Software for Energy Asset Management

Taken as a whole, the global energy grid could arguably be called the largest machine in the world. Unfortunately, it is also one of the oldest and most out of date. The good news is that new technologies, including renewables, distributed generation, storage, and innovative energy marketplaces, offer the opportunity to dramatically modernize the world’s electricity infrastructure, thereby enhancing services, reducing cost, and contributing significantly to the reduction of greenhouse gas emissions.  As the “smart grid” develops over the coming years, software will be the common thread and key to connecting, integrating, and managing new hardware technologies that are expected to enable one of the greatest industrial transformations in modern history.

Specifically:

·        over the past 5 years, more than 2.2 trillion dollars has been invested in renewable energy assets (according to BNEF); software is critical to integrate and optimize them;

·        existing grid management tools must be replaced with software solutions that provide more advanced functionality and scale with complexity;

·        as energy sources increasingly transition from fossil fuels to more intermittent renewables, electricity market participants need new software solutions to manage supply variabilities, distributed grid assets, demand response programs, marketplace communications, and more;

·        the intermittent nature of renewables also creates the need/opportunity for more advanced energy transmission and storage capabilities; innovative software solutions will be required to ensure that renewable assets, and their corresponding transmission infrastructures, are fully utilized and minimize the need for excessive capital expenditure.

Key Figures

·        $970 bn – the global renewable energy market in 2022, growing at 8.5% CAGR -> $2.2 tn by 2032 (according to Precedence Research)

·        $3.2 bn spent by power companies on software in 2020; growing at 10.2% CAGR -> expected to reach $5.2 bn by 2025 (according to BNEF)

·        $1.8 bn spent on asset maintenance software in 2020; growing at 9.2% CAGR -> expected to reach $2.8 bn by 2025 (according to BNEF)

Figure 1. Market size of asset maintenance software by sector

·        $10 bn a year in saved grid costs by VPP (virtual power plant) capacity projected to almost triple from 30 - 60 GW in US to 80 - 160 GW by 2030 and meet up to 20% of peak demand (according to D.O.E.)

·        Advanced Battery Management System (BMS) software could save automakers $18 bn annually in 2030, equivalent to $76 bn cumulatively from 2024 (according to ABI Research)

Ecosystem Classification

For the electricity industry, we classify software products, enterprises, and startups into 3 main categories:

1)       Generation: includes modelling, predictive maintenance, asset management companies, subdivided in terms of the underlying physical asset – renewables, batteries, oil & gas;

2)       Transmission & Distribution (front-of-meter): is about centralized grids and decentralized energy resources management and includes flexibility services companies, involved mainly in energy transmission management, and efficiency improvement and maintenance software companies, mainly offering solutions for grids;

3)       Consumption (behind-the-meter): is the most wide-ranging cluster and includes software companies, which help electricity consumers to manage and increase efficiency of their energy consumption, operate EV fleets or separate units, etc. It is largely subdivided in reference to the end-users: industrial/corporate and residential, with subsectors within each subdivision.

We looked at around 150 companies to get a sense of competitive landscape.

Figure 2. Pipeline of the companies

Within this broad ecosystem, Susten is focused on 3 subsectors that we believe offer the greatest number of high potential opportunities:

Figure 3. Subsectors of particular interest

Then, to identify the most promising companies in terms of their current development stage, we scored them by a) rapid scale up, b) funding and growth, b) commercial traction, relying on information provided by companies and information from news and press releases.

We have shortlisted 24 companies from our long list of 150, with some (not all!) examples illustrated below:

Conclusions

This is a fast growing sector. The companies have the potential to be scalable and therefore offer enormous upside. Certain companies, which are already working with proven technology and have strong customer traction, appear to have high potential.

We are sharing this summary in order to create a dialog. Please let us know what you think. Feel free to comment below or reach out to Katya (KK@susten.com) or any other member of our team that you know.