Activity for the Smart Grid Summit continues intensively, and our program is finally just about complete. As we enter the last days of summer, our focus is shifting more towards ramping up the marketing effort to create awareness and drive registrations for the event. Alongside this, I’m wearing another hat in this arena, and I have an update to share on that front.

Some of you will know that I have an extensive background in market research, and I have partnered with Zpryme Research to produce industry reports focused on smart grid. Our first study addresses the U.S. renewable energy market opportunity, and we’re in the latter stages of compiling the research. We’ll be segmenting the market along various dimensions and creating some forecasts to measure the growth trends. There will also be a strong qualitative component where we’ll examine the market dynamics and identify the best opportunities for growth.

Supporting this will be a series of in-depth interviews we’ve been doing, both with vendors and utilities. I’ve been speaking with a number of vendors across the spectrum, with some being focused on solar, some focused on wind, and some serving both. A very interesting picture is starting to emerge, and the market opportunity is far from clear. As with telecom, the U.S. renewable energy market lags other parts of the world, especially Western Europe and Asia. While Americans can’t get enough of their smartphones, our adoption of mobile services and applications lags well behind countries like Japan, Korea, Finland, Italy and Israel. Similarly, countries like Germany and Spain are well ahead of the U.S. for renewables, largely on the strength of their FIT programs – feed-in-tariff. China is also a major player, not just in generating energy from renewable sources, but with companies like BYD as producers of low cost solar panels.

Getting back to our research, there is certainly a major disconnect between the desirability for using renewable energy, and the realities of producing it. Every market has its own mix of energy sources, and coal dominates in the U.S. There is an inherent appeal to move away from “dirty,” non-renewable sources to virtuous alternatives like solar, wind, and of course hydro. However, as we know, solar and wind are intermittent sources, and cannot yet displace established energy forms in a major way. For a variety of reasons, wind and solar simply aren’t cost effective relative to what we’re using today.

As with many things in life, the tradeoffs come down to money, and if left to market forces, the cost of renewable energy would be so prohibitive that only the most hard core environmentalist would be willing to accept the switch. For a variety of reasons, utilities are not prepared to embrace renewables all out, and in the absence of a FIT program, the U.S. government must support this space with other programs. Energy is a capital-intensive business, with long-term projects, and major financial incentives have been needed to encourage the development of renewable energy projects. We’ll be reviewing these programs further in the research, but the main point here is that the normal conditions of supply and demand are not yet in place for renewables to be a self-sustaining market.

This raises another aspect of renewable energy that I find particularly fascinating – go big, or go small. Large scale renewable projects are attractive for utilities, especially since they keep power generation on their side of the fence. Whether they produce this energy themselves, or purchase it from large developer projects, it goes into their grid and they control the supply into the consumer market. On the other hand, these projects need artificial government and financial incentives to get built, and they take a long time to develop. Unless we start to run out of coal, and/or mothball nuclear plants, the long term economics of these types of renewable projects are not that compelling. In time, they will find their niche in the overall energy ecosystem, but not enough forces have lined up yet in their favor.

The flip side of the coin is going small, and this represents an entirely different opportunity for renewable energy. Distributed generation and micro-grid type of projects take the opposite approach, where the generation of power becomes decentralized, costs are relatively low, and programs can be put in place fairly quickly. This is not as appealing to utilities, since it shifts the balance of power to consumers, and is very similar to how the Internet and IP technology has taken control away from telcos and made consumers active participants in the equation. The upside for utilities is a reduced need for capital-intensive projects, but they now have a more equal partner at the table to deal with.

There are exciting and inventive possibilities cropping up everywhere with solar panels and small scale wind turbines, and the possibilities for going small have never been more promising. Of course, this won’t be a universal trend, as not all climates are conducive to wind or solar on a regular basis. However, these are solutions that consumers will embrace, not just because they are feasible, but it also gives them a sense of being part of the solution to bigger problems such as global warming and climate change. Needless to say, smart grid plays a big role here, as two way communications networks will be needed to feed this energy back to the grid, monetize the generation, and enable both consumers and utilities to monitor consumption.

If you’re still with me, you’ll notice a major missing piece to the puzzle here – storage. Once practical storage solutions/systems are available, renewable energy – especially wind and solar – will truly become viable, especially for going small. We’re definitely seeing evidence of this in our research, and we think this will be a major driver of renewables in the next few years.

These are just a few highlights from our research, and with such a range of dynamics, it’s hard to say whether the glass is half empty or half full. If government support programs dry up, it’s closer to empty, but I don’t think that’s going to happen. On the other hand, a lot of things have to go right for the glass to look full, and it will take some time yet to truly feel this way. So, if you’re patient, renewable energy has a promising future in the U.S. I’ll have another update on our research before the summit, but if you want a more complete picture, you need to come to LA and come to our session on Tuesday, where we’ll have an exclusive presentation of our findings.

See you there.