Take a look at where Smart Grid investment funds are based.  Of course, the Federal government’s American Recovery and Reinvestment Act (ARRA) stimulus fund kickstart of $3.4B beat all other sources of money.  But from a venture capital perspective, the top 3 US geographic sources of funding in 2009 were

• Silicon Valley (Northern California) – $1.2B
• Southern California  - $329.5M
• New England – $283.7M

Much of this investment is going to a category called energy efficiency (EE) rather than alternative energy technology.  There are several reasons for this, and the primary reasons are that EE plays have lower funding requirements than alternative energy investments which are capital-intensive, can be brought to market faster than many other Smart Grid technologies, and have a comfort level with many venture capitalists who can relate EE research, development, and deployment (RD&D) to familiar ICT (Information and Communications Technology) RD&D. 

 Silicon Valley has tremendous intellectual expertise in a number of areas that can and should make significant contributions to advancing Smart Grid solutions.  The centers of expertise include

• Software for any application
• Security and encryption
• Semiconductors, processors, and chipsets
• Game design
• Communications and networks

There are more Smart Grid-related conferences, seminars, and webinars here that expose workers from all backgrounds to the challenges and opportunities in this business sector. What I call the region’s innovation infrastructure encourages interesting fusions of different areas of expertise.  Workforce mobility and mindset supports innovation with a near constant circulation of resources in companies that expose employees to new technologies, business models, and problem-solving approaches.   There is an expectation of sharing knowledge and synthesizing data into new insights.  Silicon Valley also has a number of incubators – organizations and business plan competitions that encourage and support the growth of great ideas into viable companies.  The concentration of world-class colleges and universities in this region further enhances this concentration of intellectual capital.   

The big challenge is how to engage Silicon Valley and utilities together into a full-throttled drive to create the optimal Smart Grid solutions that will reduce energy costs for consumers and utilities, reduce greenhouse gas emissions, and build national energy security.  I recently read an article that examined the reasons for Ford Motor Company’s success in revamping its business operations.  Mark Fields, EVP and Americas President was quoted as saying, “These high-tech companies work at a very different clock speed than us, a much faster clock speed.  We had to jump in.  We had to learn.  We started thinking like a software company.”   

Can utilities learn to move at faster speeds?  Can Silicon Valley cultures learn to work with utilities and respect their regulatory and operational environments?  For example, utilities need to test all new solutions to ensure that they won’t “break the grid”.  Telecom companies have been doing this for years, too, and the lengthy and repetitive investigations not only test the solution, but the patience and financial resources of the solution vendors.  Here’s one area where a little process and model innovation should be welcomed by both utilities and Smart Grid vendors to drive down costs of doing business and accelerate introduction of solutions. 

The stakes are high, and it’s not a given that the Smart Grid will be built in the most intelligent and cost-effective ways, but the good news is that the great innovation engine called  Silicon Valley is going to be a real player in this game.

The Smart Grid is definitely global – prompting upwellings of new technology, public and private investment activities, and strategic plans at national and regional levels.  The Smart Grid has different meanings for different audiences, so in a developing country, it may mean an opportunity to design distributed generation configurations for the delivery of electricity to underserved communities.  Developed nations with legacy infrastructure see upgrades such as synchrophasors deployed into transmission systems to deliver wide area situational awareness or new investments in energy storage at distribution substations to function as independent power islands to reduce power outage footprints. 

For the vast majority of consumers though, the Smart Grid is just not part of their daily dinner conversation.  Those of us in the industry are directing a great deal of information loaded with acronyms and industry jargon towards them, but they are not getting the messages about what the Smart Grid means to them or its strategic benefits.  This communications deficit has implications for continued support of government investments.

Zpryme, a research and consulting firm, recently completed a study of governmental investment in the Smart Grid that is available here.  China tops out all government investments with a total of $7.323 Billion spent in 2009.  The USA is second with a total 2009 investment of$7.092 Billion.  From a regional perspective, the Asia/Pacific region has a combined investment of almost $10B, while the EMEA region represents almost $2B.  These investments highlight the fact that policy makers understand there can be winners and losers in the Smart Grid technology race.  And these amounts are merely starting points.  Global investments required in the energy sector for 2003- 2030 are an estimated $16 trillion, according to the International Energy Agency. In Europe alone, some €500 billion worth of investment will be needed to upgrade the electricity transmission and distribution infrastructure.                                 

Policy makers recognize that Smart Grid investments improve energy security and stimulate local economies with new businesses and jobs, along with greenhouse gas emission reductions.   Investment in Smart Grid technologies is a long-term value play, and it will be vitally important that we educate consumers, also known as taxpayers and ratepayers, about the strategic benefits of these investments.  It will be more of a challenge in some countries than others, but the ones that do it well will be the winners in Smart Grid technologies and services exports, and build thriving domestic businesses along with increased energy security. 

The countries that dig deep to invest in game-changing technologies that maximize energy harvests of clean renewables like solar and wind create industries and build employment.  These investments also reduce our dependence on foreign oil, and localize energy purchases.  I’d much rather buy electric energy from my local neighborhood solar generation facility for an electric vehicle than burn gas purchased from some hostile foreign government that funds terrorists.  Intelligent public/private educational programs build needed job skills and intellectual capital that create local centers of excellence for vital Smart Grid technologies.  Even the low-technology, low-hanging fruit of the Smart Grid – energy efficiency programs that retrofit existing housing and building stock to reduce energy costs –  also create jobs that cannot be outsourced. 

Communicating the “security and jobs” benefits of the Smart Grid to consumers goes well beyond the usual “what’s in it for me” messaging about saving money on individual energy bills,  and improving our environment, but must be factored into the story lines to build and maintain taxpayer and ratepayer support for continued Smart Grid investments.