distribution networks.

Other BRIC members have been more attracted, it would seem, in starting their Smart Grid programs by installing smart meters. But when it comes to volume of spend China will eclipse all other countries by 2015 and the major segment of the business will be automating the control and balancing of demand and communications in transmission and distribution networks.

Obama Administration Unveils Programs to Build the Smart Grid

noreply@blogger.com (Jim) — Tue, 14 Jun 2011 14:17:00 +0000

Yesterday the Obama Administration announced several programs and initiatives that should help add IT to the electrical power grid in the US.

So far investment by the current US administration totals some $4.5 billion, which was matched by $5.5 billion in private money. Monday's announcement will follow up on this.

The 9 programs and initiatives announced are as follows;
1. A minimum of $250 million in loans for smart grid projects in rural places in U.S, as well as a potential $106 million in upgrades.
2. A new non-profit program called Grid 21, which will focus on spurring consumer-facing tools enabling consumers to reduce energy consumption.
3. DOE working on new projects, including a crowd-sourced map to track progress of smart grid projects and a student competition around home energy efficiency.
4. Launch of a new website - http://www.smartgrid.gov
5. A new “Renewable Energy Rapid Response Team,” that will review clean power and transmission line projects and improve “federal coordination” for getting clean power projects deployed.
6. Creation of ways for grid operators to have access to information about threats to the power grid, and creation of security standards.
7. In the President’s fiscal year 2012 budget, the DOE has asked for funds to build a “Smart Grid Innovation Hub,”.
8. The DOE program "Advanced Research Project Agency-Energy (ARPA-E)" will support new smart grid research.
9. The administration released a report that focuses on 4 ways to help modernize the grid, including how to better align economic incentives that will spur smart grid technologies.

A Smart Time to Exit Smart Meters as IP-Based Services Start to Muscle In

noreply@blogger.com (Jim) — Mon, 06 Jun 2011 14:03:00 +0000

This month saw the first billion plus acquisition of a pure Smart Grid company with Toshiba’s purchase of Landis+Gyr for $2.3 billion .The owners of Landis+Gyr, the Australian investment group Bayard Capital announced over a year ago that they would go for an IPO within 2 years. It was therefore no surprise when rumors started in April that strategic buys were being considered from a number of suitors including GE. With the exception of GE all the other traditional electrical giants do not have a smart meter business so the odds were always in favor of one of them finding this buy irresistible. This sale was always going to be contested, as Landis+Gyr are the number one producer of electrical smart meters and have the widest exposure to world markets.

Toshiba was not thought to be the most likely buyer but they were more prepared to dig deep into their pockets and bring a big smile to the Australian / Irish faces of the O’Reilly dynasty (being the major shareholders). Landis+Gyr a private company was thought to have earned about $200 million on about $1.5 billion in annual revenues in the last year. That puts a $2.3 billion price in the realm of long-term investment. But this strategic buy should allow Toshiba to squeeze a lot more value out of L+G by integrating its existing technologies and utility projects into their own lines of business. Toshiba is a huge player in power and grid systems, alongside Mitsubishi and Hitachi, particularly in the Asian markets.

Landis+Gyr, employ approximately 5,000 people, and have in recent years seen frequent ownership changes. In the 1990s the company formed part of Switzerland’s former Elektrowatt group, before going to top private equity group KKR and then to Siemens, Europe’s largest engineering conglomerate. In January, Landis+Gyr was chosen by the State Grid Corporation of China to supply more than 10,000 commercial and industrial advanced electricity meters for 6 provinces in what will be the world’s largest smart grid.

In 2004, it was bought by Bayard. The Australian investor’s founder and chief executive is Cameron O’Reilly, son of the Irish billionaire Tony O’Reilly.

This seems like a good time to sell as demand for smart meters is expected to peak in 2013 after a tremendous run of growth and has been a major recipient of stimulus funding over the last 4 years. Smart meters are synonymous with smart grid to the extent that it is regarded as the cornerstone of its development. However there is a growing view out there that demand response and pricing signals to homes and businesses can be better achieved via the internet.

Vineyard Power on Martha’s Vineyard, the island off of Massachusetts’ Cape Cod, is involved in a pilot program with GE, utilizing GE’s Nucleus energy management system and the company’s Brillion smart appliances. So far, the pricing signals are simulated and based on regional wholesale electric rates.

The Nucleus energy management system passes this information along to the GE smart appliances, and they can delay a cycle, depending on the cost of energy at the time. Homeowners maintain the option of overriding a delay. So in this case the Internet is superseding AMI (Advanced Meter Infrastructure) meters, through a home area network that is connected to the Internet.

Providing such IP-based services over the net would require some level of energy management within the home, such as what’s being done with GE’s Nucleus systems on Martha’s Vineyard. That means more of an emphasis on whole-house energy management systems with possible tie-ins to other systems such as security, lighting control, HVAC, motorized shading and home control and automation - whereas smart meters could communicate pricing and other signals directly to smart appliances.

Home energy management systems could also offer homeowners more options - such as more sophisticated levels of preprogrammed preferences than are more likely to possible via basic smart meter-to-smart appliance connections. For example, whether to turn on an appliance might be dependent upon not only a signal being received from the utility but on the amount of energy that has already been consumed in a home that day, week or month.

It would appear that electrical utilities are not particularly interested in using this alternative, they want to be assured that they can count on the proper responses to control and balance demand and they are now committed to the smart meter solution. However the IP-based energy management system is a practical, and in many cases more cost efficient, solution.

We have noted a number of acquisitions over the last 6 months where the rationale has been to bring about a solution to interface smart grid with home area networks and energy management so we expect this technology will be used more extensively in the future.

This is just one factor that is driving consolidation. This month we indentified 7 acquisitions including Toshiba’s purchase of Landis + Gyr. This deal should ensure that consolidation in the Smart Grid business in 2011 will well exceed 2010. But on June 1st the news broke that Schneider Electric said it will pay about $2 billion for shares of Spain-based Telvent, so we can now be assured that 2011 will be a mega year for Smart Grid consolidation.