Making a Smarter Grid a Reality

Schneider Electric's attempt to move its infrastructure business into the age of the industrial internet

Schneider Electric is a $39.3 billion company (Forbes, 1) focused on energy management and automation in four key segments: buildings, industry, infrastructure, and IT (2). Schneider Electric can trace back its beginnings to the industrial revolution 180 years ago where it was a “major player in the steel and machine industry” entering the emerging electricity market (3). Over time, they have focused on bringing innovation to their electrical distribution products through acquisition of great technologies. While these technologies have kept Schneider Electric relevant and competitive, they do not compare to the disruption that digitization is bringing to the entire industry.

To stay relevant, players in electric distribution need to understand the future of infrastructure and industrial internet of things (IoT). “As a market leader in electrical products, systems and services, Schneider Electric is critically linked to the future needs of a smarter electrical grid infrastructure” (4).

Schneider Electric

What are the grid infrastructure opportunities for the electricity distribution industry?

On a macro level, the electricity distribution industry has been affected by immense technology leaps in solar energy and energy storage. These are key enablers in the shift from central generation (i.e. power plants) to distributed generation (5).

“Utilities will face a significant increase of operational complexity requiring a greater level of real-time flexibility. This step-change in terms of operational performance will only be achieved thanks to a more digitized and connected operational ecosystem.” (6)

Digital transformation has led to smarter electrical grid infrastructure. What does it mean to be smarter?  According to the U.S. Office of Electricity Delivery and Energy Reliability, a smart grid refers to “using computer-based remote control and automation. These systems are made possible by two-way communication technology and computer processing that has been used for decades in other industries” (7).

How can Schneider Electric differentiate itself?

A smart grid infrastructure increases Schneider Electric’s value proposition to “improve reliability, resiliency, flexibility, and efficiency (both economic and energy) of the electric delivery system” (8). How can Schneider Electric take advantage of this transformation and position themselves differently from competitors like GE Current, or NRG?

Schneider Electric has an advantage over other utilities in the development of smarter grids: as a diversified company they have the automation experience from their industry business segment. Their product “Ecostruxure Grid” is a platform of cloud-connected services that leverages IoT, mobility, sensing, cloud, analytics, and cybersecurity technologies that allow customers to improve their efficiency (9). This product does shift a key competency to processing big data at a scale unseen in their other industry segments. The data processed from grid infrastructure is very different than improvements to energy efficiency of a single office building in their “Building and Partners” segment.

My recommendations for Schneider Electric

  • Continue to leverage expertise and relationships in other business segments to facilitate transformation of products and services in the infrastructure segment. Schneider Electric provides cooling and energy management services for the IT segment. Are they able to leverage their customer relationships in this segment to partner on developing a “big data” core competency in their infrastructure business?
  • Build up cybersecurity technology and competency at Schneider, either internally or through partnerships. Since the grid touches so many cities, institutions, schools, homes, etc. with different risks of losing electricity, external hackers of electrical grid access represent a large emerging concern. Cybersecurity could be a true sticking point for customers, such as the cities of Austin or Dallas, and a capability unseen in their other business segments.
  • Increase effort to target cities by sponsoring a conference with public customers. Focus the conference on helping public customers measure their effectiveness of actions taken from the information provided by the Ecostruxure Platform. Assert a position as a technology leader (with the established know-how), but focus on understanding obstacles customers have to implementing actions informed by IoT. These services can easily fail if their customers are unable to take the right actions. Ultimately, targeting cities aligns with the growth potential of their product and offers many scale-able knowledge sharing opportunities.

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Student comments on Making a Smarter Grid a Reality

  1. Thanks for your post TS,

    It was very interesting to learn about Schneider Electric, a company that I haven’t had heard from before. It seems to be that their scope is very broad, it is not common to see companies working simultaneously at a grid and at a building level. Their clients’ characteristics must be very different across business lines (grid -> government, building -> real state developer). I wonder if at some point they will have to pick one business line and let the other ones go.

    Also, it seems that they are making a lot of effort to differentiate from the competition. In relation to this, it would have been useful to have more detail on

    (1) what is the competition doing? Are they following any of your recommendations already?

    (2) the increased operational complexity in the industry, considering that operations is one of the way in which they can differentate themselves. In my opinion, smart grids will simplify operations as many processes and controls could be automated.

  2. Cybersecurity is indeed a big issue in digitization of infrastructure as you rightly pointed out in this note. The threat comes from hackers as well as other players in the larger context of online security. How companies will respond to threats like this and continue to innovate against rapidly innovating hackers will be key in ensuring that this remains a sustainable business model.

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