Market Insight

Digitalization: 2019 smart metering milestones

November 28, 2018

Susanne Cumberland Susanne Cumberland Senior Research Analyst, Power and Energy Technology, IHS Markit
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Utilities of all types are heading towards a data-driven future, and this continues to accelerate the immediate demand for communicating meters. As this digitalization trend takes hold, the metering world is expected to hit some interesting milestones in 2019:

  • Over 365 million electricity, gas and water meters will ship – that’s 1 million new units every day.
  • 46% of these will be communicating meters. Adoption is lowest in gas, but still reaches 25% of meters shipped.
  • Almost two thirds of all communicating meters to ship in North America will have advanced metering infrastructure (AMI) capabilities.

The global installed base of communicating meters already exceeds 700 million and is growing rapidly, meaning the focus now shifts to life beyond the meter.

More than just billing meters

The longest standing and best understood drivers for smart metering clearly centre around billing and the labour saving on meter reads. Whilst many utilities champion the improved customer service benefits too, this is typically more as justification of spend rather than an actual return on investment for the utility.

This initial investment on meter to cash technology already brings some additional benefits to both utility and customer – for example, it is estimated that average energy consumption drops by 10% per customer, simply by installing a smart meter and improving them with visibility of their usage.

However, there are an increasing number of new applications and measurable benefits from the smart meter data that could drive the next level of investment. This includes:

  • Energy Efficiency – A growing focus on energy efficiency is clear across multiple industries for residential, commercial and industrial applications. Legislation is a big driver, including the EU 2020 Energy strategy which requires a 20% increase in energy efficiency by 2020. Many large commercial and industrial (C&I) companies have been working on this for several years in trying to improve, but also demonstrate, their efficiency. For example, Petroflow Energy Corporation recently published a paper with Intel to show its new data software solution had aided in reducing power consumption by 43%. In a world focused on improving efficiency, the number can be measured through accurate and timely meter readings. It’s clear that this application can be a huge driver for meter investment, especially in C&I sites.
  • Storm Damage Control – The ability to reduce damage caused by storms is becoming vital in regions such as the US. Storm frequency and severity are increasing and resulting in higher damage costs to utilities. During the 2017 North hurricane season there were 23 named storms and hurricanes, with Hurricane Maria alone causing an estimated $90 billion in damage. Utilities in some states are therefore investing in new technology specifically to decrease the cost of damage caused by storms, for instance, earlier this year Avangrid announced it will invest $500 million into smart meters throughout its service territories. This is part of their larger investment into bolstering the utilities storm response capabilities. The smart metering data can be used to better map outages and build a richer picture of the live situation, helping to decrease outage times and restore power quicker.
  • Energy Theft – Reducing energy lost to theft (or non-revenue water/gas) has long been a measured outcome for many AMI systems, but is increasingly important.  The desire for cheaper energy leads to more (and creative) methods of tampering and has led to some countries implementing rigorous testing of meters before installation. In India, an electricity meter is required to go through 40 different tampering test methods before being deemed suitable for deployment. However, this most effective permanent solution for reducing energy theft relies on monitoring of frequently provided meter data to analyse any changes. Most vendors have created software that will alert if there is a change in consumption behaviour (e.g. sudden reduction in usage, a period of no reading) and suggest further investigation. In times of scarcity of energy supply, such revenue protection for utilities will become even more important.

All of these future applications will make greater use of the data produced by the initial hardware investment, both for meters and their communication networks. Utilities are starting to spend across all four pillars of IoT – Connect, Collect, Compute and Create (for more detail read our previous insight) as they take advantage of the full solution. In billing-related AMI alone, over $75bn will be spent on electric and water AMI solutions from 2016 to 2023.

How does that impact decision making now?

Whilst all of these factors may change the pace of adoption for smart metering, the short-term impact on decision making for AMI does not drastically change.  Meter-to-cash is still driving the main need for connectivity within smart metering; and this will remain the case for the foreseeable future.

Current decision-making processes surrounding IoT in smart utilities focus around the cost of communication technologies, rather than the technical benefits. The total cost of ownership can be impacted by five main areas:

  • Predetermined factors,
  • Hardware costs,
  • Operational costs,
  • Data management costs,
  • Provision costs.

Predetermined factors include the environment, the population density, and legislation; these are factors that cannot be changed by the utility. For example, many EU smart meter rollouts are legislated to be complete around 2020-2021, forcing the cost considerations towards those technologies that are achievable more quickly, utilities have less time to wait for new/better solutions to develop.  There are various parameters to consider making a deployment cost-effective, including networking.

Beyond predetermined factors, the cost of ownership considerations become more unique to the individual utility and the application they wish to implement. The choice of communication technologies impacts the remaining four factors and creates the variation in the total cost of ownership.

In smart metering at least, that means there will be no clear solution that ‘wins’ the market – both in 2019 and beyond. As the data below shows, no single technology dominates in meter hardware shipments from 2017 to 2024.

In the long-term, investment into AMI solutions and their communication networks will increasingly consider the additional ROIs and data uses. Applications such as: Energy efficiency, storm damage control, and energy theft, should become a bigger part of the decision-making process as a result.  However, in the short-term it seems that 2019 will show no signs of concern for overall meter adoption as AMI further becomes a leading IoT solution for utilities.

 

Click the following link for more information on the insights available from the IHS Markit Smart Utility Meter Intelligence Service.

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Power & Energy Technology
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