Market for Volt/VAR Optimization Set to Transform

Global shipments of volt/VAR Optimization (VVO) control electronics used in smart electricity grids are forecast to double during the next five years, according to a new report entitled, The North American Market for Smart Grid Volt/VAR Optimization – 2013 from IMS Research, now part of IHS.

Despite a slowdown in some areas of smart grid spending after the boom years of the American Recovery and Reinvestment Act of 2009 (ARRA), strong growth in VVO is anticipated in the coming years, propelling shipments and revenue alike. From barely over 50,000 units in 2013, VVO control shipments are expected to climb to well over 100,000 units by 2018.

“Following the years of government-funded smart grid projects during the ARRA period, utility companies now are beginning to look at new ways to leverage their Advanced Meter Infrastructure (AMI) data and to defer the expense of major new-generation and infrastructure projects. For these firms, VVO is emerging as a strong choice,” said Jacob Pereira, utilities infrastructure analyst for IHS.

A number of challenges still need to be addressed, however, before VVO becomes a truly common practice among utilities.

“Verification of positive results is often difficult for utility companies to obtain,” Pereira added. “The degree of accuracy at the end of the line can be less than ideal for this application, and utility companies in many regulatory environments are hesitant to institute efficiency schemes because it reduces their revenues. Nonetheless, the increasing prevalence of high-accuracy line sensors and regulations that encourage efficiency are gradually combatting these objections.”

Even more exciting is the potential for dedicated VVO software. In fact, annual revenues from the sale of software exclusively used in VVO schemes will more than quadruple by 2018 from current levels, IHS predicts. As a result, this is one area where major smart grid companies are paying very close attention.

Such attention already has been made evident in recent years via the acquisition of various grid software and analytics companies made by some of the major players in the field, along with the development and release of internally generated software by others.

As efficiency regulations become increasingly demanding and technologies continue to improve, the VVO market is expected to become one of the new rising stars of the burgeoning smart grid. To this end, utilities, regulators and suppliers will all be watching the field closely in the coming years.

 

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