Smart grid M&A growth trend a sign of supplier and investor confidence
By Allan McHale
Bolstered by a potential world demand of $2 trillion for smart grid technology over the next 20 years, the smart grid has after some seven years of embryonic existence now successfully entered its infancy. World sales climbed to $36.5 billion in 2012; a growth of 30% on 2011.
M&A activity in the smart grid space reached $19.5 billion, almost doubling the value of deals in the previous year, according to Memoori’s latest report The Smart Grid Business 2012 to 2017.
Not surprisingly this business, which is transforming itself into an "Internet of Energy,” will open up numerous opportunities to both invest and work within. We forecast world demand will grow by a CAGR of 18% to the end of this decade. So this business looks like an attractive safe port in a storm for investors, offering better prospects than most other businesses within clean tech.
However, as we noted earlier in this series, there is a dark cloud casting a shadow on future performance. The regulators / policy makers are struggling to find the framework on which it can be properly built and without this in place demand will slow down and investment funds will dry up. The problem is not insurmountable, but does require significant changes to the existing structure so that all the stakeholders can play an active role.
Analyzing M&A strategy
By 2020 the pure global smart grid business will need to be running at $140 billion if we are to achieve CO2 emission targets by 2030. Today’s players will not be able to achieve this rate of growth by organic means alone for the structure of the electrical manufacturing transmission and distribution supply industry is both fragmented and needs an infusion of new technologies. This will need to be acquired through M&A if it is to be capable of properly serving the demands of the pure smart grid market.
This message has been heard; witness the enormous growth in M&A activity that has taken place in the last three years and the type of companies that have been acquired. The continued growth in consolidation and the future shape of the smart grid business will depend upon a number of factors that we detail in our report The Smart Grid Business 2012 to 2017.
Allan P. McHale (CEng, MIMechE, MEI, MBIM) has spent 45 years in the energy and building controls industry -- from design and commissioning utility power stations in the 1960s to managing global sales and marketing operations and subsequently starting up three marketing consultancy operations all in energy related businesses during the last 20 years.
Memoori’s report - The Smart Grid Business 2012 to 2017 - is a definitive resource for the smart grid industry, combining clearly defined market sizing statistics, a review of the structure of the supply side and financial analysis of M&A and Investment opportunities. It is available for purchase in the SGN Research Marketplace.
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