Greentech Media has been tracking the rise of distribution automation as the next big sector for utility smart grid investment -- and the next big sector for industry consolidation.
GTM Research predicts the U.S. market for distribution automation -- the sensors, controls, and centralized or distributed intelligence needed to manage distribution grids -- will grow to $3 billion by 2015, as stimulus-funded projects start to prove their cost-benefit ratios to utility regulators.
GTM Research smart grid analyst Ben Kellison has also laid out how the DA sector is ripe for consolidation, with the “Four Horseman” of the grid -- Siemens, Schneider Electric, ABB and General Electric -- spending billions of dollars on acquiring startups and long-established companies that help them fill out the gaps in their distribution grid offerings.
Beyond the Four Horseman, we’ve got heavyweight transmission grid and utility control center player Alstom Grid, as well as select second-tier players with less money than the big boys but with key technologies for the DA sector, including Cooper Power Systems, Current Group, Efacec ACS, S&C Electric and Schweitzer Engineering Laboratories (SEL). Rounding out the DA list are a host of smaller players that have garnered smart grid venture capital investment and may be prime takeover targets.
Of course, this list used to include a lot of names that have now been swallowed up by the big players in the industry. Smart grid M&A spending leaped to $10.6 billion last year, and volumes should rise to reach $12 billion by 2015 according to Memoori Research. We'll be discussing these trends at The Networked Grid conference taking place this April in Raleigh, N.C. As a preview, let’s review the acquisition track records of the major players in the space (in alphabetical order) and get a sense of what they’ve been doing with their purchases.
ABB: This Swiss grid giant has been among the biggest smart grid acquirers since 2010, spending about three times as much as Schneider Electric and four times as much as Siemens, according to a Bloomberg analysis. It’s also been setting some spending records, including its 2010 purchase of Baldor Electric for $3.1 billion (plus $1.1 billion of new debt), which gave it big market share in industrial motors.
ABB also went big into the “soft grid” in 2010, spending nearly $1 billion to buy Ventyx, a maker of utility and energy industry software that covers everything from transmission and generation planning tools to energy market analysis and execution platforms. Ventyx has since that time more or less absorbed ABB’s distribution grid software into its sprawling software suite.
ABB has since acquired power plant control software vendor Insert Key Solutions and business intelligence software vendor Obvient Solutions to add to the Ventyx mix. More importantly on the distribution automation front, Ventyx has been adding features like transmission flow and outage data management and model-based volt/VAR optimization to augment ABB’s core capabilities in the sector. As for what’s next from Ventyx/ABB, company executives told me at DistribuTECH to look out for integrated demand response and virtual power plant capabilities that it has deployed with Xcel Energy’s SmartGridCity project in Boulder, Colo. and is now piloting with other, as-yet-unnamed customers.
ABB is also on a streak of making smaller purchases to shore up its presence in other sectors. Last year saw it buy fast EV charging startup Epyon, direct current data center power system vendor Validus Systems, European mine management software maker Mincom, and Powercorp, an Australian distributed renewables integration company.
ABB’s most recent acquisition was February’s $3.9 billion purchase of U.S. power gear major Thomas & Betts, which makes reclosers, fault indicators, switch gear and capacitor switches and controls for the low- to medium-voltage distribution grid. The Memphis, Tenn.-based company most recently linked a partnership with long-time grid automation innovator Schweitzer Engineering Laboratories on a new class of intelligent capacitors, and has been linking to fault indicators over Elster’s smart meter networks since last year.
ABB CEO Joe Hogan has said that the company is allocating as much as $18 billion for transactions through 2015, meaning that the grid giant isn’t done filling out its portfolio yet. Perhaps some of the companies that ABB has invested in, including car charger ECOtality, smart meter networking specialist Trilliant or cyber security provider Industrial Defender, could be targets?
Alstom: The grid arm of this French power equipment heavyweight doesn’t have the distribution automation heft of its Four Horseman rivals, specializing more in the generation and transmission side of matters. Its biggest acquisition in this field was its purchase of the transmission assets of French power giant Areva last year for $3.9 billion in cash and $900 million in debt. (Schneider Electric bought Areva’s distribution grid business).
One interesting move by Alstom was its 2010 acquisition of software vendor UISOL for an undisclosed sum. The Santa Clara, Calif.-based company is the brains behind the OpenADR standard for automating demand response, and it also builds DR software platforms in use by U.S. grid operators PJM, CAISO and Midwest ISO. It’s also getting into smart grid architecture services, which could include planning for DA deployments.
On the equipment side, Alstom announced a systems integration partnership with S&C Electric Co., an important player in distributed intelligence DA systems, at last month’s DistribuTECH show in San Antonio, Texas. At the show, Alstom also demonstrated its own distribution grid management solution for Washington state’s Snohomish County Public Utility District, which it announced in November.
Current Group: This Germantown, Md.-based company has shifted from its ill-fated roots as a broadband-over-powerline technology company into a smart grid infrastructure player. It raised $13 million in September, and has projects underway in North America and Europe, with eyes on Asia as well.
