The progress towards deregulation in Europe
Despite the fact that the UK has put back the introduction of half-hourly metering for individual customers by six months, it is still much further down the deregulation road than any other country. The major manufacturers are developing tools to go into each house which allow owners, at the press of a button, to change from one supplier to another.
Norway and Finland have made considerable progress, and citizens there are enjoying the benefits of being able to choose their energy supplier.
Italy’s main utility, Enel, is pursuing a programme of avid competition. Enel plans to grow and attack world-wide markets – and as it is a huge group, it stands a good chance of success.
In Germany electricity distribution is very much under the control of municipalities, and deregulation and competition are not yet high on the agenda. However, the big groups such as VEBA are more aggressive and are moving into the electricity, heat, wireless and communications markets.
Companies such as RWE are looking to the east to expand their business, and have bought shares in transmission and distribution companies in countries such as Czechoslovakia and Poland.
FRANCE RESISTS THE TIDE
Spain is already geared up for deregulation. France, on the other hand, is resisting the tide. Its biggest utility, Electricité de France, has the support of most of its customers. Electricity is supplied reliably and relatively inexpensively, so the drive for change is not much in evidence.
This contrasts with the supply of water, which is well on the way to deregulation in France. Three large companies share the management of water meters and are competing to get business from users. There is lots of discussion between these "giants" as to how the future will look.
In eastern Europe the desire for deregulation and competition is there – but sadly the funds are not available to make it happen. When this situation changes, we expect to see these countries adopting the most up-to-date technology available; they are not hidebound by the traditions of the past.
So the speed at which individual countries are pursuing deregulation and competition differs. They all, however, have one thing in common – they are all prepared for deregulation, which in the main is being driven by customer demand. Customers are aware that the partial deregulation of the telecommunications industry has brought prices down, and they are keen to see the same happen with electricity.
However, customers are also aware that this partial deregulation was not without its problems; there are still some reservations about the levels of service now available. To counter this, they are asking for enough regulation to prevent the excesses that have occurred in other parts of the world from happening in Europe.
There is no doubt that deregulation will help prices to come down. Some large organisations in the USA, for example, buy all their electricity from one supplier. This allows them to shop around to get the best deal. Industrial customers in Europe can already choose their preferred supplier in some cases, obtaining substantial price discounts.
In the future, it is likely that brokers will buy electricity and sell to individuals – but this won’t happen tomorrow. When Europe adopts a single currency in 1999, the role of the broker will be more evident; it will be much more easy to pay energy accounts from a multitude of suppliers in one currency. We do not, however, expect the Euro to significant influence on deregulation.
Utilities all know that deregulation will happen – it’s merely a question of happening at a different speed, because of the different cultures in the various countries. The timing of the move depends on governments, unions and commitment to the policy.
DOES DEREGULATION IMPLY AMR SYSTEMS?
Utilities are all focusing on how to keep and grow their customer base, which can best be achieved by providing a better service. AMR is the only way to do this.
Once the decision to deploy automatic meter reading systems has been taken, the preferred communication medium must be chosen. I believe radio communication will have the edge. In Europe the main issue is access, and the first move towards AMR is often to use radio to measure consumption where meters are difficult to access. In the first instance it is not necessary to introduce AMR to easy-to-read installations.
But this is not to say that other systems don’t have a role to play. Telephone communications will be favoured in some countries, because of the deregulation in the telephone industry. Indeed, more and more utilities are asking for open systems from several sources. The utility structure itself is not fast moving, and utilities are understandably very cautious before they adopt new technologies. They seek a mix of suppliers and of systems, so they can meet the needs of their customers while protecting their investment.
The memorandum of understanding which was recently signed by Itron and Schlumberger is a good example of this mix. Schlumberger will sell and use Itron’s radio technology, and Itron will use the PLC technology developed by Schlumberger.
Major decisions will soon be made in terms of AMR installations by the key players. There are about ten opinion makers with the skills, money and manpower to make things happen. They will bring the market behind them, and then we can expect huge installations.
However, the growth of AMR systems in Europe is already evident. In 1996 we installed 15 000-20 000 units. In 1997 this jumped to 150 000, and we are planning for 500 000 in 1998. Contrast this with the situation in the United States, where 300 000 units a month are being installed. We won’t see that in Europe – we expect about 40 000 units a month at best.
The cost of the investment will prevent AMR from spreading as quickly as it has in the USA. In addition there are no clear norms or regulations such as protocols , which creates uncertainty. We believe, though, that deregulation will drive the move to adopting new technologies.
And this means that we as suppliers will have to deregulate our own thinking. We can no longer afford to be insular; to employ those people with whom we are comfortable. We must hire people of different cultures – people who understand the markets, languages, habits and regulations in their own countries, and who can there fore understand the customer needs in the areas we are trying to sell to.
Providing a better service, at a competitive price, is the all-important factor for both utilities and suppliers as fundamental changes occur in the markets we serve.