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Troy Jensen currently is Co-Founder, CEO & Senior Managing Director of Müller Jensen Capital Partners Ltd, an innovative Private Investment Management & Proprietary Trading Firm based in New York City. Müller Jensen Capital's operations include Private Equity, Venture Capital, Real... More
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  • No Size Limit to Ride the Smart Grid! 0 comments
    Oct 25, 2009 8:09 AM
     By Troy J. Jensen, Senior Vice President, SolVentus Energy, Inc.
    October 25, 2009 - Phoenix, AZ:  It's State Fair season again in Phoenix, Arizona, one of two cities in the Southwest I like to call home (with Los Angeles being the other). As I was driving past the fair last week, I marveled at all the rides, from the old favorites to some new, scarier-looking variants. And I looked at all the working parts that held those thrilling rides together - and yet they must be disassembled quickly, loaded onto trucks, and hurried on to thrill another county of fairgoers. To think of all the factors involved in the engineering process - speed, movement, safety, reliability, easy assembly, size limitations for their disassembled pieces - it was truly something to admire. Just before I drove on, I noticed the ubiquitous size limitation signs we all ran up to as children, fingers-crossed that we had grown enough in the past year to finally hop on the big rides. At that very moment, I was on the speaker phone with several Smart Grid executives, one from a large player, and three from smaller start-ups with exciting technology that is currently gaining critical traction in the marketplace. The discussion was a friendly little debate on what role the giants getting involved in the Smart Grid space - companies with household names like Google, Oracle, IBM, General Electric, large utilities and of course, the giant among giants - the Federal Government - would have in terms of their effect on the multitude of smaller Smart Grid contributors. Two thoughts clicked immediately - first, I had just figured a catchy little title for this article - and second, when we stand back, as I did at the fairgrounds, and give a long, wide look at all the working pieces that will integrate and interoperable with each other, you get that same staggering feeling, marveling at both existing pieces, as well as the possibilities. With all the buzz surrounding the Smart Grid, I wanted to further explore the subject of that friendly little debate in my car - will the large players dominate the Smart Grid evolution, dictating standards that may or may not inhibit innovation, or, like the Internet, will startups have a chance to thrive on the Grid, providing the constant innovation that, in my opinion, will be critical to ensuring the optimum evolutionary path the Smart Grid takes.      

    The large firms entering the space as enthusiastically as they are is by no means a bad thing, from any vantage point. Google and GE and Oracle are bringing large amounts of funding, fantastic technology, and very important experienced leadership into the space. It has created the start of the big momentum swing, and both the present Smart Grid solutions and platforms, as well as what is on the drawing board for both near-term and longer-term deployment, is fantastically impressive. The Smart Grid will soon be a household term as it begins to touch end-users in many ways, and is an absolutely critical piece of our nation's energy distribution scheme. It will improve efficiencies and save energy, which has been the primary focus during its current infancy stage. As it evolves, and innovations begin to dramatically increase the Grid's capabilities, the potential impact on the United States economy cannot be overstated. It will change the way we consume and generate energy; it will lead to the discovery of revolutionary new transmission strategies, including the wireless transmission of electricity and space-based electricity generation; it will effect what we drive and how we drive; it will impact industrial production immensely; it will create giant energy markets where various energy sources (not just electricity, but soon fossil fuels and even water distribution); it will lead to dramatic changes in all our electric household appliances; it will usher in a major period of software applications that will utilize the real-time Smart Grid data for numerous executions; ultimately, it will begin a very lucrative transformation period for the United States economy, resulting in a golden period for the US economy; and it will provide the U.S. Economy an extraordinary advantage in the global market. 

    Can the Smart Grid truly be this large of an opportunity?

    Our analysis says it is an opportunity of a very large magnitude, and will positively impact the economy much stronger than the Internet did in the 90's, ushering in the "GreenTech Revolution" period.  , and the largest technology companies are all incepting Smart Grid divisions, preparing for the oncoming opportunity. Google will be a force to reckon with as the Smart Grid begins to gain traction in the next 24 months - they are dedicating not only large amounts of capital to Smart Grid initiatives, but under the radar, a lot of their Tier One talent base. That dedication of elite talent at Google to the Smart Grid and other GreenTech initiatives should not be overlooked, that talent is one of Google's most valuable assets. Google also has strong ties to the current Administration, which is certain to dictate some of the standards of the Smart Grid as it evolves. And Google is also very active in funding smaller Smart Grid players, as well as actively looking for tactical start-up acquisitions and strategic partners in its PowerMeter initiative ( The Smart Grid activities of Google, Oracle, IBM and other major technology providers is a clear indicator at the macro-level that the Smart Grid is ready for an accelerated growth stage, and there are limitless opportunities for investors and entrepreneurs to fulfill the growing needs of GreenTech and the Smart Grid sector. 

