The water utility landscape is shifting, nowhere more so than in smart metering, as utilities across the globe increasingly adopt fixed communication networks and advanced metering infrastructure (AMI) solutions. Indeed, three out of four communicating meters shipped in 2023 will use a fixed network.
This shift aligns with utility priorities, as they focus less on collecting meter readings and more on extracting the full value from the data. Technology vendors will play a key role in this transition as they assume greater operational responsibility, providing and supporting the services once wholly handled by the utility. In fact, annual global revenue for vendor managed, meter-data based services are on the rise. IHS Markit estimates vendor revenue from utilities’ operational expenditures (opex) will exceed $576 million between 2016 and 2023.
Why is this happening?
Water utilities have historically been slower to adopt smart meters than electric utilities. On average, water utilities are smaller, have fewer investment resources and less national legislative regulation than these other types of utilities.
The decreasing price of connectivity, and the increasing value of metering data, have both continued to improve the business case for smart water meters. Likewise, software as a service (SaaS) and other new business models allow smaller utilities to reap the benefits of large-scale software offerings at a more reasonable price.
The potential applications for the use of water AMI data are also fewer than for electricity (for example, where voltage and other live measurements can be taken and used). However, this dearth of applications helps to focus and refine the business cases. IHS Markit has identified the following three key applications for water AMI solutions:
- Meter to cash
- Customer-centric applications
- Non-revenue water (NRW) reduction
As a result of the more narrow scope for water AMI, vendor-managed service offerings will start to focus on solutions targeting meter data management (MDM), billing automation, data verification and leakage detection.
What does the global picture look like?
While some utilities trends are global, others vary dramatically by region. Today, the most universal trend is for utilities to move to a basic SaaS model of hosted software. By 2023, 89 percent of all new MDM software licenses will be on a vendor-hosted basis.
In the short term, North America will continue to lead the adoption of meter-data-based services and revenue, closely followed by Europe, largely due to the significantly higher installation base of communicating meters in that region. MDM as-a-service constitutes the highest proportion of utility opex spending in North America, while network-as-a-service is the highest in Europe.
Asia-Pacific, largely dominated by China, leads the long-term forecast, however, driven by significantly increased adoption of communicating water meters over the next seven years. In 2022, annual opex revenue in the Asia-Pacific region will eclipse North America.
How is business changing for water utilities and technology vendors?
The future for AMI in water metering is bright. The water meter of the future will be significantly more integrated into multiple utility software systems, designed to fully deliver the value of metering data to the utility. The offer of opex, managed service offerings helps to accelerate adoption too; between 2016 and 2023, annual global opex revenue will increase by over 1,000 percent.
This growth trend indicates a fundamental shift in the relationships between technology vendors and their utility partners. Over the coming years, vendors will take on increasing responsibility, but they will also bear the risk for utility operations. The extreme end of this scale is a potential shared-benefits business model, where vendors provide services and solutions up front, but are paid a proportion of the savings and increased revenue. Even so, greater risk and responsibility can also bring higher long-term revenues for vendors and further entrench their relationships with utility partners. The main benefit to utilities from these new business models is the ability to leverage the latest available technologies and improve the investment case for AMI, while the ultimate goals of decreasing leakage, improving efficiency and lowering costs can benefit all stakeholders.
Although the water utility market might not yet be ready for shared savings, the current picture clearly shows IT-centric data services and a rise in AMI adoption. These will be the two key trends for water utilities and vendors to watch, as the technology-driven water network takes shape.
Smart Water Utilities Managed Services Report – 2018
This first edition report from IHS Markit provides insight into the future of the evolving marketplace for technology-based services to the water utility, centered on the role of advanced metering infrastructure (AMI). Covering communications networks to meter data management software and analytics, the report includes market sizes and revenue projections for the next five years across 28 sub-categories of products and services.