The last panel session at the Fujitsu smart grid symposium was from the VC perspective.

The panel consisted of:

Moderator

• Eric Wesoff, Senior Analyst, Greentech Media

Panelists

• Steve Vassallo, Venture Partner, Foundation Capital
• Tammi Smorynski, Director, Intel Capital
• Josh Becker, General Partner, New Cycle Capital

From left to right: Wesoff, Vassallo, Smorynski, and Becker

What is the killer application for smart grid? This question is asked at every smart grid conference I go to. Most times, the answer is that after automated metering infrastructure (if that is counted as an application rather than an infrastructure), it is demand and response (DR). DR is based on a simple idea that shaves the peak demand and adjusts the entire demand to stay within the supply. If you press more, the usual answer is that it’s an application you haven’t considered yet in your wildest dreams. I am not sure whether the home area network (HAN) applications are considered killer, but there are many companies in this space.

This session covered a lot of ground, but one thing that caught my attention is the promising market for smart grid. A large number of startups and established companies have entered the HAN space. Wesoff said the number is tens if not hundreds. This is easy to explain. When you look at the entire power grid, the transmission side involves a large capital investment and specific expertise in high voltage transmission. It is not easy to obtain either one. Even on the distribution side, it is still capital-intensive and requires expertise in such areas as renewable power generation and managing/integrating the power generated by renewable energies.

On the other side, automated metering infrastructure (AMI) and field area network (FAN) are straightforward ICT applications requiring relatively little capital and power expertise to implement. HAN appears to be very similar to those two. Moreover, it seems to be easier to work in the HAN sector. We are familiar with home appliances and can easily test them with monitoring and metering. This also means the barrier to entry is not very high.

Incidentally, Vassallo’s firm invested in Silver Spring Networks (AMI/FAN) and EnerNoc (DR), which is public.

Smorynski of Intel Capital was skeptical about the HAN market growing into a viable market segment within smart grid.

Her points were two:

1. The average person does not care about day-to-day or hour-by-hour power consumption as long as he or she is reasonably happy with his or her electricity bills. The average person sets the energy efficient setting once and forgets about it.

2. In a typical home, HVAC (air conditioner and central heating) consumes the majority of power (some 60%). Also, people may be sensitive to the use of lights. But after those two, there is not much a consumer can do.

So the home energy management (HEM) sector does not seem to attract much attention from the average Joe or Jane. So far, DR has been implemented for commercial and industrial markets. The HEM market may move when DR includes the majority of residential power consumption data. Even when that is the case, will the average person at home stare at his or her energy consumption display every ten to fifteen minutes? I know myself. If I get that kind of gadget, I may stare at it quite often for the first two or three days and then forget about it.

It remains to be seen if this analysis is right. One thing is true: no simple and easy thing can win the market.