    Let's look at the Smart Grid's current evolutionary stage by way of comparison to the Internet's early days and evolution, with the caveat that they are two different animals, but both trying to accomplish the same thing - lightening fast communication of massive amounts of critical data. One important point of differentiation as we make this analogy between the Smart Grid and the Internet is that the Smart Grid's data is directly tied to the efficient, coordinated distribution of the United States' electricity and energy capacity, a CRUCIAL component of social, economic and national security for our nation. This will inevitably require federal, state and local government involvement, as well as involvement from the utilities and the actual energy generators - LOTS of input points that will not allow the Smart Grid to evolve quite as organically as the Internet has, at least in these first few years. Inevitably, to accelerate growth, investment and continual innovation, Smart Grid communication platform standards will have to emerge at several levels.  There are so many small working pieces needed as a large national Smart Grid comes to fruition, we will see constant innovation in a fast-paced environment, just like we saw with the Internet. 

    To further illuminate the issues raised above regarding data transfer platforms, here is a good (if a bit old) article that lays out the communication platform standards and some of the players from 

    To quickly illustrate a glimpse of the opportunity, here are four very general examples:

    1. The Actual Smart Meter - The actual meter hardware, and what communication platform will be used to read it (radio frequency mesh networks, Wi-Fi, Wi-Max, the use of Internet Protocol throughout the stages of data collection, etc) and transmit that information to both the end-user and the utility. The processes and data transfer platforms chosen will dictate how truly real-time inbound data is. One cautionary note: the Smart Meter is the pivot point, if you will, of the Smart Grid - it serves as the connection between all the Smart Grid applications inside a residential or commercial building, and the utility companies, who will desire as much energy usage information as possible to aggregate and analyze, to determine with as much quality real-time intelligence instant energy distribution decisions. That explained, there is a 20% pocket of the public that resists sharing data, viewing it as an invasion-of-privacy that could be abused in some fashion. The Internet and cable providers have faced it, Google Maps has faced it and now allows users some blockage ability of their satellite imagery, and the Smart Grid very much will face this challenge. The public currently holds a very low opinions of the energy and utility companies. And the potential that through these Smart Meters and Smart Appliances, data regarding activities inside their own homes will be beamed to utilities, energy corporations, marketplaces, and even state and federal governments, is already starting to cause grumblings. The industry should be well-prepared to combat many of the myths of the Smart Grid, provide information on what actual data the Smart Meters transfer, who exactly receives that data, and how that data is used.

    2. The End-User Touchpoints - Basically, the different ways the energy consumption intelligence is communicated to the end-users. We have seen many existing, upcoming and proposed solutions for both residential and commercial energy management systems - wall-mounted touchscreen dashboards, online-accessible dashboards with remote command-and-control ability (your Smart Grid software has analyzed and suggested, based on the current kWh tier cost, the time-of-day, the afternoon weather data it's being fed in real-time - clouds moving in and falling outdoor temperature - to turn off your air-conditioner, which you remotely do on your laptop in an airport), mobile applications with the same remote ability as well as potentially mobile applications with automated command-and-control functionality (walking around your house with the latest PowerMeter application for your Google Android phone, you can turn on and off lights, appliances, etc), and I think critically, the role A.I. (Artificial Intelligence) will play to continually evaluate and improve your home's energy consumption efficiency automatically, putting many energy efficiency decisions on autopilot so we are not bogged down with yet another information stream to monitor (email, Twitter, newsfeeds, Google Wave - I don't want another thing to monitor, to be sure!) - the opportunities are endless for various data communication and energy management solutions on the end-user side. I'm excited daily by what I see evolving!

    3. End-User "Smart" Home Appliances and Commercial Equipment - Smart Grid data will be fed to household appliances, as well as commercial equipment, and will be able to suggest, or simply implement automatically, energy management decisions based on real-time data being fed back-and-forth, improving efficiencies and lowering costs. If you load the dishwasher up and hit start, and it suggests based on the time-of-day you will save $3.24 to wait 38 minutes to run the machine based on the off-peak tier kWh cost, studies have shown consumers will wait the 38 minutes. In the cases of other home equipment - take pool pumps - they could be automatically set to run at off-peak times, and to not run during rain and wind storms based on weather data feeds (when those pop-up pool bottom cleaners are useless) to maximize savings without the end-user having to manage it on a constant basis. There are huge obvious advantages to commercial equipment applications, although in many cases, hours-of-operation and type-of-enterprise will dictate usage, and software will be developed to factor in that information as well. Imagine the commercial opportunities with real-time energy usage and management data to bring efficiencies into place, with energy costs being a major percentage of fixed overhead for many businesses.

