Boeing Co. defense chief Dennis Muilenburg is seeking to enter the potential $20 billion U.S. smart-grid market as the second-largest military contractor’s key programs are being canceled or face budget cuts.

After a month in the job, Muilenburg, 45, told Bloomberg he’s accelerating plans to expand beyond aerospace and defense that were started by his predecessor, Jim Albaugh, who was named head of the commercial-jet division on Aug. 31.

“We know that we have to reposition our business, and that repositioning is something we are very aggressively doing,” Muilenburg said in an interview in his office overlooking the Pentagon. “One idea is to take some of our defense technology and use it to help solve problems in the energy sector.”

According to the head of Boeing's defense business unit, it's simple – the defense contracting business is facing a big shortfall over the coming years.

The smart-grid market is a big market to tap – but not so big compared to the potential drops in defense projects Boeing and other contractors are facing.

President Barack Obama has said the United States will scrap a $5 billion missile defense system in Eastern Europe, which Boeing was set to build. And the U.S. Army's Future Combat Systems program, which Boeing leads, is also facing cuts, MarketWatch reports.

It's not the only defense contractor facing a decline in business as the Obama Administration seeks to shift defense spending from large complex weapon systems toward more support for troops in Afghanistan and Iraq. That shift could lead to a 27 percent drop in U.S. military R&D and purchasing spending over the next three years, Macquarie Equity Research reported Monday.

Enter the smart grid. Mullenberg told Bloomberg that Boeing's networking and integration expertise in missile defense and army combat systems could be applied to "adjacencies" such as smart grid systems.

Energy projects would put Boeing in competition with General Electric Co., International Business Machines Corp. and Cisco Systems Inc. for $4.5 billion of U.S. stimulus spending aimed at improving the grid. The planned “smart-grid” technology seeks to lower costs and prevent disruptions with systems that allow energy providers to communicate. The market for the grid’s communications segment may be worth $20 billion in the next few years, Boeing spokesman Chris Haddox said.

Boeing is already a partner in smart grid projects being proposed by Southern California Edison and Consolidated Edison in New York, both of which are seeking funding from the Department of Energy's $3.9 billion smart grid stimulus grant program.

Fellow defense contractor Raytheon plans to help Tucson Electric Power get a $25 million grant to link solar panels and in-home energy management systems.

Lockheed Martin said in September that it was working with eight utilities seeking DOE smart grid grants for projects including a $150 million project planned by American Electric Power Co. in Ohio and a $38 million proposal from PPL Electric Utilities in Pennsylvania.

Lockheed is also partnering with Ocean Power Technologies to help the New Jersey-based company build wave power buoy projects.

And British defense contractor BAE Systems' U.S. subsidiary has created a company called Balance Energy that is seeking to commercialize microgrids, or renewable energy, electricity storage and smart grid systems serving office parks, campuses and other self-contained areas.

Its first project would be a microgrid at the University of California at San Diego, if San Diego Gas & Electric is awarded a $100 million Department of Energy smart grid grant.

Of course, these projects and hundreds of others are collectively seeking much more money than DOE has available to give out, meaning that some may be delayed or shelved if they don't get the grants they're seeking, according to GreenTech Media.

Security for the digital communications and control systems these smart grid projects will put in place has emerged as a top priority for the federal government, which is now developing standards for smart grid deployments.

Defense contractors are well versed in securing and managing complex military systems, which could give them a leg up in their smart grid efforts.

Of course, these defense contractors will be competing against such giants as IBM, Cisco, Microsoft and others in providing smart grid integration and security expertise.

Sources: Boeing, Lockheed, Bloomberg, Greentech Media

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written by Fran Tracy, November 07, 2009

I applaud boeing for looking beyond the millitary for inovative ways to improve. I just wonder why solar panels ( the stick on kind) can't be put on airplanes and cars to generate electricity while it is being used.
Fran

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