Echelon Wins More Smart-Grid Biz

Echelon Accelerates Smart Grid Adoption

As a leading provider of smart grid meters, Echelon (ELON - Snapshot Report) is well positioned in the rapidly growing advanced metering infrastructure (AMI) market. On July 7, 2009, Echelon, in partnership with ROMlight International, announced that it would install its LonWorks control networking technology at the Kelly Western Services Ltd. aircraft hangar in Winnipeg for high bay lighting systems, which are particularly used in buildings.

Echelon has been growing through customer wins and also has footprints in Germany, Denmark, France, Russia, Sweden, Italy, Australia, Austria, The Netherlands, and the United States. This deal is its first win in Canada.

Smart control networking provided by Echelon helps in cost savings for utilities by reducing labor costs and increased meter reading accuracy, through capabilities such as early detection of failing streetlights, forewarning about outages, light output balancing and dimming services.

Kelly Western replaced all of the 1,000 watt lamps in the hangar with ROMlight’s 575 watt digital ballast high bay fixtures embedded with Echelon’s control networking technology. This helped reduce energy use by over 60%, or over 250,000 kWh per year, and obtain dimming services during off peak hours.

This strategic relationship is expected to pave the way for growth for ELON. We also believe Echelon will benefit from the increased investment in energy efficient projects and technologies. Additionally, ABI Research expects the AMI market to grow at a CAGR of 24% through 2013. By 2013, 28% of electric meters are expected to be ‘smart.’ Echelon will definitely benefit from the growing smart control networking technology. Revenue to Echelon is expected to be around $2 billion from smart projects.

Although Echelon is poised for growth from new customer orders but we remain uncertain on how speedily the future new projects will be awarded to Echelon. Echelon’s largest competitor, Siemens AG (SI - Analyst Report), also offers metering systems directly or through large IT integrators such as International Business Machines (IBM - Analyst Report) or telecommunications companies such as Telenor. We therefore reiterate our Hold rating on Echelon.