    4. Utility-Level Data Collection, Communication and Analysis - Obviously, huge enterprise-solution opportunities here on the macro-level, but also keep in mind all the different smaller pieces needed to collect, transfer, analyze and communicate that energy usage data. Some examples: the actual smart meters utilities are starting to install; the wireless reading devices utility companies will be purchasing to read those meters; the software and data collection hardware points (will they be inside the utility meter vehicle zipping by? Will the information read be immediately beamed via 3G or 4G wireless networks back to central data collection centers? Will newer developments have smart meters hardwired to high-speed data cable, enabling a secure, encrypted IP transfer of data via installed fiber? Or how about utilization of existing power lines with power line data communication...); utility-provided end-user data communication hardware and software package options; data interconnectivity platforms to other utility companies, state grids, and a federal grid for government oversight, management and emergency command-and-control capability; data interconnectivity platforms for real-time energy marketplaces, bringing free-market forces and their inherent efficiencies to the transfer and distribution of electricity and other energy sources, resulting in lower energy costs for end-users and higher profitability for energy generators by diverting power to peak-time demand geo-locations (I believe this will really help the Clean Energy sector, with their intermittent power generation sources like solar and wind, become more profitable, become a important part of the base-load that only traditional energy generation sources can provide today, and lower the all-important levelized cost-per-kWh to levels competitive with traditional fossil fuel energy sources). As you can see, lots of niche opportunities here as well.

    Conclusion: Small Startups Will Play an Integral Role in the Smart Grid's Evolution

    In conclusion, with so many working parts critical to the evolution of the Smart Grid, there are incredible opportunities for small, innovative startups to enter the Smart Grid space and achieve the type of stunningly-large success quickly that we witnessed with the Internet. There indeed are hurdles to clear in order to begin this acceleration compression point. The major hurdle facing many Smart Grid startups are the myriad of regulations, differing rules and very little in the way of standards. These barriers must be eliminated quickly, allowing innovation to dictate new emerging standards, not government bureaucracy or utility consortiums with self-interests dictating technologies and standards that may prove to severely inhibit growth and performance of the Grid. As I consult and invest in firms entering the Smart Grid sector, I am stressing the importance of keeping close watch on key indicators of the large players. It's critical for Smart Grid startups to weigh carefully the industry macro-trends and standards emerging as they develop their technologies and hardware solutions.

    Some of the large Smart Grid company's indicators we are now keeping constant watch of:

    • Strategic partners
    • Future planning announcements
    • Studying R&D budgets directed at the Grid - both budget allotment trends and obtaining as much intelligence on where those funds are being directed
    • New product announcements and introductions, and their time frames
    • Technologies, data communication platforms, and software solutions
    • Interoperability and open-source trends, versus proprietary solutions

    As we monitor and gather this intelligence, trends will begin to emerge and allow us to help smaller startup clients with recommendations based on where different areas of the Grid are trending, to ensure their killer application or hardware will not be rendered obsolete because of a certain data platform they designed their solution with fades into extinction a year after their product debut. My guess is if the current Administration moves in the next 12-24 months on setting federal Smart Grid standards for some of these communication and data touchpoints, keep a close eye on Google's activities (again, Google and the current Administration are tight, and Google has the clout, the reputation, the talent and the cash to move fast help dictate some of those standards). 

    This report is the launch of SolVentus Energy's weekly focus on the Smart Grid, with the goal of informing and assisting readers as you evaluate GreenTech, and Smart Grid, startup investment opportunities. We invite you to visit for further information. 

    Next Weeks Focus - Itron: For all the buzz surrounding Google and Oracle and GE, Itron is THE current Smart Grid industry leader. They have fantastic traction in the strategic first-to-market (FTM) play, and that has always been an important deciding factor in all things technology. They also are bringing on important synergistic partners, have fantastic solutions already in place and operating, and impressively, are a Google PowerMeter official strategic partner. We will focus on Itron in detail next week!

    Disclosure: No holdings in any of the companies referenced in the comment.
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