In the last year, Aclara has contributed to a significant consolidation in the Smart Meter business. The acquisitions of GE’s smart meter business, Tollgrade’s grid communications infrastructure business, and most recently, Smart Grid Solutions has continued a trend we are seeing in the Smart Meter market.
In the last year, Aclara has contributed to a significant consolidation in the Smart Meter business. The acquisitions of GE’s smart meter business, Tollgrade’s grid communications infrastructure business, and most recently, Smart Grid Solutions has continued a trend we are seeing in the Smart Meter market. That trend is the rapid consolidation of the market and the shifting of market capacity from larger industrial companies and start-ups to companies dedicated to smart meter infrastructure and its ancillary components. Companies like Landis & Gyr , Aclara, Itron, Elster, Silver Spring Networks, Trilliant, and eMeter will continue to pick up meter and meter infrastructure companies to build broader and deeper portfolios. We also believe there is a good chance those companies have the potential to acquire each other as well. More traditional industrial companies like Siemens and Schneider will have to decide if they want to be the consolidators, or push their meter business to someone else in order to focus on broader grid and energy product portfolios.
The drive behind the market moves and consolidation is that the government mandates and funding for smart meters in North America and Europe have stabilized. While smart meter initiatives are still in place and driving forward, there are no new pushes for increased funding and government mandates beyond what exists. That is a sign that the market is ready to be consolidated and companies are worried about margins. This has created opportunities for companies like Itron and Aclara to invest in acquiring both competitors and complementary meter infrastructure technology. In speaking with some Investor-Owned Utilities (IOUs) in North America we see a trend of meter initiatives moving from the selection and acquisition phase to implementation. We see most major utilities continuing to roll out their meter projects, but the selection and procurement of large numbers of meters in projects has slowed or stopped.
What hasn’t stopped is the build out of the infrastructure for meter communications, meter management, and meter data management. That is where traditional meter companies, like Aclara and Itron have moved or are moving to offer the “one-stop-shop” for smart meter rollouts. It’s a good news, bad news situation for utility end users. On one hand, having a dedicated single source for meter systems that can potentially alleviate some integration work is very welcome. On the other hand, any consolidation poses some risk in cost for the procurement process. IDC Energy Insight’s opinion is that the meter business is a very competitive market still. That competition will be enough to keep any one player from dominating the space in the foreseeable future. Having said that, market saturation along with tight margins in the Smart Meter business has created acquisition opportunities which is consolidating the field of players in this space.