The cleantech revolution


Center for Energy and Environmental Security research analyst Elias Leake Quinn proposes a regulatory and a technological solution. The regulatory solution ensures that “databases are used only for their principle [sic] purposes: informing efficient electricity generation, distribution, and management.” The technological solution “must come in two parts: one addressing the security of the database as aggregated and kept by the utility, and the other addressing the security of transmitted data.” With regard to the latter, “One possible approach might be to aggregate and encrypt the data being sent from smart meters back to the utility by putting additional hardware on each transformer. This would basically anonymize an individual’s information to roughly the scale of a city block.”12 Whichever solutions prevail, it is clear that energy optimization and privacy need not be mutually exclusive goals.

6.8 billion is the number of megabytes that would need to be stored and managed once the smart-grid infrastructure hits 40 million advanced meters.

Security concerns. While the privacy issue has naturally emerged as a major concern, there are other potentially serious challenges to building out not only smart, but also secure, infrastructures. For example, the deployment of smart meters leads to enormous amounts of data sharing and interoperability of systems within electricity grids. As this heightened two-way connectivity between energy producers and end-users grows, so, too, inevitably, will concerns surrounding the potential exposure of smart grids to cyber attacks. Such vulnerabilities could cover a broad spectrum—from an individual home’s smart meter being hacked by a petty criminal, to a cyber-terrorist intent on blacking out an entire city. As smart infrastructures proliferate, steps are being taken to harden systems and add layers of security to best guard against cyber vulnerabilities. Clearly, proofing smart infrastructures against criminal or malicious attacks not only poses a serious mandate to utilities but also has emerged as a national priority.

Defining your role in emerging smart-infrastructure markets

For some companies, successfully entering a smart-infrastructure market has meant forming alliances or making acquisitions. The smart-grid and electric-transportation sectors will likely produce a new crop of major cleantech players, but a strong trend suggests that this will be achieved through cross-industry collaborations. Making the right alliance or acquisition at the right time during this dynamic phase will benefit companies intent on securing a foothold in the smart-infrastructure markets.

Sustaining cleantech’s second wave. Government support and incentives—in the form of tax credits, mandates, ARRA grants, and loans—have done much to grow the first wave of cleantech industries, including wind and solar energy generation and biofuels. It may be that similar government support and, just as important, further consumer and commercial buy-in will sustain the second wave of cleantech players currently emerging. Key to companies’ spotting and acting early on potentially significant opportunities in existing and emerging smart-infrastructure industry markets will be their fixing a vigilant eye on current and anticipated federal and state government support, as well as on consumer and commercial adoption of new and next-generation clean technologies.

Customer is key. For smart infrastructures to grow, customers must accept them. Therefore, it is critical that all stakeholders who are building out these infrastructures develop programs that accommodate customers’ needs and preferences. If the build-out of these infrastructures is not focused on customers, they likely will not adopt them.

Smart infrastructures as a national industrial policy. As part of its drive to stimulate the economy, the Obama administration has focused on energy generation, management, and consumption as key beneficiaries of government stimulus money. Indeed, this administration has laid the groundwork to modernize the nation’s electricity grid as well as to spur growth in the electric-transportation sector. These initiatives follow cues already taken at the state level and signal the beginnings of a national industrial policy—with the development of smart infrastructures at its core. Going forward, continued momentum of this policy (in the forms of ongoing stimulus disbursement and a possible carbon cap-and-trade system) would likely open more opportunities for companies—big and small—that can deliver products and services needed to create modernized infrastructures.

Choose the “smartest” partner. As the ambitious roll-out of these smart infrastructures begins, the need for companies to ally and partner with other companies is evident. This has created cross-industry convergences that might have seemed unlikely just a few years ago. However, as technologies develop, some will be the standard-bearers, and others will not. Therefore, choosing the right partners (and the technologies they represent) in smart-grid-related projects will be increasingly important—particularly when that choice means committing to a certain technology.

The winning technologies will be those that will be not only scalable but also easily adaptable to next-generation technologies and innovations. For example, successful smart-meter roll-outs are predicated on their ability to endure through generations of new technologies connecting to them at both ends—into the home and to the utilities. Alliances, then, need to be forged with partners whose technologies will most easily adapt to future innovations. And, as in any fast-growing industry, committing to certain technologies—as a producer or an adopter—will continue to be a challenging undertaking, as more and more players enter the smart-infrastructure space, offering still more technologies and solutions.

Wide adoption equals the tipping point. Finally, smart-infrastructure development likely will reach an economic tipping point when a Moore’s-Law-like cost reduction results from wide adoption of technologies—from sensors, to substation automation, to home energy management systems. Clearly, all smart-infrastructure players—from energy management software developers and start-up electric-vehicle-charging-station developers to utilities—will benefit from economies of scale. Companies entering smart-grid and electric-transportation markets are taking a lead and establishing early market share. However, the early and high-growth stages of these markets will likely be the most volatile. Wide and enduring adoption of these technologies will be the key to the maturing of the markets they are creating. Economies of scale will happen—and a tipping point will be achieved—only when industrial, commercial, and consumer adoption of smart-infrastructure technologies becomes pervasive and ingrained.

Tim Carey is PwC's US Cleantech leader.

12 Direct quotes in this paragraph are from Privacy and the New Energy Infrastructure, pp. 40-41. Quinn attributes any merit to this approach to Jonah Levine at the Center for Energy & Environmental Security, University of Colorado Law School.