Market Horizons™ Report
Real-time Automation & Controls (RTAC) in the North
American Electric Utilities Marketplace (2003-2007)
PART FOUR
Market Analysis & Future Outlook
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-1
About This Report
InfoNetrix LLC, an independent technical research and consulting firm specialized
in utility automation and information technology (Utility Automation/IT) markets
conducted the research for this report. InfoNetrix reports are available for
subscription by any and all interested parties, foreign and domestic (except as
prohibited by law), in accordance with the pricing and terms set forth in the
prospectus, provided separately.
This report addresses Real-time Automation & Controls (RTAC) in the North
American Electric Utilities Marketplace. Other reports in the Market Horizons™
Series provide similar analyses of Real-time Automation & Controls (RTAC) in the
North American Water/Wastewater Utilities Marketplace and of Geospatial and
Mobile Computing Solutions (GMCS) in the North American Utilities Marketplace.
Please visit www.InfoNetrix.com for more information about these and other
InfoNetrix Advisory Services.
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-2
General Information & Notifications
PURPOSE
The information contained in this document is for the sole use of InfoNetrix clients
and is not to be distributed outside client organizations. No part of this publication
may be reproduced, transcribed, or transmitted in any form or by any means,
electronic or mechanical, including photocopying, recording, or by any electronic
storage and retrieval system, without permission in writing from the copyright owner.
DISCLAIMER
This publication has been prepared with care, however, no guarantee of accuracy,
completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix
be liable to any user of the publication or any portion(s) hereof for any direct or
indirect damages, expenses, costs or losses of any kind resulting from its use.
COUNTRY OF ORIGIN
United States of America
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-3
Research Standards & Methodology
The preparation of this report follows generally accepted standards of market
research practice and is based on principles of truthfulness and professionalism. A
reasonable and prudent effort has been made to ensure that factors and
circumstances having a material impact on any decision-making process derived
from, or impacted by, this report are included in the analyses and recommendations.
The representations of industry and market data and portrayals of the business
environment are based on market research conducted by experienced professionals
with broad knowledge and experience in the markets addressed.
The information upon which the findings and analyses contained in this report are
based was obtained through a combination of telephone interviews with key
suppliers and consultants and other individuals with extensive market knowledge
and experience, augmented by survey with a cross section of utility managers and
ongoing interactive research with over 1,000 utilities annually. Each telephone
interview/survey was guided by a specially designed questionnaire to obtain
pertinent data, insights and market perspectives. These interviews were augmented
by secondary research across a wide range of reliable public and proprietary
information sources pertinent to the study.
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-4
Research Reliability & Acceptance
The information presented in this report was gathered, recorded and analyzed with care and
precision. However, there will undoubtedly be differences between the findings presented and
actual results for various reasons and, because future events and circumstances frequently do
not occur as expected, those differences may be material.
For these and other reasons (including, but not necessarily limited to human error,
misinterpretations, misunderstandings and information sensitivities among respondents), the
resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts
presented herein reflect judgments made as of the period during which this report was prepared.
As such, some aspects can be expected to change as a result of numerous direct and indirect
factors, which are beyond the scope of this report to accurately predict. For example, it assumes
that current events will continue to have the same effect on the marketplace in the future and
that the conventional wisdom of today will continue to be completely applicable to future market
conditions, which is at best, unlikely.
By accepting and using the information contained in this report, the user assumes all
responsibility for its use for any and all purposes as user may deem appropriate and agrees to
hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential
damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively
solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies
discovered during the course of using this report. Please direct any such correspondence to
InfoNetrix Client Services.
(Detailed company contact information is provided on the web at: www.InfoNetrix.com.)
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-5
Market Horizons™ Report Contents
1. Executive Market Briefing
2. Marketplace Characteristics
3. Market Drivers, Issues & Trends
4. Market Analysis & Future Outlook
5. Supplier Environment
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-6
Market Analysis & Future Outlook
•
•
•
•
•
Current Market Assessment
Market Outlook Analysis
General Market Outlook
Systems Outlook
Field Data Devices Outlook
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-7
Current Market Assessment
Market Perspective
“You don't take technologies to market, you
take products to market. A technology
reaches the marketplace if it supports a
product that provides utility and value."
