Stimulus: How the Smart Grid Could Make Out

IDC sees the $787 billion federal stimulus package spurring $77.6 billion in revenues for various "green" energy industries. Most of that is headed for renewable energy – but smart grid observer Jesse Berst thinks smart grid companies could grow revenues by twice as much as the $8.6 billion IDC predicts.

Jeff St. John March 16, 2009

Jeff St. John

Senior Editor
Greentech Media

Reporter covering the green technology space, with a particular focus on smart grid, demand response, energy storage, renewable energy and technology to integrate distributed, intermittent green energy into the grid.

Now that the federal government is set to spend tens of billions of dollars of stimulus money on the new green economy, which industries are going to get the most stimulation?

A new report from research firm IDC says that renewable energy is set to receive the lion's share of new revenues – but that smart grid and energy efficiency companies should expect a decent jolt as well.

The IDC study found that $787 billion stimulus package signed into law by President Barack Obama last month is likely to generate $77.6 billion in sales for the broader green energy industry, according to Bloomberg.

Of that, about $66 billion will head towards renewable energy, the firm found. Energy efficiency improvements, like programmable thermostats and building energy management systems, could garner $3 billion in sales from stimulus spending.

Another $8.6 billion will be directed toward so-called "smart grid" equipment and technology to add two-way digital communication and controls to the nation's electricity transmission and distribution system, IDC found.

But just how these different sectors will get a hold of that stimulus to boost their revenues is still being worked out – and that has a lot of observers wondering whether or not the pie might be sliced a little bit differently.

Take smart grid. The stimulus package specifically addresses $11 billion toward smart grid, including $4.5 billion in matching grants for smart grid projects to be chosen by the Department of Energy in a process that's still being worked out (see Obama Signs Stimulus Package).

But several other pots of stimulus money could also be open to smart grid companies, which could double that $8.6 billion in projected revenue growth, Jesse Berst, head of smart grid consulting firm GlobalSmartEnergy, said in a recent online analysis.

One example is the $7.2 billion set aside for expanding broadband services to underserved areas, he said. Utilities and partner companies that can show bringing smart grid services to rural areas also includes a broadband component could benefit from that, Berst said – an option that giants like IBM are already considering (see Broadband Over Powerline Brings Smart Grid to Rural Areas).

Likewise, smart grid-related projects that can fulfill a request to "improve energy efficiency in the transportation, building and other appropriate sectors" could seek a piece of the $3.2 billion to be distributed by states through energy efficiency and conservation block grants, Berst wrote.

The stimulus package's $6.5 billion increase in loan authority for the Bonneville Power Administration and Western Area Power Administration is likely to boost spending by those two federal generators and distributors of hydropower electricity, Berst noted.

Energy efficiency might also see a benefit beyond its relatively small share of the stimulus pie, because energy efficiency companies aren't likely to have the same large up-front capital requirements to get going, several observers note (see Best Greentech Exit Strategy: Go Into Energy Efficiency).