Benefits of Victoria’s smart meter rollout outweigh costs


Peter Batchelor,
Minister for Energy
and Resources,
Melbourne, Australia — (METERING.COM) — September 6, 2010 – An independent economic review of Victoria’s smart meter rollout program has found that the benefits far outweigh the costs.

According to the new review the total cost of the AMI program is estimated to be Au$1.813 billion (US$1.66 billion), plus or minus Au$249 million, over the period 2008 to 2028, while the benefits are estimated to be in the range Au$2.577 to 5.004 billion.
No matter which mix of costs and benefits is used, the program is cost effective, says the report. Even in the extreme, with the lowest case benefits and highest costs, a clear net benefit results.

The review was prepared by Oakley Greenwood for the Victorian Department of Primary Industries (DPI), and consolidates earlier costs and benefits studies.

For the AMI rollout alone, which includes smart meters together with supporting communications infrastructure, IT systems and processes, the present value of the total cost is estimated to be Au$1.621 billion. Almost all of these costs will be incurred by the five electricity distribution companies that operate in Victoria, and according to the review these are about 11 percent more than the 20-year cost that the distributors would be likely to spend on metering and metering related activities if there was not an AMI program (Au$1.459 billion).

Most of the benefits (Au$2.036 billion) result from savings that will be experienced initially by the Victorian electricity distributors as improved operational efficiencies are realized through the utilization of the AMI infrastructure itself. The benefits of the AMI rollout (as distinct from the AMI program) over that same timeframe are estimated to range from Au$1.874 to 3.513 billion.

The report concludes that there is a sound economic case for both the AMI rollout and the AMI program, and from an incremental perspective the economics of the AMI program are even stronger. There is significant upside potential for additional benefits, and progressing from the AMI rollout to implementation of the full AMI program improves cost effectiveness. Finally, it is reasonable to expect that the vast majority of the benefits that are forecast to result from the rollout and use of AMI will ultimately flow to customers, but this will ultimately depend on effective regulatory price setting processes.

“This independent report clearly shows smart meters will deliver benefits for Victorian families and our government made the right decision to rollout smart meters,” said minister for energy and resources, Peter Batchelor. “Importantly, the report also says that ‘the vast majority of the benefits that are forecast to result from smart meters will ultimately flow to customers’.”

Smart meters are being rolled out to all homes and small businesses in Victoria and more than 250,000 smart meters have already been installed. The cost of the rollout is being met by a set metering charge for each electricity customer – this year that charge is on average Au$68 per year.