By Mark England, CEO, Sentec
Across the world, smart meters are dramatically changing the way energy is produced, bought, sold and consumed. As a critical weapon in the global fight against carbon emissions, smart meters are set to play a key role in encouraging increased consumer awareness of energy consumption, more dynamic pricing and a consequent drop in demand. This article looks at how the ongoing evolution of the smart meter industry is presenting some interesting commercial opportunities for players that would typically sit on the periphery of this market.
Smart metering rollouts are taking place in many countries as governments address stringent carbon reduction targets. But the progress of these rollouts is markedly different across different countries. In the U.K., preparations for a nationwide smart meter rollout are well underway. Individual countries within Europe are at very different stages along the path to smart metering. Spain is currently undergoing large scale trials, and Sweden has nearly completed its rollout of smart meters. While a number of other EU countries are also considering their own rollouts in the next decade, including France, Ireland, and Portugal, there are some clear lessons to be learned from international peers. For instance, some early adopters have run up against a technical stumbling block as they discover that their first generation smart meters, developed to support time-of-use pricing and fraud detection, now need upgrading for more sophisticated functions.
In learning from this lesson, the desire for future-proof technology has moved up the agenda. Therefore, in order to secure key contacts, smart meter manufacturers must look towards solutions that will not be obsolete by the time rollout is complete; the ability to be upgraded in situ is now a vital function for all new meters.
In the U.S., several utilities have experienced vociferous resistance from their customers, with Pacific Gas & Electric (PG&E) facing a lawsuit from customers in the Bakersfield area who believe their smart meters are overcharging them after seeing substantial rises in their bills once the meters have been installed. Similarly, in the Netherlands, the detailed plans for smart meter installation were put on ice due to concerns over the security and privacy of smart metering data and how they would affect consumers if the proposed compulsory rollout were implemented.
While there are some obvious challenges yet to be tackled, the environmental and political impetus behind the smart metering revolution is gathering in strength, bringing with it unprecedented opportunities for those companies with a stake in the market. As governments, utilities and manufacturers work to eliminate these early problems, smart metering technology has continued to develop apace, creating fertile commercial territory for established and new players alike.
With specifying and manufacturing bespoke meters becoming steadily easier, the sector is seeing mounting interest from non traditional players – from systems integrators and distribution operators to retailers – who are following the lead of large utilities like Enel and introducing their own proprietary meter designs. Even Google wants a piece of the action, launching its own free energy monitoring tool, Google PowerMeter, which uses energy information provided by utility smart meters and energy monitoring devices to allow users to view their home's energy consumption from anywhere online. Microsoft has also launched a rival online power management tool Hohm, which provides users with personalized energy saving recommendations such as placing new caulking on windows, eliminating air leaks, and installing a programmable thermostat.
Consumer electronics companies are also beginning to take this burgeoning marketplace very seriously. This is not such a drastic deviation from core technological capabilities as one might initially think. While some of these companies lack the necessary knowledge of the grid, sectoral requirements and the business structure of utilities, they already have the core manufacturing and design skills that can be extended into the smart metering domain, and may see particularly compelling opportunities in peripheral products to meters such as meter displays.
The opportunities presented by the nascent market are proving particularly attractive to those companies that have found their usual revenue streams and customer bases eroded by the global downturn. The smart metering world is set to become an increasingly competitive marketplace as utilities and other companies with a vested interest recognize smart meters as a key area for product differentiation. As energy suppliers search for ways to shore up their market share, they will face the challenge of ensuring that their customers get the same high level of functionality and user friendliness from their smart meters that they do from their everyday consumer electronics goods. This will be no easy task, given that some users are likely to want minimal interaction with their smart meters in the first place.
Developers of smart metering products will need to constantly revisit system level functionality, finding innovative ways to deliver energy saving information to users to keep them engaged with their smart meters. The scope for future enhancements is practically limitless. One option could be a warning email or text message that is sent to a customer when they have made a change to their energy consumption which is likely to cost them more money, or a message with advice on how to take advantage of more favorable tariffs. Another possible way to encourage interaction with customers could be for energy suppliers to provide their customers with a proprietary energy monitoring “app” that would give them a quick and easy way to view and manage their energy usage. Social networking could also be used by energy suppliers to stimulate greater participation and engagement from their customers.
The pace – and success – of smart metering rollouts is likely to vary widely by region and, indeed, by country. In the U.S., the smart meter market is driven primarily by the communications infrastructure and is characterized by a profusion of relatively new players. The incumbent manufacturers have already adopted their own proprietary communication solutions to compete. However, the U.S. market is likely to be a tougher nut to crack for these newcomers, largely because they lack the scale of their manufacturing counterparts in Europe.
In Europe, several large utilities now dominate the energy sector, and consequently the smart metering landscape. Huge utilities like Germany’s RWE and Italy’s Enel have a network of subsidiaries that give them enormous cross-border scope across Europe. And as these utilities start to operate across multiple territories, the road towards adopting a single, cohesive standard of metering throughout Europe suddenly becomes much smoother.
Smart metering is already a reality and will represent a long-term change in the way customers and suppliers alike view their relationship with energy. As smart metering technology becomes ever more sophisticated, it is likely to act as a springboard for broader smart grid technology applications as they develop. This is a market with huge potential for both new and existing industry players to make their mark through bespoke meter designs, communications solutions and software development. Those companies with the long term strategic vision to recognize its potential at this relatively early stage of its development will be perfectly placed to reap the rewards of investing in a market that is gearing up to be a source of enormous innovation for some time to come.