The smart grid market is expected to grow at a compound annual growth rate of 17.76% to reach a market size worth US$92.107 billion by 2026. This market was valued at US$29.336 billion in 2019. A smart grid is essentially an electric supply network that is integrated with digital communications technology in order to detect local changes in usage and automatically enable self-healing of the network. The growing modernization of grid infrastructure and rising awareness about carbon emission management is expected to be the major factors driving the smart grid market growth. Moreover, the government’s supportive policies are also expected to augment the market growth. On the other hand, the high initial costs required for the deployment of smart grid technology solutions and the generation of high volumes of complex and unstructured data that can lead to multiple threats are expected to act as a barrier to the growth of the smart grid market.
Rising Demand for Environment-Friendly Technology in the Developing Economies Will Boost the Market Demand for Smart Grid Technology
Smart grid essentially provides structured and well-founded power with the help of various smart grid applications and technologies. This ensures opportunity for both economies as well as the environment. Smart grid technologies are popularly being used across the globe. This has further created the demand for advanced metering infrastructure. In both underdeveloped and emerging economies, the government is recognizing the benefit of smart grid technology as a strategic infrastructure investment and is encouraging enterprises to deploy it in their production process. This will further ensure long-term prosperity. Moreover, it will help the enterprises achieve the carbon emission targets. These factors are anticipated to fuel the market growth.
The Rise in Investment by Both Public and Private Sectors Will Augment the Market Growth
The smart grid market is expected to witness growth owing to the increased investment in the market by both the public sector and private sector. For instance, in May 2018, an investment of US$ 94,90,000 was announced by Natural Resource Canada to incorporate the next-generation smart grid project. Many companies are constantly coming up with new technologies such as smart meters, EV Chargers, and other infrastructural technologies. This is anticipated to bolster the market growth of the smart grid market during the forecasted period. But on the other hand, due to the low accessibility to electricity, especially in underdeveloped nations, the poor regulations to deploy grid infrastructure by the government has restrained the growth of the smart grid market.
The Growing Awareness About Carbon Footprint Management Will Fuel the Market Demand
The regulatory pressure for reducing carbon emission is anticipated to be the prime factor driving the market for smart grids. Moreover, the global market is facing an increase in demand for electricity and the adoption of renewable generation. In addition, the globally rising population, industrialisation, increasing environmental concern owing to fossil power stations, and urbanisation has pressurised the government to plan regulatory standards for carbon emission, enact mandates for the implementation of smart grids and raise awareness about energy conservation. Moreover, incorporating a smart grid into use will save money for the end-users such as residential, commercial and industrial.
The Government’s Policies and Mandates Will Create an Opportunity for Various Companies to Expand Their Operations
Government across the globe have implemented various supportive policies and are giving fiscal incentives for deploying smart grid technology. The global market is witnessing a rise in the number of electric vehicles. This would further provide an opportunity for the expansion of the smart grid market. Moreover, much smart grid and utility companies are focusing on enhancing distribution efficiency. This would supplement the growth of the smart grid in the global market.
The Software Will Have a Significant Market Share During the Study Period of 2019 to 2026
The smart grid market is divided, based on software as Advanced Metering Infrastructure, Smart Grid Distribution Management, Smart Grid Network Management, Grid Asset Management, Substation Automation, Smart Grid Security and others. Smart grid distribution management is expected to grow significantly. It is also known as Advanced Distribution Management. It helps in energy distribution management. Moreover, Advanced Metering Infrastructure is anticipated to witness significant growth owing to the rise in the efforts to advance the electricity grid, increase in the investment by the government in advanced metering infrastructure and reduction in T&D loss. Further, by hardware, the smart grid market is divided into Sensors, Programmable Logic Controllers, Smart Meters and Networking Hardware and by service, the market is segmented as Consulting, Deployment and Integration, and Support and Maintenance.
The High Initial Cost for Deploying a Smart Grid May Hinder the Market Size of the Smart Grid Market
One of the prime factors that may hinder the growth of the smart grid market is the high initial cost required for incorporating smart grid technology solutions. It initially requires huge investment to set up the smart grid technology. The rising cost can also add up to the government budget, thereby creating a fiscal burden. Moreover, the deployment of smart grid technology comes with high operational and maintenance costs.
During the Forecasted Period, the Asia Pacific Region Will Show Robust Growth
The smart grid market is segmented, based on geographies, like North America, South America, Europe, the Middle East and Africa, and the Asia Pacific regions. North America is anticipated to hold the highest market share and dominate the smart grid market during the projected period. The growth will be mainly due to the rapid technological advancement taking place in the sector of smart grid distribution management, distribution automation, and advanced metering infrastructure. The region is constantly increasing investment in the smart grid as well as smart city projects. Moreover, the growing demand for superior smart grid mechanisms is also creating the demand for smart grids in the region. In addition, the government has regulated various policies and encouraged the use of electric vehicles, this, in turn, will fuel the market demand.
The Asia Pacific region is expected to exhibit the highest growth rate during the forecasted period owing to a rise in the adoption of renewable energy, especially in developing countries. For instance, in India, the Ministry of Power has launched the India Smart Grid Forum initiative to promote the development of smart grid infrastructure. Countries like China and Japan are anticipated to hold a significant share in the market.
The Impact of the Outbreak of COVID-19
The threat posed by the outbreak of COVID-19 has drastically impacted the stakeholders of almost all industries. The entire market chain has been impacted by the spillover. The global lockdown has resulted in the shutdown of various enterprises and has disrupted the production process. This is mainly due to the hampered supply of various components and types of equipment. However, the demand for smart systems is expected to witness growth owing to the rise in grid operations.