The smart metering transformation has reached the gas sector. A series of advances in technology, efforts to integrate smart infrastructure, macroeconomic developments and regulatory requirements are driving investment in the sector, writes Chris Testa, Research Director, Northeast Group
Overall, investment in smart gas metering will reach $3.2 billion per year in the next decade.
By the mid-2020s, the majority of gas meters deployed each year will be communicating, and the installed base of communicating meters will reach about half of the market.
Smart gas metering has often been the ‘forgotten segment’ of the smart metering market, but as the sector develops it is moving to the forefront of smart infrastructure and smart cities. Somewhat ironically, some of the same reasons that smart gas metering has been ignored are now driving its prominence. The primary reason smart gas metering has often been considered secondary to electricity or water is that fewer homes have gas meters. While there are over a billion residential electricity and water meters in almost all countries of the world, there are only approximately 350 million gas meters outside of China, clustered in about 50 countries. But while fewer in number, natural gas customers tend to be in wealthier regions such as North America, Europe, and East Asia. These are also the regions that are the most proactive in developing smart cities, and smart gas metering will fit into these larger plans.
A second reason that smart gas metering has received less attention is that some of the benefits are less clear. Unlike with electricity, gas utilities are not looking to institute dynamic pricing, as the cost of gas is not as variable as electricity prices. Additionally, essentially no homes will be creating their own gas, so net metering will not be possible and smart gas meters are not likely to play a role in distributed energy resource (DER) plans. In terms of revenue collection, smart gas meters can still be effective, but gas utilities cannot remotely turn gas service back on due to safety regulations. Yet, in part because of these factors, smart gas meters do not require highly robust communications options and are likely candidates to benefit from low-power, wide area networks (LPWAN) such as newly rolled out NB-IoT networks and LoRa networks.
LPWAN options are hyped as a key driver of smart city infrastructure by lowering connectivity costs and bringing well-capitalised telecom providers into the market. But so far, few smart city applications have shown the ability to scale at a level that is attractive for investment. One of the main exceptions is smart metering, and smart gas metering fits neatly into this role.
Yet even as cities and utilities look forward to smart cities, there are also regulatory, technological and macroeconomic reasons why the smart gas metering market has already begun to grow steadily. In terms of regulations, the EU is currently leading the way. When the EU set electricity smart metering targets for 2020, it also requested that countries do a cost-benefit analysis for smart gas metering. While fewer countries decided to do a full rollout of smart gas meters, many of the largest countries decided to move forward – most notably France, Italy, the Netherlands, and the UK.
All of these countries are in the process of multimillion-meter deployments, helping accelerate the market and making smart meters standard for the gas metering sector in Europe. Even more notably – in terms of total units – China set a policy of bringing natural gas connections to all households by the early-to-mid 2020s. While the majority of these households will not use smart meters, the sheer size of the Chinese market means it will soon come to represent the majority of smart gas meter deployments.
These increased deployments are complementing technological trends as well.
Previously, most communicating gas meters used one-way AMR communications or ‘clip-on’ AMI communications (where a two-way radio is attached to an existing meter). While there are still a number of communications options in use, most of the largest rollouts in Europe are now using integrated AMI meters.
In the US, clip-on modules are still dominant, but most vendors have now developed solid-state integrated meters and some US utilities have begun to proactively request these.
AMI meters are also allowing utilities to offer new features to customers. Utilities are increasingly adding sensors throughout the gas distribution network, including pressure monitoring and methane sensors, which increase the safety and efficiency of the network. These sensors require two-way communications and the infrastructure provided by AMI. These benefits – in addition to basic operational efficiency – will be critical in developing the business case for AMI gas metering outside of countries with mandated rollouts.
Finally, overall trends in the gas sector point to increased growth for smart gas metering. Natural gas demand is increasing in most regions – especially outside of the core markets of Europe. While most of this consists of power generation and industrial gas demand, there are also countries that are adding new residential customers – and these customers are consuming at higher levels. This demand will create more need for meters and sensors throughout the gas distribution network. Many regions are also expected to see significant growth in natural gas production in the near term. This could mean prices are unlikely to rise significantly, somewhat reducing the incentives for smart meters. But it will lead to increased need for sensors to improve the economic and environmental efficiency of the networks. It could also lead some countries to expand natural gas access, increasing the overall metering market. Additionally, many of the largest natural gas-consuming countries import the vast majority of their gas. Improving the efficiency of the gas distribution network will be important to reduce gas dependency.
Smart gas metering is effective in reducing ‘lost and unaccounted for gas’ (LAUF). As utilities face pressure to improve the efficiency of expanding networks for economic, political and environmental reasons, smart gas metering will be increasingly important.
These trends show that smart gas metering has quickly developed and is now a fundamental pillar of overall smart infrastructure programmes. Governments are helping drive the shift, but just as importantly new advances in gas metering technology are helping utilities better serve their customers, at a time when macroeconomic factors are making gas metering as important as ever. Meanwhile, these trends are dovetailing with a push for smart cities and vendors’ thirst for connected endpoints to move these projects forward, which will drive growth in this previously forgotten segment. SEI
About the author
Chris Testa is research director at Northeast Group. He manages the research and writing of each of the firm’s regional and thematic studies. Chris has also worked on the ground on smart grid projects in Colombia, Costa Rica, the Dominican Republic, Jamaica, and Panama, among other countries. He has served as an adjunct professor of environmental policy at McDaniel College in Westminster, MD. Chris earned an undergraduate degree from Northwestern University and a master’s degree from Johns Hopkins SAIS where he specialised in Energy Policy and International Economics.
About the company
Northeast Group is a market intelligence firm based in Washington, DC with expertise in the smart infrastructure and smart grid sectors. The company analyses and forecasts how smart infrastructure and the Internet of Things (IoT) will be deployed at utilities and in smart cities. Northeast Group publishes market research studies and datasets and offers custom research services.