Across 35 emerging market countries, there are more than 400 vendors vying for the more than $66 billion smart grid market opportunity by 2023. Among these 400 vendors, the number of local-based vendors active in smart grid projects currently exceeds the number of large international vendors, signaling an opening up of the smart grid vendor landscape.
This is according to a new study from Northeast Group that highlights this trend as well as the increasing level of collaboration between international and local-based vendors. Among the local vendors, over 160 of them based in Central and Eastern Europe, Eurasia, Latin America, Middle East and North Africa, South Africa, and Southeast Asia are well positioned in the smart grid market. Of these, over 25 percent are already active in smart grid projects.
"The smart metering market alone is expected to cumulatively reach $66.3 billion in emerging markets by 2023," according to the study. "It is not surprising that emerging market-based companies are rising to meet this demand. Local vendors are often best positioned to understand the unique characteristics of specific smart grid markets, which can vary greatly from region to region. These vendors are proving to be invaluable partners for international vendors and several of them are also capable of carrying out large-scale projects on their own."
International smart grid vendors have taken note of the market opportunity in emerging markets. Of the leading smart metering, distribution automation, IT, home energy management and professional services vendors, nearly all already have a significant presence in emerging markets, and over 10 percent already have offices in all 35 countries covered in this study.
On average, leading international vendors currently have between three to five emerging market partners, which help them in a number of ways, from gaining local market insight to avoiding potential tariff barriers.
"As smart grid markets in North America and Western Europe mature, the leading vendors are looking for growth opportunities in emerging markets. International vendors have already deployed nearly 3.5 million smart meters in emerging markets, with plans for millions more. The rise of emerging market-based local vendors is more likely to lead to increased partnerships rather than a significant loss in market share for the leading international vendors in most markets."
These market dynamics could also lead to an increase in mergers and acquisitions in the smart grid sector in emerging market countries. M&A activity is forecast to level off in the more developed smart grid markets after a flurry of activity over the past couple of years.
Leading smart grid vendors with sufficient capital could look to acquire emerging market-based vendors, who often own technologies and capabilities well suited to local markets. There have already been about a dozen such acquisitions of emerging market-based smart grid vendors in recent years.
Northeast Group's study found that vendors in the smart grid market vary in terms of size—ranging from less than 10 employees to well over 1,000—and segment, covering smart metering, distribution automation, IT, home energy management and professional services.
The study provides detailed analysis of the leading 40 emerging market-based vendors already active in smart grid projects, and an assessment of over 120 additional vendors based on company capacity, business partnerships and product development.