IMS Research Evaluates Smart Grid Equipment MarketApril 16, 2013
Predicts that the shale gas boom will fuel the rebound in growth for the smart grid equipment market in North America.
AUSTIN, TX -- The shale gas boom in the United States will play a key role in the development of the nation's smart electricity grid, affecting almost every part of utility infrastructure decision making in the coming decade—and driving a resurgence in market for related equipment starting in 2015.
After three years of decline, the combined market for distribution automation hardware and smart electricity meters in North America will resume its expansion in 2015, with revenue rising to $3.2 billion, up 3 percent from $3.1 billion in 2014, according to a new report from IMS Research, now part of IHS (NYSE: IHS). By 2017, the market will expand to $3.6 billion, as presented in the attached figure.
"The shale gas revolution in the U.S. is having a massive impact on the energy market, with the new energy production expected to bring the country closer to energy independence, an event with major economic and geopolitical ramifications," said Donald Henschel, senior analyst, metering and energy management, for IHS. "However, this development is also having an impact in another, more surprising area: the smart grid. Natural gas is optimal for use in smaller distributed-generation operations, which can form the basis of microgrids. The rising attractiveness of flexible, adaptive microgrids will help the smart grid grow to overcome the serious challenges faced by this region's utility sector, and will drive growth in sales of required equipment in the coming years."
Smart Meters Get Smarter
Smart meter shipments hit a high point in 2010 thanks to the surge of money made available by the American Recovery and Reinvestment Act (ARRA) of 2009—better known as the stimulus. The U.S. smart meter market then entered a major decline in 2012, with shipments plunging by 16 percent.
However, the contraction is expected to moderate in 2015, and growth will return in 2016.
Smart electricity meters represented the first wave of publicly visible investment in the smart grid in much of North America. These devices lowered costs associated with billing, especially for rural electric cooperative utilities, which were often early adopters.
Newer smart meters using communications technologies like cellular, meshing or point-to-point radio, direct fiber, or next-generation PLC communications offered utilities the ability to collect meter data essentially at will, without sending staff into the field. Additionally, most of these metering systems provided for two-way communication, allowing the meter to be updated or reprogrammed, or in some cases, for the power connection to be severed remotely.
Now, there is growing potential for these meters to play more active roles in the operation of the electric grid, serving as data collection points for advanced grid applications, like conservation voltage reduction (CVR).
Distribution Automation Market on Automatic
The distribution automation market consists of 25 equipment types, including the full range of intelligent electronic devices (IEDs), voltage regulators, capacitor banks and switches, reclosers and other switchgear. These devices play a critical role in the smart grid, and their sales revenue is expected to rise through the period from 2010 to 2017.
Stimulus Stimulates Smart Grid
The rapid growth in smart metering in the U.S. can be attributed almost completely to the effects of the ARRA in 2009. This program offered up matching funding for smart metering and other smart grid projects, enabling utility companies to invest in smart grid projects at effectively half price.
"ARRA has redefined the U.S. and thus the greater North American smart grid market, reshaping investment patterns for years to come," Henschel said. "By halving the cost of new smart metering systems and distribution automation projects as well as application testing, ARRA created the environment for smart grid development with three big changes. First, it built up a new, much larger installed base of field networks and sensors. Second, it allowed decision makers at utility organizations to see the value of these technologies in viable use cases at neighboring utility networks. Finally, it created the market volume necessary to encourage greater competition, innovation and cost reduction in what had been previously much smaller, higher-cost equipment markets."
Natural Gas has a Gas
Late in the first decade of the 21st century, the availability of natural gas in North America increased dramatically. The refinement of shale gas extraction techniques and the discovery of further tight gas resources converged to allow for the rapid increase in domestically available natural gas. Hydraulic fracturing, commonly called "fracking," began to be applied to shale formations rich in natural gas at the very end of the 20th century. Subsequent discoveries and field developments have made natural gas extraordinarily cheap. These low prices are also being driven by a lack of short-term export potential, as the infrastructure to compress or liquefy and ship natural gas to hungry oversea markets is still being built.
Natural gas affects the utility grid in several ways. Its rising role in centralized generation is critical, but the opportunity for natural gas also extends to more affordable and environmentally sound microgrid development, providing energy security on distribution networks.
On the Grid
Other factors propelling the growth of the U.S. smart grid market include:
- The increased availability of dedicated sensors, which together with smart meters are expected to spur the next wave of smart grid schemes
- The requirement for greater security in the electricity grid
- Strong demand from rural electric cooperatives, which are emerging as technology and business innovators in North America
- A profound inflection point in the growth of the microgrid market, spurred by requirements for improved reliability and reduced operational cost
- A range of new challenges for electricity utilities that could be addressed by smart grid technology, including severe weather, electric-vehicle charging and increased stress on aging grid equipment
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