North American utility revenue meter markets


By Krathika Belliappa

This change places pressure on meter manufacturers to formulate new growth strategies to survive and retain their market position. In the past, it was basically price-based competition, but now the major challenge for vendors is to provide a complete solution to clients, which typically involves the entry into alliances, acquisitions and/or partnerships with the AMI/AMR technology developers. Meter manufacturers should take into consideration the end user, technology and regulatory trends. They should also carefully assess the AMI/AMR company’s technical expertise, investment in R&D and financial condition to create synergy and value for its stakeholders.

The meter market has experienced growth over the past two years, and the same is expected to continue in the future. Growth increased by an estimated 15 percent during 2005, compared to single digit growth in the years prior to that, when the market recorded revenues of approximately $1.02 billion. Growth in 2007 estimates at 13 percent and is expected to continue at a high rate. This is largely attributed to a widespread trend of previously deferred AMR/AMI projects that have been restarted.

Figure 1 shows the growth forecast for total North American utility revenue meter markets from 2003 to 2012. Today meter vendors and AMI/AMR technology developers step forward to acquire or partner with each other. In the future, the industry could be one in which both AMI/ AMR technology developers and the meter manufacturers will stand as a single entity rather than two different businesses. This strategy will help manufacturers have a strong foothold in the market, explore new opportunities, and build and sustain competitive advantage.


Figure 1 – North American utility revenue meter markets
(Source: Frost & Sullivan)

Overall, utility financial position improved significantly from what it used to be during early 2000. This, along with aforementioned AMR/AMI initiatives, helped total electric meter sales and single phase solid state meters in particular. During 2005, the market experienced a whopping 29 percent revenue growth rate compared to 2004. During 2006, the revenues stood at $348 million, up 20 percent from 2005.

The residential sector accounts for the major portion of revenues and expects to increase. In terms of shipments, the replacement market is the largest contributor towards sales not only because of ageing meters, but also replacement of existing units with AMR/AMI-capable meters. Mechanical meters are also slowly being replaced with solid state meters due to their greater accuracy and initiation of AMR/AMI technology. Though demand for solid state meters increases at a fast pace, manufacturers should not take this for granted as Frost & Sullivan research indicates not all utilities consider solid state meters to offer superior overall value compared to electromechanical meters. Some utilities still place large orders for electromechanical meters, such as Northern California’s Pacific Gas & Electric. One benefit is the long life of electromechanical meters of about 30 years compared to an estimated 20 years for solid state meters. Some utilities are also sceptical of solid state meters’ abilities to handle high surges.

Solid state meters do have strong proponents. The Energy Policy Act of 2005 endorses time-based rates, which only solid state meters and AMI can support. It states flat rates and traditional meters result in inefficiencies and adversely affect the final end user. States will be expected to mandate their utilities to offer time-based rates to customers within a specified time period. This Act also states that concrete justification needs to be submitted by entities not willing to follow this policy.

Utilities, however, also resist some of these changes. Because of the ageing transmission and distribution (T&D) infrastructure, along with increased pressure from regulatory bodies to improve reliability, utilities are now concentrating on the upgrade of T&D grid. This is a high priority and also highly capital intensive, which may adversely impact the allotment of budget towards AMI/AMR projects. Some of the utilities are also risk averse to try new technologies and will only act as observers until they see the results yielded by the adoption of new technologies by other utilities.

The water market is witnessing growth, largely driven by AMR/AMI projects. As the number of AMR projects grow in this market, the prices of these systems slowly decreases, making them affordable for both small and large utilities. As of 2006, the revenues stood at $502 million with a growth rate of 11 percent; replacement demand was the highest contributor to these revenues. The market is expected to witness steady growth and unit shipments are likely to double 2006 shipments by 2012.

Most water utilities expect to turn to electronic meters over the long term, as benefits offered by electronic meters outweigh those of mechanical meters. Utilities’ requirements have been changing; they are now seeking no lead, low lead or alloy meters. The meters should be tamperproof, upgradeable to AMR and have leak detection and remote disconnect capability.

In the water meter market, the main factor is the price of units, despite new technical advances. Most utilities have competitive open bid laws and almost always select the lowest bidder. Therefore, pressure mounts on manufacturers to keep prices low. This can be difficult, as rising copper prices mitigate some cost cutting strategies, though alternatives are being explored in both production and design.

The gas meter market is in an upswing, though still lower compared to electric and water meter markets. Reduced meter reading costs through deployment of AMR technology has caught the attention of gas utilities, though the market overall still feels two-way metering technology and hourly/ daily consumption data from an AMI system is unnecessary. Most utilities go for less expensive, one-way meter reading technology that helps decrease labour expenses. Combined electric and gas utilities are likely to opt for AMI technology. With manufacturers improving their gas meter offerings and encouraging replacement of meters to support the AMR technology, the market revenues for 2006 stood at $304.6 million. Diaphragm meters are the most commonly used meters in North America, and the residential segment accounts for the majority of revenues in the gas meter market.

Gas utility meters have a longer life span and thus reduce the need for replacement. Unmetered gas connections are fewer in number and require fewer new installations. The growth rates in the next few years expect to remain constant. Figure 2 shows the growth rates for the North American electric, water and gas meter markets from 2003 to 2012.


Figure 2 – North American electric, water and gas utility
meter markets (Source: Frost & Sullivan)

The electric, water and gas meter markets have experienced growth in the past two years. Both the electric and water meter markets will experience stable growth over the coming years, which is mainly attributed to the commencement of AMI/AMR projects. AMI/AMR projects have injected life into the otherwise dry meter market. One of the major challenges faced by manufacturers is adaptation to evolving market conditions. It is hard for stand alone meter manufacturing companies to sustain in the long term. Today there are partnerships and acquisitions taking place between the meter manufacturing and the AMI/AMR companies. As most of the customers now seek a complete solution, manufacturers will have to work with the AMI/AMR companies in the form of a partnership, alliance, acquisition or others to ensure customer satisfaction, to survive and to retain/increase market share.