Thursday, February 18, 2010

The ah-hah moment on Smart Grid Tech Business Models

A quick survey of a handful of smart grid tech companies who are creating devices for consumer use shows that they are mostly targeting the utilities rather than the consumers (home owners). Why?

Looking at the numbers I've come up with, it's clear that this is a game of very large numbers. Small percentages of large numbers are still large numbers. So you need a customer who can leverage those very large numbers.
The consumers cannot.
The utilities can.

Pulling data from the DOE site on total generation in CA, number of customers in CA and cost of generation. Then including the power mix for PG&E and taking that as an average for CA, you get a non-surprising result.

Assuming a 10% consumption reduction via electric usage dashboards:
  • The average consumer would see a $80/yr savings.
  • The combined generators of power in CA would see a $461M/yr savings.
It's hard to get a home owner excited about $80/yr.
It's probably a little easier to get a utility interested in a few hundred million $ per year
... and this doesn't include planning for Cap & Trade...