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Market Insight

European Utility Week 2019 Highlights from the Smart Utilities Infrastructure team

November 19, 2019

Susanne Cumberland Susanne Cumberland Senior Research Analyst, Power and Energy Technology, IHS Markit
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Software, services, communications and the growing presence of Chinese vendors were just some of the highlights from European Utility Week 2019.  With the event co-located with POWERGEN in Paris between the 12th and 14th November, over 18000 visitors and 800 exhibitors attended the show. 

The Smart Utilities Infrastructure team attended across all days to gain further insight into the latest developments in industry and future expectations for IHS Markit Technology, now a part of #InformaTech.

The smart metering industry is about to change phase as we head through the next five years, something we discussed with Smart Energy International in this video.  Even a market as mature as Europe (with 200 million smart meters installed by the end of 2019) will see this transition take hold, with focus naturally moving to new markets and new solutions – as we saw from across the show floor in France.

Shifts in Communication: Hype or Reality?

Whether it be logo, brochure, or announcements of products, there was increased visibility of LoRaWAN, NB-IoT and even 5G across the vendor booths this year.  From marketing alone, it’s easy to build a picture of mass adoption for these new communication technologies, whilst the reality of real-world projects doesn’t yet match.

IoT is still being defined in the minds of utilities, as they look to understand the need for advanced applications and the implications on connectivity choices.  Additionally, new technologies always struggle to gain early adoption during the significant hype at the beginning of development; especially from cautious utilities.  There are numerous reasons around this, including: the maturity of long-standing communication technologies (especially in EMEA), the long return on investment period for old communications technology still not yet being fulfilled, lack of knowledge in the technology, lack of skilled workforce for new technologies, and in some cases the lack of viable business case to change.

The reality of smart metering across Europe to date is that the newer, public network technologies of NB-IoT, 5G and LoRaWAN haven’t made significant inroads to the common technologies such as PLC and RF.  One in every four communicating meters shipped in 2018 used cellular or LPWAN technologies and whilst this will grow to one in three by 2025, the overall picture is for a slow change in utility thinking.

Digging deeper across the show, the more interesting trend lies in the pilot studies for NB-IoT to date.  Electricity metering is often seen as the leading market for metering – and certainly leads the overall shift towards Advanced Metering Infrastructure (AMI) – this is not necessarily the case for specific communication technologies. NB-IoT has yet to see any major adoption within electricity meters but is increasingly gaining traction within the gas meter market. Whilst gas only accounted for 11% of all communicating meters shipped in 2018, the relative adoption potential here might well lead other meter types for NB-IoT overall.

Evolution of smart metering to smart solution

Whilst communications and connectivity has typically dominated the industry conversation in recent years, the new leading discussion in European Utility Week was definitively the software and service solution.

In a pre-show whitepaper, we predicted that any meter vendor with less than 15% of revenue coming through managed software/services in the next 5 years will start to see market share decline even in hardware markets.  The utility challenge is no longer just about connecting new endpoints – it’s about making the most of the data available.

For the most part, the evidence of EUW19 would agree with total solutions taking centre stage as vendors evolve their business models to better suit utilities needs.

Meter vendors and leading industrial and software players (e.g. Siemens, Schneider Electric and Oracle) continue to show their MDM solutions alongside the multiple vendor head-end software solutions available.  However, the 2019 show floor was noticeable for the more targeted approach of the third party ‘software startup’ compared to previous years, where companies are much more specific about individual applications (with a much lower focus on Blockchain in particular).

One of the strongest challenges for these companies (and indeed the larger vendors too) is the ability to scale across Europe, where critical national infrastructure data is often required to be kept within country borders, meaning a vendor data centre in each region.

The Challenge for Chinese vendors

With the challenge of software and services in mind, this brings an interesting analysis to the most clearly visible trend of this year’s European Utility Week; the vastly increased presence of Chinese meter vendors in both size and placement of booths.

These vendors have been slowly gaining share in low-cost markets in recent years in smaller projects, for example across Africa, Central & Eastern Europe, Latin America and SouthEast Asia.  However; despite the European presence at the show, real-world full-scale deployments are much fewer and further between based on the evidence to date.

Whilst hardware starts to converge, the longer-term challenge will remain for these vendors as they struggle to win consideration for total solutions in European markets – especially the managed service and software hosting aspects.

An eye on Milan 2020

Aside from the obvious change in brand from European Utility Week to Enlit for Milan’s hosting of the 2020 show, it will be interesting to track the progress of connectivity, software and international vendors in the coming years – especially as the European metering transition takes hold around 2020-2021.  The hardware wave is nowhere near over, with another 43 million communicating meters shipping across EMEA next year; but expect even less hardware and even more solution evolution by the time the industry reconvenes in Italy next year.

 

Click here for more information from the Smart Utilities Infrastructure team at IHS Markit.

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