- Alberto Leon-Garcia, IEEE Fellow & Professor, University of Toronto
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-8
Current Market Assessment
Market Composition & Direction
• Slowed pace of utility consolidation
 Utilities still digesting the last round of M&A activity
 Expect a more rational M&A approach ahead
 Most IOUs now decided on a future G,T&D business posture
• Restructuring has slowed dramatically but is
expected to go forward despite delays and setbacks
 Standard Market Design still 1-2 years from final adoption
 ISO/RTO plan moving forward slowly, more confidently
except in Southeastern US where it is stalled indefinitely
• Energy Bill may be enacted in 2004 Congress;
contents & outcome remain uncertain but passage
seen as a definitive step toward solid direction for the
industry and improved investment confidence
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-9
Current Market Assessment
Market Values & Growth
• RTAC market values remain sluggish 2002-2003
 Lingering utility spending restraints due to…
• Continued macroeconomic uncertainties
• Distractions from non-core business activities such as…
– International M&A
– Trading desks
– Merchant power deals
• Confusion about industry restructuring & market direction
– National Energy Policy
– ISO/RTO plan
– Standard Market Design
 Weak Average Selling Prices (ASPs) caused by…
• Intense competition in a depressed market
• Routine improvements in price/performance ratios
• Beneficial impact of product standards/standardization
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-10
Current Market Assessment
Project Opportunities: EMS/GMS/TMS
• EMS remained flat (50% are sole sourced)
 Continued very small numbers of large (high ASP) projects
 Largest systems for ISO/RTO buyers (highest ASPs)
 Continuing incremental upgrades/expansions by utilities
• GMS fell off substantially from 2002 outlook
 Sharp declines due to demise of merchant power market
 Many projects in 2002 forecast now mothballed or canceled
• TMS offers best prospects for short-term spending
due to:
 Transmission congestion and clear need for investments
 National attention on T&D due to August 14th blackout
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-11
Current Market Assessment
Project Opportunities: DMS
• DMS remains in a slow growth mode but shows good
long-term (2005-2007) growth potential
 Increasingly larger numbers of smaller DMS projects
continues
 Project increases across all utility types
 MUNIs & RECs beginning to adopt automation at a slightly
faster pace than prior to deregulation/restructuring
 Distribution Automation (DA) component ramping up as
cellular coverage and bandwidth availability improves,
especially among MUNIs and RECs
 IOUs remain cautious about Distribution ROI but are getting
more aggressive as restructuring is better defined, especially
for those now committed to being in the DistCo business…
previously a major impediment to investing!
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-12
Current Market Assessment
Project Opportunities: FDDs
• FDD average selling prices remain depressed (gradual recovery
2004-2007 expected but will remain thin)
 Traditional substation RTUs continue to be displaced by substation
controllers & gateways communicating over LAN with IEDs
 Short-term (2003-2005) increases in transmission-level RTU
procurements
 Good to excellent RTU/SSC unit growth rates but overall market
values heavily offset by ASP declines
 Largest volumes continue to target substation modernization &
upgrade projects
 Good growth in DA for ultra-low cost and modestly priced units
 Most sales in 2002-2003 were expansion/upgrade units rather than
new projects as utilities waited for economic recovery
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-13
General Market Profile
RTAC Market Values
Annual Expenditures ($ Millions)
$10,000
$1,969.7
$1,000
$249.7
$249.3
$312.0
$393.1
$537.5
$477.8
$100
$10
$1
2002
2003
2004
2005
2006
2007
©2004 InfoNetrix LLC All Rights Reserved Worldwide
2003-07
4-14
General Market Profile
Market Composition & Contributions
Annual Expenditures ($Millions)
$600
$85.0
$500
$84.5
$81.1
$310.0
$300
$200
$393.3
$83.0
$400
$73.0
$77.3
$176.7
$172.0
$452.6
$230.9
$100
$0
2002
2003
2004
All Systems Projects
2005