Current’s portfolio once included the voltage and reactive power management software it built for Xcel Energy’s SmartGridCity project. Current sold that business to S&C Electric Co. last year, limiting its DA footprint on the software side. It still makes DA hardware, however, and recently landed an underground fault detection and grid monitoring project with Pepco in Washington, D.C.
In Europe, where Current now gets about 95 percent of its revenues, the company has seen its smart metering, communications and sensor technology taken up by Spanish mega-utility Iberdrola for a multi-million smart meter deployment, with smaller projects underway in Portugal and Poland. While these are mainly smart meter projects, Current did beat out S&C to supply Iberdrola with transformer monitoring technology.
General Electric: GE got off to a slower start in the smart grid acquisition space, but it’s still spent a lot of money, with about $11 billion in purchases by GE Energy. The biggest so far has been its $3.2 billion 90-percent stake in power conversion equipment maker Converteam in April 2011. In January, it bought Lineage Power Holdings, which makes efficient AC/DC equipment for large organizations, for $520 million, and in May it bought fault location sensor vendor FMC Tech for an undisclosed sum.
So far, GE’s buys have been concentrated in power equipment and hardware, though it has bought Australian grid software vendor Opal Software to gain entry to the Asia-Pacific market. GE also recently promised to spend up to $1 billion on company-side software development through 2015, a push that includes a new development center in northern California.
GE is already a major player in distribution grid management software and, of course, hardware. Last fall it launched a new smart-grid-as-a-service business line that could give smaller, more cash-strapped utilities the opportunity to integrate DA systems into their smart meter, demand response or other smart grid deployments.
S&C Electric Co.: This Chicago-based grid stalwart has a broad DA offering in the form of its IntelliTEAM SG Automatic Restoration System. The equipment-software-distributed intelligence combo is being used by utilities including Chattanooga, Tenn.’s Electric Power Board (EPB), and presents serious competition to the likes of ABB, Siemens, and GE. It’s also doing a backyard battery, community energystorageproject with AEP in Ohio, deploying a neighborhood’s worth of small-scale batteries that could back up the grid as well as the homes they serve.
As a smaller player in the field (annual revenues of about $500 million last year), S&C will also be hard-pressed to make sure its products integrate with those from major vendors. S&C’s “layered intelligence solution” that combines Alstom’s distribution management system (DMS) and S&C’s automatic restoration gear is a good example of the way DA equipment is increasingly being built with interoperability in mind.
Schneider Electric: This French power gear giant likes to say that 70 percent of the world’s electrons flow through its equipment, though that’s mostly on the building side of the grid, through gear bearing the Schneider brand as well as those of acquisitions like industrial automation vendor APC, inverter maker Xantrex and circuit breaker giant Square D, to name a few.
But Schneider has been making major buys in the smart grid space as well. One of its biggest came last summer, when it acquired Spain’s Telvent for $2 billion. Telvent gave Schneider a booming business in smart meter integration, SCADA and distribution grid management systems to tie into Schneider’s strength behind the meter. In September the two announced new integration capabilities between grid and building-side gear, as well as pulling Telvent’s weather forecasting smarts into the grid management mix.
The two launched a SmartCity line in November, recasting their grid management systems as the glue in a citywide context of smart buildings and homes and plug-in vehicle management systems. Given Schneider’s strength in buildings, it will be interesting to see how it approaches grid optimization from the customer side as well as the utility side.
Schneider also landed a sizeable piece of grid action with its 2010 purchase of Areva’s distribution grid business for $975 million in cash and $386 million in debt. Smaller buys include 2011’s purchase of Virginia-based data center tech vendor Lee Technologies and Indian cabling giant SmartLink Network Systems for $112 million, as well as the Dec. 2010 purchase of French energy analysis software vendors Vizelia and D5X for undisclosed sums. Internationally, Schneider’s recent acquisitions include Indian industrial energy management company Conzerv, Brazilian power conditioning firm Microsol Tecnologia, Australian automation company SCADAgroup and Russian power equipment vendor Electroshield-TM.
Siemens: The German industrial and energy giant had been, until recently, the quietest of the smart grid giants in terms of acquisitions, with only a few undisclosed deals to buy HVAC optimization software startup Site Controls and utility software consultancy Energy4U. At the same time, Siemens was sitting on an 18.5 billion euro ($27 billion) pile of cash as of this June, Bloomberg reported, giving it room to start buying.
Siemens' smart grid push began in December, when it bought data management startup eMeter. Siemens was a long-time partner and investor in the San Mateo, Calif.-based startup, and while most of eMeter’s business lies in the smart meter space, it has been working with Siemens and customers like Kansas City Power & Light to link smart meters and distribution grid systems in a way that could serve DA functions.
Siemens’ utility control center and SCADA systems are widespread in the market, giving it a lot of endpoints and platforms to link up to new technologies. Like General Electric and ABB, Siemens wants to provide demand response as well as distribution grid management, a goal it is pursuing with customers including New York City utility Consolidated Edison announced and enterprise IT provider TIBCO.
Siemens is also looking at the networking gear to link up all of its smart grid systems. In January, it announced plans for a $381 million cash acquisition of RuggedCom, a Canadian maker of hardened grid and substation routers that’s in competition with industry stalwarts like GarrettCom and GE Energy, as well as relative upstarts like Cisco and Juniper Networks.