Opportunities on the Edge
As at other recent sector events, the evolution of the “grid edge” and its corresponding impact on the power grid more broadly was a key topic at DistribuTECH this year.
“On the commercial and industrial side,” says Semple, “People are focused primarily on customer-owned distributed energy resources (DERs), such as on-site renewables or generation, energy storage, and electric vehicle (EV) charging infrastructure, including the development of microgrids. For the residential market, the focus is on incorporating the evolving ‘smart home’—from smart thermostats and connected appliances to solar-plus-storage offerings—into the grid.”
The current market features established players like Schneider and Siemens, as well as newer competitors such as Enbala, Blue Pillar, Bidgely, and Sense.
Investing in the Future
Grid hardening and modernization remains a focus of both utilities and regulators seeking to improve the reliability and resiliency of the electric grid, particularly with regard to the impact from storms and other climate-related events.
To some extent, this focus has intensified in the wake of the historic California wildfires, says Spitzer: “There was definitely some chatter around the potential long-term implications for T&D operations from the PG&E fallout in California, but it still seems too early for anything definitive to come out of that situation.”
Semple also notes that utilities pursuing these improvements have met some pushback from regulators in recent months. “Most notably, Duke Energy in North Carolina and Dominion Energy here in Virginia have faced increased scrutiny from regulators on the payback of grid hardening and modernization investments for ratepayers,” he says.
Longer term, Semple sees growth in the incorporation of sensors and advanced communication networks, which, he says, should drive improvements in grid reliability and resiliency in the coming years.
Fundamental Value
Overall, the long-term opportunity for private equity investors and strategic parties in the sector remains robust.
“The long-term trends of increased electrification and the transition from fossil fuels to renewables represent one of the great economic opportunities of the next few decades,” says Semple. “While the opportunity set is compelling, not all businesses attacking the market will be successful.”
Spitzer suggests strategic buyers and investors continue to focus on the fundamentals. “The recipe for success in these markets is really no different than in other sectors: Deliver a differentiated solution or technology with clear and tangible economic value for the customer,” he says. “It’s great to deliver more qualitative benefits alongside those, but without them, it’s tough to achieve long-term economic success.”
Published March 2019