2006
2007
All Field Data Devices
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-15
General Market Profile
All RTAC Systems Opportunities
Number of Opportunities
10000
1671
1000
251
207
182
463
414
336
100
10
1
2002
2003
2004
2005
2006
©2004 InfoNetrix LLC All Rights Reserved Worldwide
2007
2003-07
4-16
General Market Profile
All RTAC Systems Values
Annual Expenditures ($Millions)
$10,000
$1,558.8
$1,000
$176.7
$172.0
$230.9
$310.0
$393.3
$452.6
$100
$10
$1
2002
2003
2004
2005
2006
©2004 InfoNetrix LLC All Rights Reserved Worldwide
2007
2003-07
4-17
Detailed Market Profile
All RTAC Systems Opportunities
Number of Opportunities
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-18
Detailed Market Profile
All RTAC Systems Values
Annual Expenditures ($Millions)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-19
Detailed Market Profile
All Transmission Systems Opportunities
Annual Expenditures ($Millions)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-20
Detailed Market Profile
All Transmission Systems Values
Annual Expenditures ($Millions)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-21
Market Opportunities: EMS
Number of Opportunities
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-22
Market Values: EMS
Annual Expenditures ($Millions)
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-23
Market Opportunities: GMS
Number of Opportunities
Most GMS projects
already under way are
proceeding as planned
Many/most future GMS projects are
being delayed, postponed
indefinitely or canceled
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-24
Market Values: GMS
Annual Expenditures ($Millions)
A few remaining GMS projects are expected to be awarded in 2004,
after which period GMS market values will likely fall off significantly
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-25
Market Opportunities: TMS
Number of Opportunities
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-26
Market Values: TMS
Annual Expenditures ($Millions)
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-27
Market Opportunities: DMS
Number of Opportunities
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-28
Market Values: DMS
Annual Expenditures ($Millions)
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-29
General Market Profile
All FDD Values
Annual Expenditures ($Millions)
$410.9
$1,000
$73.0
$77.3
$81.1
$83.0
$84.5
$85.0
$100
$10
$1
2002
2003
2004
2005
2006
2007
©2004 InfoNetrix LLC All Rights Reserved Worldwide
2003-07
4-30
Detailed Market Profile
All RTAC FDD Opportunities
Number of Opportunities
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-31
Detailed Market Profile
All RTAC FDD Values
Annual Expenditures ($Millions)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-32
General Market Profile
All T&D RTU Values
Annual Expenditures ($Millions)
$319.1
$1,000
$57.5
$60.9
$63.7
$64.6
$65.4
2003
2004
2005
2006
2007
$64.6
$100
$10
$1
2002
©2004 InfoNetrix LLC All Rights Reserved Worldwide
2003-07
4-33
Detailed Market Profile
All GMS RTU Opportunities
Number of Opportunities
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-34
Detailed Market Profile
All GMS RTU Values
Annual Expenditures ($Thousands)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-35
Detailed Market Profile
All TMS RTU Opportunities
Number of Opportunities
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-36
Detailed Market Profile
All TMS RTU Values
Annual Expenditures ($Thousands)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-37
Detailed Market Profile
All DMS RTU Opportunities
Number of Opportunities
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-38
Detailed Market Profile
All DMS RTU Values
Annual Expenditures ($Thousands)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-39
General Market Profile
All T&D SSC Values
Annual Expenditures ($Millions)
$91.8
$100
$17.4
$18.4
$19.1
$15.5
$16.4
2003
2004
2005
2006
2007
$20.4
$10
$1
2002
©2004 InfoNetrix LLC All Rights Reserved Worldwide
2003-07
4-40
Detailed Market Profile
All T&D SSC Opportunities
Number of Opportunities
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-41
Detailed Market Profile
All T&D SSC Values
Annual Expenditures ($Thousands)
Average
Selling
Price
Ranges
©2004 InfoNetrix LLC All Rights Reserved Worldwide
4-42