Government policies and the need for utilities to expedite operational efficiency have unleashed new opportunities in the Australian smart grid market. Utilities aspire to reach better operational efficiency as they upgrade their electricity grids to incorporate renewable energy sources, while reducing unnecessary capital expenditure. Establishing a smart grid provides the most promising solution.

A shift toward renewable energy sources, such as wind power, can result in inconsistent production of energy. There is a growing need to smoothly integrate such production of renewable energy, to incorporate environmentally friendly electric vehicles, and to manage varying peak demand spikes. Government mandates for smart meter rollouts and pilot projects in various states have driven up momentum for investments in the Australian smart grid market.

New analysis from Frost & Sullivan, "Australia Smart Grid Opportunity-Utility Survey", finds that the cumulative market is expected to be $383.1 million in 2010 and estimates this to reach $6.13 billion in 2015.

"The adoption of intelligent power grids helps manage multiple new interfaces, while ensuring high availability and better operational efficiency through data collection, analysis, and alerts," said Frost & Sullivan Consultant Rajat Gupta. "Smart grids integrate different technologies such as energy and infrastructure, automation and control, and information communication technology."

Smart grid development in Australia started with the deployment of smart meters in Victoria. New South Wales has a mandate to deploy smart meters by 2017. Utilities in other states have initiated pilot projects to test the feasibility of various smart grid technologies. Currently, the focus in Australia seems to be on smart meters and demand management.

Utilities are keenly watching the outcomes of these pilot projects. Given the results are positive, the chances of a complete smart grid rollout in Australia are extremely high.

Regulations play a critical role in market development. Until recently, utilities have been focusing their attention on increasing power consumption to ramp up revenues. Regulatory support is necessary for them to hike investments on smart grids, and changes must be made in the revenue models and incentives offered to encourage efficient consumption of energy. The disaggregated nature of electricity means that there could be a potential mismatch between who incurs the cost and who reaps the benefits of smart grid.

"Establishing a smart grid requires heavy financial investment, and it is uncertain how costs can be recovered in a disaggregated industry," said Gupta. "As the technologies supporting smart grids are in their developmental phase, scalability and sustainability are vital in the current situation, where there are no prior standards."

Early participation in pilot projects and developing a business case for smart grids will enable better understanding of the cost benefits surrounding the product for both utilities and regulators.

As the market progresses, sorting out customer concerns such as increase in costs, privacy, technological standards, and change management is of prime importance. While some of these issues can appear operational in nature, careful handling is required to ensure smart grids are deployed in a seamless manner with the support of all participating stakeholders.