Lux Research forecast last week that the global smart grid market will grow some 250% over the next five years, reaching nearly $16 billion by 2015 compared with today’s $4.5 billion. Interestingly, Lux further forecast that only a few select firms will take full advantage of this looming largesse.
It’s understandable why the payoff won’t be widely shared. As regulated entities (on the transmission and distribution side), electric utilities have an obligation (specifically, the time-honored “obligation to serve”) that effectively requires that they be conservative when partnering with IT firms that can provide the money-saving, blackout-avoiding technologies which are at the heart of the smart grid. In other words, big is better.
This is why most of the more than $11 billion of new smart-grid-related revenue that Lux expects to be generated over the next five years will be pocketed by the IT beasts that already are pocketing the yeoman’s share of the $4.5 billion currently being spent.
For at least one firm – demand response leader EnerNOC (ENOC) the potential payoff is life-changing, and only further adds to my purely personal suspicion that EnerNOC is going to be acquired at some point by a much larger firm.
Two logical buyers of EnerNOC would be Accenture (ACN) and IBM (IBM). The two are jockeying for leadership in the rapidly-developing smart-grid analysis and services market, which Lux Research believes is “poised for explosive growth” led by demand response applications.
Still another IT behemoth in line to gobble up billions of new smart-grid revenue is Cisco Systems (CSCO). Think of Cisco as the smart grid’s Mr. Goodwrench. Whether it’s routers, switches or other equipment, Cisco’s goal is to provide the IT components that utilities (with the help of consultants led by Accenture and IBM) will fashion into a system that automates the power industry from end to end – from generation to transmission to distribution to consumption.
DISCLOSURE: No position.
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Bill Paul is Managing Editor of EnergyTechStocks.com.