Companies not using advanced metering solutions, or using the technology solely to reduce personnel costs (traditional automated meter reading – AMR) are missing a real opportunity. Deployed strategically, smart metering technology can dramatically transform utilities in ways that will improve service and profit, delivering real value to stakeholders. The solutions available today have evolved from traditional AMR into solutions that are true business value enablers.
Both operational systems and pilot programmes around the world are demonstrating how smart metering can fundamentally change the utility industry. Recent research involving 31 North American utility companies engaged in smart metering pilot programmes demonstrated the following benefits:
• Savings in asset management ranging from 4% to 19%
• Collections savings from 15% to 20%
• Load forecasting savings, which ranged from 9% to 14%
• Demand management savings from 2% all the way to 22%
The key to unlocking these types of business benefit is to look beyond the traditional focus on AMR, which has centered primarily on achieving labour savings. In fact, it’s almost impossible to make a business case for implementing a smart metering solution if the only objective is to replace meter readers.
The implementation of smart metering technology is analogous to the introduction of other technologies into an existing enterprise. At first, many companies hoping to make quick gains in efficiency and profits rush to replace the meters (and associated field infrastructure) to realise benefits in removing the manual read processes. But companies only begin to realise the true value of these meters after they recognise that, to tap their full potential, they have to transform the way business is done in the utility – implementing improved processes and organisational structures to best leverage the new functionality available with the rollout of the new meters.
In other words, technology is only ‘smart’ when companies use it to truly transform themselves in ways that deliver business value. There are two clear lessons learned from the multiple smart metering deployments that have occurred over the past five years. The first is straightforward, but crucial: Don’t rush in. Think about how work gets done and how smart metering systems can be used to do it more efficiently. The second is equally critical but more complex: Neglecting to align technology with short- and long-term business goals is almost always a recipe for failure. Use of smart meters may help to reduce headcount, but the real value of the technology becomes evident with a business transformation.
Although at first glance the advantages in implementing a smart metering solution seem clear, justifying the business case can be a challenge. While the costs associated with smart metering are decreasing overall, the upfront costs – estimated at an average of $110 per meter – remain prohibitive for many smaller and mid-size utilities. And for utilities of all sizes, constant upgrade costs can be daunting. Because of the substantial capital risks involved with smart metering, it’s critical for companies to seek out as much information as possible about the technology before investing in it. It’s also critical to seek the advice of trusted advisors who have been in the trenches with smart metering. These advisors can assist in developing a solid business case representing the realistic level of benefits that can be expected.
There are multiple operational models available for utilities, ranging from build-and-operate to outsourcing the entire operation service. By and large, utilities have been slow to embrace outsourcing because they are managed conservatively and tend to be more risk-averse than other industries. However, smart metering is one of the areas where an outsourced approach should be considered in order to ease the pain and reduce the risk associated with a large capital investment. Innovative approaches such as sharing infrastructure and networks provide additional potential savings through an outsourced solution.
Utilities should work with their trusted advisors – for example, a systems integrator – to determine the correct operational model that best meets their needs. The key is to determine a model that allows the utility to mitigate risk while improving the speed to benefit. There is not a ‘one size fits all’ solution here, as each utility has unique factors that need to be taken into account. There is a growing trend for large, mid-size, and smaller utilities to investigate the potential of outsourcing as a component of their overall smart metering approach, varying from service-provider models for meter reads only to ‘all in’ meter-to-cash scenarios. Utilities should seriously consider whether their particular situation warrants the inclusion of outsourced components.
With more utility companies expected to implement smart metering solutions in the near future, service providers are ramping up their offerings to the industry. In weighing the various providers, utility companies should keep in mind the following considerations:
• Technology and process expertise: Components of a utility company’s smart metering solution can – and often should – incorporate more than one field and endpoint technology (e.g. power line carrier, radio frequency, broadband over power lines). Service providers who have worked with and implemented a range
of technologies and vendors can help a utility company identify which technologies and their representative vendors would be best suited to help them meet its business goals.
• Ecosystem of partners: Some service providers prefer to handle many aspects of a project in-house, while others believe in a more collaborative approach in which the client, service provider, preferred partners and other vendors work in tangent in developing a project designed to meet the client’s business objectives.
• Meter-to-cash capabilities: Some service providers offer an end-to-end meter-to-cash solution that accounts for all of the back-office processes impacted by smart metering. The provider not only co-ordinates metering and charging, but also billing production, payment processing and credit management, as well as customer care.
• Demonstrated ability to deliver on promises: Service providers who have already successfully helped utility companies transform with smart metering are best equipped to help other companies do likewise.
• Global footprint: Because smart metering is taking root throughout the world, service providers with a global footprint have a better understanding of regulatory environments and other geographically specific requirements.
ALIGNING BUSINESS GOALS
Whether they work independently or with a service provider, utility companies need to clearly identify their short- and long-term business goals before making any investments in smart metering technology. Labour savings typically are among the top business priorities, largely because they’re one of the easiest issues to quantify. But beyond the benefit of labour savings, companies should also consider additional benefits that often deliver truer business value.
• Real-time outage detection and smarter outage response: Companies have traditionally relied on their customers to call in power outages, and then dispatched repair crews on a case-by-case basis to respond. It was not unusual for a crew to arrive at a customer’s home, only to discover that the ‘outage’ was nothing more than a bad fuse or a tripped breaker. With smart metering, companies can detect real outages immediately as they occur, and alert the customer. They can also check to see if other problems exist in their power systems, and dispatch repair crews on a more efficient ‘triage’ basis. This not only makes the repair process more efficient, but also improves customer satisfaction.
• On-demand billing: Smart metering allows customers to get their bills on demand, which is especially advantageous when a customer is moving because the bill can be prepared while the customer is on the phone. As a result, the customer gets a final bill immediately instead of weeks later. Traditionally, a move-out bill costs more than $50 in the US. With smart metering, the estimated cost drops tenfold to less than $5.
• Remote connect and disconnect: The cost to the utility of physically rolling a truck for each connect and disconnect that occurs is extensive. Smart metering enables these services to be performed remotely, providing significant savings in both actual dollars and operational efficiency.
• Theft and tamper detection: Smart metering solutions provide value-added services to quickly recognise and react to alerts from the metering endpoints indicating either theft or tamper situations. As these alarms occur at a particular meter, they can be sent via an immediate notification back to the utility for action as appropriate. This provides for quicker recognition and resolution, leading to direct savings of lost revenue.
• Engineering analysis: Most utilities design their systems to support an anticipated peak load, dedicating more than half of their capital to support the expected 100 to 200 hours in peak demand a year. Smart metering enables utilities to anticipate and better control loads during peak demand periods. In addition to reducing the burden on peaking plants that would burn hydro-carbon fuels, this decreases the loads to customers, who often have no idea that the decrease is occurring.
• Customer monitoring: Smart metering allows customers to monitor their power consumption in real time, rather than waiting for the monthly usage summaries that accompany their bills. Because customers have more control over their consumption, their satisfaction increases, while their complaints and disputes decrease.
To use smart metering merely for data collection is to miss the whole point of the technology. Smart metering can – and should – be seen as the main information gathering device for the operation and transformation of a utility