A Google search reveals plenty of headlines declaring “winners and losers” in the race for Smart Grid investment grants. Click through, however, and you’ll find they merely list utilities who got money as winners and those who didn’t as losers.   Our view: It’s waaaaay more complex. And it’s going to take waaaaay more time to know for sure. In the bigger picture, who won the money chase isn’t as important as how the money and the attention will impact various stakeholder groups over the long term. Here are six examples, including two that have gone largely unnoticed.

Utilities – It All Depends on the Losers
Some of the nation’s utility giants –Duke, Center Point, PECO, Florida Power & Light among them – received the maximum $200 million. Others were snubbed, most notably Oncor, PG&E and Austin Energy.

But as we’ve mentioned, the long-term impact of the Smart Grid stimulus hinges on the reaction of utilities whose applications were rejected. Since the initial round was oversubscribed, there will be no second or third funding rounds as originally planned. So it was good to see Oncor’s pledge to carry on even without a grant.

Most vendors and consultants are betting that utilities will move forward even if they were denied a grant. “Once you’ve invested in a high school degree, you still go on to college even if you don’t get all the scholarships you applied for,” explains consulting engineer Aaron Snyder of EnerNex Corporation, a leading power engineering firm that worked on numerous grant applications for clients.

“The Smart Grid sector has been changed forever,” claims SmartSynch CEO Stephen Johnston, whose firm worked with several dozen utilities on stimulus applications. “The 3,000 utilities that did not win a grant will still benefit. Thanks to the stimulus, standards will emerge, functionality will increase and costs will drop.”

But utilities without federal money can’t move forward unless regulators agree to pay for the improvements – and that issue is still murky.

Regulators – Losing Their Smart Grid Appetites?

Regulators of “losing” utilities may have a tough time approving Smart Grid upgrades.  They’ve got to counter the perception that the utility’s project wasn’t good enough for the feds, but they are going to go forward anyway, requiring a rate increase.

Katherine Hamilton, president of Gridwise Alliance, has called on state utility commissions to support projects that did not win awards, but the jury is still out. “Are state regulators turning against utilities?” wondered Oppenheimer utility analyst Shelby Tucker in a recent note to private clients. “As we look at the next three to six months, we see a number of rate cases that could determine their mood. They must choose between encouraging new infrastructure projects, which create jobs, and keeping returns low to minimize rate increases.”

Suppliers – Watch the Little Guys

The bulk of the $3.4 billion is going to projects that include smart meters. As a result prominent meter and communications vendors such as Itron, Echelon, Landis+Gyr, Cisco, Silver Spring Networks, and SmartSynch are clearly in the winner’s circle. In fact, as soon as the awards were announced stock prices jumped for public companies in line for direct orders from utilities. While granting that many public and private companies will benefit, Deutsche Bank analyst Carter Shoop believes “Itron has the most upside potential.”

What remains to be seen is the plight of scores of smaller companies and startups that invested time and effort in their applications, but got passed over. Will they find other projects quickly? Will their venture investors lose confidence? Will utilities prefer to make a “safe” choice by choosing firms that have the added credibility of a stimulus-funded project?

Systems Integrators – The Overlooked Winners?

“Program management is a big and overlooked issue,” points out SmartSynch’s Johnston. “Winners will have to put together their project plans in a hurry, and meet stringent requirements for transparency and reporting.”

We agree, and that’s why we believe some of the “hidden” winners will come from the defense and aerospace sectors, whose giant firms have honed the techniques of managing government projects. Systems integrators such as BAE Systems, Lockheed Martin and Boeing Computing Services offer project management expertise utilities need but rarely have in-house. We think the stimulus projects will be the wedge that opens up the Smart Grid market for those firms.

“Lockheed Martin partnered with several utilities on Smart Grid projects that received funding,” verified Tom Grumbly, a Lockheed Martin Vice President. “In addition to those projects, we also look forward to supporting customers on Smart Grid demonstration projects that will be announced in the next couple weeks.”

The ZigBee Alliance – The Momentum Continues

Speaking of overlooked winners, how about the ZigBee Alliance, an association of companies creating wireless solutions for energy management and many other consumer applications? Counting matching grants, more than $1.2 billion in Smart Grid projects will go forward with ZigBee as the declared standard.

Taxpayers – The Biggest Question of All

But the hardest question to answer is whether or not taxpayers will win in the long term. Some experts say no. For instance, Kurt Yeager, executive director of The Galvin Electricity Initiative, decries the overemphasis on metering. His organization wanted the funds directed at local microgrid projects to offset “the unreliability of the current centralized architecture.” Many others share the view that the money should have been spent to advance the state of the art.

The flip side, of course, is that there are a lot of paychecks involved in making and installing the 18 million smart meters that the stimulus money will fund. Many believe the grants will create a critical mass of communications and metering that will become the foundation for many future Smart Grid applications. “The technology is ready,” asserts Eric Dresselhuys, of Silver Spring Networks, which saw several important customers win grants. “The funding will go a long way toward accelerating and broadening deployment of the critical Smart Grid infrastructure.”

So the game is on, the stakes are high … but uncovering the true winners and losers will require us to wait a while longer and look at more than just the obvious places.

More on SGN:

   Smart Grid Stimulus: Will We Get Our Money’s Worth?

   Smart Grid Stimulus: The Pause that Distresses

   Smart Grid Investment Grant Awards by Category (pdf)