Venture capital plugs in
First published in Cleantech Infocus: Smart Grid, February 2009. Copyright Cleantech Investor Ltd. 2009
The smart money is turning to the smart grid. That's the label that's been given to the nascent revolution in the way that electricity is distributed and used. The smart grid aims to make utilities more efficient, to integrate clean and small-scale forms of generation into national networks, and to help households and businesses cut their consumption and bills.
There's a host of technologies required to make the smart grid a reality, from distribution hardware and control software, through new communication and transmission channels, to smart meters and monitors in the home.
In large part, the smart grid is about applying IT to the electric grid. It's about two-way communication between producers and consumers, and blurring the distinctions between the two by giving households credit for feeding power into the grid from domestic wind or solar installations.
If the smart grid is to become a reality, it will require a wave of investment comparable to that enjoyed by the IT industry in the 1990s. So it's no wonder that venture capital investors are plugging in. According to figures from the Cleantech Group, the smart grid sector overtook biofuels in terms of new money raised from VCs in 2008.
The biggest rounds went to two US companies, GridPoint and Silver Spring Networks. Both are developing a suite of network technologies to help manage supply and demand, and are currently running pilot projects with local utilities.
GridPoint announced a $120 million round from existing investors in September, bringing its fundraising to over $220 million. The Virginia firm positions itself as a technology partner for utilities, offering a software-based platform for controlling a network of distributed generation and storage facilities.
GridPoint says that its software allows a distributed network of windfarms, solar installations and advanced batteries to respond to changing demand in the same way as a centralised power station. The platform also allows new technologies, such as charging points for hybrid electric vehicles, to be added to the grid without destabilising the fine balance of supply and demand. Part of GridPoint's latest funding was immediately invested in the acquisition of V2Green, a young Seattle-based company which is developing smart grid interfaces for plug-in hybrids.
GridPoint’s investors include the Altira Group, Goldman Sachs, New Enterprise Associates (NEA), Perella Weinberg Partners, the Quercus Trust, Robeco (part of the Rabobank Group) and Susquehanna International Group (SIG)
Silver Spring Networks meanwhile raised a $75 million round in October, led by Kleiner Perkins Caulfield & Byers in the first announced investment from its new Green Growth Fund. Silver Spring is developing a suite of smart grid technologies which use the familiar internet protocol (IP) to connect utilities and consumers.
The California-based firm has been called 'the Cisco of the smart grid', in the bullish hope that its network technology will become the default for electricity networks just as the older firm's routers serve as the backbone of the internet. Silver Spring's products include network hardware and software, as well as plug-in wireless cards which can integrate domestic appliances and meters into the smart grid.
Another California firm, Trilliant, raised $40 million in August from MissionPoint Capital Partners and London-based Zouk Ventures. An established networking company that first moved into remote metering in the 1990s, Trilliant is now rolling out a range of communication infrastructure systems based on wireless mesh networking. Eka Systems, which closed an $18.5 million fourth round in July, is also developing smart grid hardware and software based on wireless networking.
Other firms are focusing on specific areas of the smart grid. UK-based RLtec, which raised seed funding from the Low Carbon Accelerator fund in October, is concentrating on demand-response systems for domestic appliances. These systems reduce the amount of electricity used by individual appliances such as fridges at times of high demand, smoothing total demand and improving grid efficiency.
Specialist software houses are also stepping into the smart grid market, and can be attractive propositions for VCs because of the relatively low capital investment required. Virginia-based Positive Energy has developed demand-response software for utilities, and raised $14 million from New Enterprise Associates in December. In addition the company provides services such as home energy reports and carbon calculators.
Investors are also targeting the supporting communications infrastructure. Most of the network developers rely on existing broadband and wireless networks to allow communication between utilities and customers, and are effectively piggy-backing on investment from the ICT industry. But in many areas these networks will not be sufficient.
The one communications network present in any area that wants to join the smart grid is the electricity grid itself. German broadband group Power Plus Communications provides broadband access over low- and medium-volt powerlines. Investors at Climate Change Capital, which led a €10 million funding for the firm in November, say this will play an important role in the move to smart grids in many territories.
But for the majority of people, the most obvious sign of the smart grid will be the integrated metering and display systems in their own homes. These allow consumers to directly monitor and manage their own energy use, with many systems monitoring gas and water use as well as electricity. That's just the kind of combination of emerging technology and potentially huge market that VCs find attractive.
Smart meter production is dominated by established players such as GE and Itron, but VCs see these as likely partners or buyers for younger companies with innovative metering technology.
SmartSynch, based in Mississippi, raised a $20 million fifth round in May 2008 from an international syndicate of investors including Siemens Venture Capital. The company's meters use open standards and communicate via public wireless networks. SmartSynch says this gives its systems cost and maintenance advantages over proprietary network technologies.
Tendril Networks, which announced a $12 million second round in March 2008, is taking a more consumer-focused approach. The Colorado firm provides plug-and-play hardware based on common standards, and a web-based portal from which users can monitor and control their electricity use in real time.
Several emerging UK companies are also concentrating on user-friendliness. Just as GridPoint is positioning itself as the Cisco of the smart grid, London-based Onzo calls itself 'the iPod of cleantech', producing attractively designed meters and displays for the mass market. In April, Onzo raised £2 million from Sigma Capital Group and Scottish and Southern Energy, which also placed orders worth £7 million.
Cambridge-based GEO, which raised £800,000 seed funding in September, is positioning its 'Home Energy Hub' as a lifestyle product with real benefits. The firm is marketing a range of monitors which collect data from a smart meter or sensors attached to individual appliances, and display the information in a variety of ways.
Smart grid investment is likely to continue to grow in response to political pressure on both sides of the Atlantic. The new US president has called for 40 million new 'smart meters' to be installed in homes across the country, as well as an overhaul of the transmission network. Similar initiatives are being prepared in Europe, including the UK.
Such major infrastructure investment is seen as a potential way to help national economies clamber out of the recession. If so, then investing in the smart grid really could be the smartest thing to do.
| < Prev | Next > |
|---|
