Alstom Grid: Under the smart grid microscope
By Jesse Berst
When a utility selects a vendor for a major project, it is agreeing to a long-term relationship. It must be careful that its vendor partners have not just a valid short-term solution, but also similar values and a compatible long-range roadmap.
For this reason, SGN periodically assesses major players to give utilities a perspective on their strategic vision, their strengths and their challenges. Today we're putting Alstom Grid under the microscope. In this article we'll cover:
Â· Alstom Grid's past (and how it pertains to the future)
My market perspectives are gleaned from hundreds of interviews and conversations each year with vendors, consultants and utilities. Even so, it's still just one point of view, and -- as always -- we invite you to chime in with your own opinions using the Talk Back comment form at the bottom of the page.
Held back by its own history
For years, the organization now known as Alstom Grid has been distracted by its ownership changes. Let me give you a brief history so you understand what it had to face. It formed in 1978 in the Pacific Northwest as Esca Corp. In 1990, the French company Cegelec acquired Esca. In 1998, Paris-based Alstom merged with Cegelec and things were shuffled again.
In 2004, the French government took a 21% stake in Alstom to support its recovery from a financial crisis. Alstom was also "encouraged" to sell several of its subsidiaries to raise cash. The T&D activities went to Areva, another French company, and the division became known as Areva T&D.
New management again, and a new management philosophy. Areva is basically a manufacturing company. It did not know how to manage the software side of the business it had just purchased. It tried to enforce a product marketing mentality in place of the more entrepreneurial / consultative approach that had been the norm.
A few years later, Areva underwent its own crisis and was forced to sell assets. In 2010, Alstom reacquired the T&D operation from Areva, forming the division now called Alstom Grid.
Parent company Alstom is a large French multinational with three major activities: 1) transportation infrastructure, 2) power generation and 3) grid. It employs more than 85,000 people in 70 countries and had revenues of roughly $25 billion in 2011.
Now for the good news: Two years after being reacquired by Alstom, there are no further ownership changes on the horizon and Alstom is hitting its stride. Clearly, things are going well. Last year, Alstom Grid hired 125 people for its Redmond, WA headquarters, bringing the total there to 450 (not counting independent contractors). Alstom Grid has 1,800 employees in the U.S. overall and operates in 45 of the 50 states.
Distribution management systems (DMS). Everywhere I go, I hear utilities clamoring for a more integrated view of their world. The gradual confluence of transmission with distribution is already underway. For instance, one of Duke Energy's early steps on the smart grid path was to bring its transmission and distribution teams more closely together. Whether or not utilities actually merge the two departments, more and more of them are realizing that many transmission concepts can be ported to the distribution realm with terrific benefit. Analysts such as Gartner are now starting to talk about this concept under labels such as "advanced DMS."
Perhaps Alstom Grid's biggest opportunity, therefore, is to bring what it has learned in transmission to the distribution realm. Although the trend may take a few years to accelerate, I think distribution utilities will ultimately see the value of a real-time DMS. If I'm right, that will be good news for Alstom Grid. Its DMS technology is equal to that of its chief rival, Schneider's Telvent division. And its delivery organization is decidedly superior. (My rumor mill says Telvent is having installation problems at BC Hydro, Progress Energy and Hydro One. Is that right or just sour grapes from competitors? Use the Talk Back form at the bottom to let me know what you are hearing.)
ABB, Siemens and GE lag behind Alstom Grid and Telvent in the DMS race. They are not as adept at moving transmission capabilities down to distribution. And they are slower to integrate applications such as outage management and volt/VAR optimization.
One challenge for all DMS vendors: Slow sales cycles. A DMS is a "big bite" for a utility.
Volt/VAR optimization. Call me naive, but I continue to think that utilities will wake up to the importance of Volt/VAR optimization. When that happens, Alstom Grid's big picture view will be an advantage. "If you are only making local and single-feeder decisions, then you are not really optimizing the system," Atkinson explained. "You need a global model modified by local measurements."
M&A and partnering. Alstom Grid doesn't have the bankroll and the mindset to buy its way into new markets as we've seen from ABB, GE, Schneider and Siemens. It has no venture capital arm. It does not have as many large partnerships as its competitors. And it hasn't mastered the skill of using partnerships with smaller companies to "date" as a prelude to "marriage" (acquisition).
To be fair, where Alstom Grid has made acquisitions, they've been smart and strategic (albeit small). What's more, it has started to step up the pace of its partnering. In August 2012, it teamed with Cisco to advance substation automation. In September 2012, it signed an MOU with Toshiba to explore ways to merge Alstom Grid's utility-centric offerings with Toshiba's customer-centric equipment.
Positioning. Alstom Grid has a good reputation with customers, but it does not have as strong a brand image as its competitors. In its latest market materials, Alstom Grid trumpets its ability to "interconnect all equipment and players on the grid." This positioning -- "we are the heart of the grid" -- could be a clear differentiator if the company hammers it home strongly. It speaks to Alstom Grid's strength in the integrated control room.
If I were them, I might also stress real-time capabilities. For one thing, Alstom Grid has the only real-time PMU software. What's more, it has begun to extend its real-time situational awareness from transmission systems down to distribution systems. "We have thrived with the biggest, most complex systems in the world," Atkinson reminded me.
Information technology. Competitors ABB and Siemens are moving away from the classic control center / market systems approach towards what I'll call an "information technology approach." ABB spent more than $1 billion to get that expertise via its acquisition of Ventyx. Alstom Grid is weak in IT as compared to competitors. What is it prepared to do to gain additional IT products and capabilities? Does it have the vision? And the budget?
Thought leadership. Alstom Grid is one of the clear technology leaders in HVDC, EMS and MMS. However, those are relatively small markets. In other categories, Alstom Grid is a solid performer but it has not assumed a thought leader role -- kind of like a politician that has good ideas but can't be bothered to attend any town hall meetings to let constituents know.
Although Alstom Grid certainly profited from the smart grid's go-go years, it was too distracted by its ownership shuffle to grow as fast as it could have. As we now transition to the smart grid's "mature" phase, Alstom Grid seems well-placed to benefit. More and more smart grid projects will be tied to safe-and-same business cases, reliability metrics and the like. That ROI approach plays well to Alstom Grid's strengths.
The Talk Back form awaits your comments.
Jesse Berst is the founder and chief analyst of Smart Grid News.com, the industry's oldest and largest smart grid site. A frequent keynoter at industry events in the U.S. and abroad, he also serves on advisory committees for Pacific Northwest National Laboratory and the Institute for Electric Efficiency. He often provides strategic consulting to large corporations and venture-backed startups. He is a member of the advisory boards of GridGlo and Calico Energy Services.