A new report from London-based Memoori Research says that the utility sector’s single-minded focus on smart meter deployments is deferring work on global energy infrastructure that could foster worldwide connectivity and provide a solid foundation for future progress.

The report, The Smart Grid Business in 2011 to 2016, estimates that the latent potential for advanced metering infrastructure (AMI) amounts to about nine percent of the smart grid market—but sales of meters corresponded to nearly 40 percent of the smart grid market in 2010.

Photo courtesy of Memoori Research

Further, Memoori’s research finds that $2 trillion must be invested globally by 2030 in order to realize the full supply- and demand-side potential of the grid. The grid must be able to incorporate renewable electricity production from a multitude of distributed sources and be capable of matching the supply of electricity with demand at the point of usage and in real time.

In order to meet those goals, by 2018, global smart grid investments should peak at $155 billion—some 50 percent higher than the current annual expenditure for all electrical transmission and distribution equipment. In 2010, sales of smart grid systems stood at just $16 billion, clearly showing the business still has a long way to go.

The authors of the research compare the upgrading and updating of today’s utility infrastructure worldwide to Leonardo Da Vinci’s restoration and completion of his great late Renaissance work, “Virgin of the Rocks.” When Leonardo Da Vinci was obliged to finish off his first version of “Virgin of the Rocks” some 25 after being first commissioned, forensic evidence now shows that the artist totally rebuilt the framework of the painting, which then enabled him to incorporate all the technical improvements of light, shade, expression, and beauty that he had since mastered. He rendered no simple refinement of minor details, which is all he was paid to do; but a complete retrofit that is now, some 528 years later, one of the world’s finest paintings.

The report notes that we now face a comparable dilemma as we move forward with the restoration of an outdated and inefficient electrical grid, as well as a “supreme challenge”—providing a grid that will support a low-carbon economy. Should we now rebuild the entire framework in order to do the job correctly and completely? Or should we make incremental improvements in the hope that they can be seamlessly joined together later? “Sadly,” the research firm says, “we are going for the latter option in most regions of the world.”

“We are investing where the quickest return on investment can be achieved, commensurate with lowest technical risk; and that, in most cases, is putting maximum investment in smart meters,” according to the authors of the study.

Memoori emphasizes that the industry should not shirk the responsibility, or ignore the opportunity, it still has, to rebuild its infrastructure, using  the latest digital communications, control technology, and analytical software—and test this out at full scale. In addition, the researchers claim, insufficient attention has been given to developing open communication standards and delivering a solution for protecting the grid from cyber attacks. Had the Da Vinci mindset been applied some five years ago to the grid, we now would have been close to a total solution that could be transferred around the world.

However, the shortfall may have been inevitable, according to Memoori, and the industry is not completely to blame: Faced with a $2 trillion investment, the priorities of the smart grid build-out were bound to be influenced by eco-political matters, restricted by existing regulatory frameworks, and constrained by the drastic changes involved in changing the architecture of the grid. These represent formidable barriers to the delivery of a truly smart grid.

Where does the industry go from here? The outlook is not bleak, the authors say. In the space of five years, mergers and acquisitions have grown from $134 million in 2007 to $10.6 billion in 2011. First, the growth—and now the scale of the build-out— indicate that the supply side is gearing up to meet the requirements of new technology, and forecasted  demand for smart grid products and systems. Investment in the market is also on the increase, with venture capital companies committing some $1 billion per year in 2010 and 2011 to smart grid suppliers.

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