The recent termination of the GE-Fanuc joint venture was the sign that GE would either get in, or get out of automation. I mentioned in a previous column that this would take a few months of deliberation and strategy sessions – till the turn of the year. Expect GE to move quickly in 2010.
GE has publicly stated that it will shrink its GE Capital division, and has just recently struck a deal with Comcast to reduce its stake in media company NBC Universal. CEO Jeff Immelt has spoken emphatically, many times, about the new GE focus on growing manufacturing and industrial businesses.
GE’s recent moves have accumulated a war chest, of roughly $25B cash on the balance sheet at year-end 2010. There are plenty of signals that GE is now on the deal war path for industrial companies. Rockwell Automation has been mentioned as a distinct possibility. Buying Rockwell would allow GE to replace its media earnings, and to grow in the automation arena, where the giant is not even a top-10 player.
JP Morgan analysts have calculated that GE will make a $60 per share offer, roughly $8,5 billion, for Rockwell Automation. In response to that news, ROK share prices jumped 3,6% to a new 52-week high of $48,12, and continue to trade briskly.
Why Rockwell? Why now? GE sees Rockwell technology as a plus, and its distribution/installed base in North America a competitive advantage. Too, Jeff Immelt keeps emphasising global opportunities and GE would boost Rockwell’s distribution on a global scale that competes with Siemens and ABB.
Rockwell responded to the prospects of being bought-out by GE with the usual sweet nothings, “We believe that the highest value for Rockwell Automation shareholders will be realised by remaining an independent company and executing our growth and performance strategy.” Heck, what would they say?” “Sure, we are for sale!”
But, what the 500-pound gorilla wants, it usually gets. GE’s entry will bring new life to the stale and stagnant automation business.
Smart Grid Revolution
The products we run with electricity have changed enormously, but the massive grid that delivers power to our homes and businesses has hardly changed at all for over a century.
Today, power companies cannot track the electricity they produce and distribute. They do not really know about problems till customers start calling. And steady leaks are a big problem – about 7-9% of power is lost in the transmission wires.
Consumers have similar problems. They only get a glimpse of their energy consumption when the utility bills come once a month. They pay about the same for power any time, ignoring the fact that power is much more expensive during peak times.
The result is an antique grid that is prone to failures - like the blackout that hit the NE US and Canada in 2003. Our technologies are 21st century, while our power-grid is barely in the 20th.
The ‘smart grid’ brings networked intelligence, allowing power companies to monitor distribution and respond rapidly to changes. Consumers can use intelligent appliances to control how and when they use electricity for power-hog appliances, which shrinks power bills and smoothes demand.
The smart grid incorporates the use of superconductive transmission lines for less power loss, and keeps track of all electricity flowing in the system. It also integrates alternative sources of electricity such as solar and wind.
Building the smart grid brings the power distribution into the Internet age. Information is used to optimise power usage, making the entire system operate much more efficiently and reliably.
People’s homes will have more detailed information through energy-monitoring tools and web-based programs that give a realtime view of how much energy is being used, which appliances consume the most, and how homes compare to others.
When power is least expensive a smart grid could turn on home appliances like washing machines, or factory processes that can run at arbitrary hours. This will allow energy bill savings of as much as 15%.
How big is the smart grid market? Utilities will need to add an aggregate of nearly 40 gigawatts of clean energy generation by 2030. To get all that power to customers, total investment of $2 trillion into transmission and distribution networks will be required. And that is just the additional clean power – there will be even more investment in the software, hardware, and wireless networks to enable the power grid to intelligently manage all the additional capacity.
Smart meters can cost anywhere from $100 to $300 per meter to install depending on the sophistication of the meter. So, say 40 million smart meters will be installed; that could cost $4 billion.
Historically the investment into smart grid technology has been minimal, but venture capitalists have recently started to pump money into the sector. Look for lots of start-up companies and new growth in the future.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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