Smart metering: transforming the energy future
Worldwide, power and utility companies are expected to invest US$62b by 2022 in smart meters alone. We estimate the total smart rollout investment, including deployment of field forces, is likely to be three times this figure.
Conservative forecasts estimate that between 90 and 130 million meters will be installed worldwide every year until 2022, with initiatives underway around the world:
- Under European Union (EU) legislation, 80% of consumers will need smart meters installed by 2022.
- Japan is taking steps to deploy an expected 27 million new smart meters.
- The US regulator is pushing energy companies to accelerate the rollout of smart meters, to save money for consumers and reduce the need for power plants.
- The State Grid Corporation of China plans to install 300 million smart meters by 2015.*
Smart meters can create a “virtuous circle” linking energy companies, investors, customers, communities and regulators.
What benefits are utility companies seeking?
1. Increased cash collection — Utilities can improve cash collection through smart technology by:
- Implementing prepaid smart meters and collecting the cash before consumption
- Implementing a “remote disconnect” functionality in case of customer bad debt
2. Network optimization — Collecting data on energy use enables better balancing of the network and a live view of grid activity, including technical failure. Granular, aggregated and analytical data generates information for better network planning and optimization to reduce losses.
3. Reduced energy consumption — When customers see their levels of energy use and costs on a home display, we see a change in consumption patterns. When utility companies are able to offer Time of Use (ToU) tariffs, customers can adapt to use energy when it is cheaper.
4. Reduced non-technical losses — Tamper controls built in to smart meters can alert utility companies to power theft. Data can be analyzed to detect unexpected consumption patterns, which can also indicate potential theft.
Key lessons from global markets
Working with more than 20 major utilities worldwide on smart metering programs, we can draw some key lessons from these markets:
1. Successfully modeling cost and benefit
Lesson: Ensure the business case stays aligned with objectives
The objectives of a smart rollout will vary widely between organizations and countries. They can include revenue security, consumption control or other “green” goals. Costs will vary depending on these objectives.
Once the smart business case is defined, strict control is needed to ensure the rollout operation does not allow new requirements to slip in at a late stage and subvert the plan. You also have to be prepared to deal with uncertainties, such as:
- Lack of a defined regulatory regime
- Funding shortages
- Wide variations in smart meter costs
2. Creating positive customer experiences
Lesson: ensure consumers clearly understand the benefits
Energy companies and governments worldwide face challenges in all aspects of “smart customer” management, including:
- Creating a positive image of the value smart meters can bring
- Reassuring consumers that data is secure
- Communicating clearly and efficiently on the installation process
This is primarily a communications challenge. The key lesson is the need to define benefits clearly and simply, and start communicating as early as possible, to stand the best chance of acceptance and success.
Creating a flexible approach to governing data access – protecting consumers’ privacy while giving them the option to benefit from data-centric innovations – is a key success factor.
3. Defining the optimum supply chain
Lesson: no proven “best” route — population volumes and overheads govern decisions
In a value chain that spans meter manufacturers, installation teams, technology and finance, how can utilities select the right partners and make this network work well together? We’ve not yet seen a definitive model of the “right” way to manage the chain. However, it chiefly depends on:
- The size of the customer population
- Your attitude to overhead costs
- Whether you want to delegate the implementation phase to external suppliers
4. Changing the business to be smart enabled
Lesson: prepare to innovate — and prepare personnel for changing roles
One key area of change in the transition to a smart metering environment is the role of client-facing personnel.
Smart technology offers the possibility of new tariffs and new value propositions, including advice on energy consumption. Sales, contact center teams and field forces need to be trained to take on this more sophisticated energy advisory role.
* "2013 State Grid Corporation of China Profile," ZPryme Research and Consulting, March 2013.