Last week LeRoy Nosbaum, former chairman and CEO of Itron, rejoined the company as president and CEO after two years in retirement, following the retirement from these positions of Malcolm Unsworth. Two days into the job, Smart Energy International spoke to Mr Nosbaum about the changing state of the industry and his vision for Itron.
Returning to the industry after two years, what changes have you observed?
One of the big things is that we’ve moved from the promise of smart metering and imminent installation of many projects to the point where many smart meters have been installed or projects completed, so we’ve gone from hype and promise to reality and results. Along the way we’ve gone from how we thought it would play out to how it has played out and we’ve seen networks that were not working as well as they were purported to, although I’m happy to say Itron doesn’t appear to have that problem. We see consumers who were supposed to love this technology because they were going to save money beginning to bark because they are not.
So for me the challenge has moved from selling the idea of smart metering to making a reality of “smart,” i.e. going from installing a lot of equipment to the utility actually using it in a smart way.
What is your strategy going forward, and what are focus areas for growth and development?
I’ll be a little cautious as pushing strategy two days in is a bit dicey! But let’s say that Itron – as are other vendors similarly – is starting to look beyond the smart metering product per se at the host of opportunities that surround that product. Whether it’s hardware, software or system solutions, we need to take the core of the smart meter installation and make it smart. Where the industry has to evolve, and where Itron necessarily evolves, is from developing the core technology to optimizing its benefits and providing greater value. I think there’s product there – hardware, software and system product. And I think there’s a necessary education that must surround that, both of the consumer and the industry, utilities as well as governments and regulators.
Having said that, the strategy going forward is also to extend what we do more broadly across the globe, whether it’s in South America or Europe or Asia. I would be a fool if, in my position, I wasn’t querying my people what we’re doing in those areas where the opportunities stand the probability of being enormous. Then you trip down to: are we are organized right, do we have the right people in place, and are we developing the right products with particular places in mind? These are the top of mind issues.
Where will greatest demand come from in next 5 years?
I’m a strong believer in what I think is a fact of life – that a product suitable for one geographical location is not necessarily suitable for another, as the circumstances are different. The geopolitical climate makes a difference too. For example, when the Chinese decide to do something they just do it without the interminable debates as we seem to be have in the US or Europe, so I think one of the markets that will become big – and it’s already started to – is China.
I think there’s going to be another wave as we extend the smart grid to water and to gas, so I look to those markets to be expansive. Also I alluded to the fact, sitting on top of a smart grid solution has to be what I call a whole host of enabling solutions so consumers can get real benefits and real benefits flow to utilities. It’s not in reading meters or getting people to use electricity at different times of day, it’s being smart about what’s going on – where are the outages, where are system conditions that shouldn’t exist, where are gas pipelines deteriorating, where are water pipes deteriorating and water leaking out, how can I better help a consumer better manage their bill by being smart inside the home? – all of these are another wave that is soon to be upon us.
Do you envisage Itron expanding into new product areas?
I am an expansionist from day one and we’ll expand into new product areas and we’ll make sure were expansive in all areas of the globe where it is profitable to do so. We must continue to grow. We spent more than $475 million over the last four years on R&D across electric, gas and water and that’s a nice number, but as we continue to grow we can grow that number.
Can you give any clues on any new products that are coming up?
That one I’ll withdraw from!
What about the synergies between electric and water in sharing “smart” infrastructure, is this something Itron could facilitate or how do you see the difficulties being overcome?
If I knew how to overcome that, I’d know how to overcome the issues that go on at political level! It’s tough – I’ve been in the business for more than 40 years and it’s hard to get utilities to work together. The fact is governments and regulators haven’t picked up a hammer and beaten them into submission over the issue. There’s no technical reason why you have to string two similar networks over the same area to read electric meter or water meters or gas networks when one network will get the job done. One area we should be questioning is whether there is room for a facilitator who comes in and installs the network and sells the service back to the utilities. The opportunities to be more efficient are there if the problems can be worked out – but they are difficult because they’re not technical but people challenges.
What about the radiation effect of smart meters and what can be done to overcome this issue?
Some of it is education and there’s no question that we as an industry, and Itron as a vendor, need to be very proactive in providing educational materials and technical support saying that smart meters are safe. Part of the problem is that smart meters are provided by the utility with whom the consumer fundamentally has issues because he doesn’t like paying the bill. So there’s an inbred animosity but some utilities haven’t go in front of it as much as they could, and we haven’t done a good enough job of saying to utilities this has to be part of their program from the get-go.
What impact is the economic situation having on the industry?
It’s having an effect that’s different in different places. Regulators are very concerned about agreeing to any sort of smart meter deployment as they know there’s no money and consumers are under a lot of stress. Then there are utilities saying that if they don’t get special treatment in the rate base then they’re not doing it – not because they don’t think it’s a good idea but because they’re being cautious too.
Having said that, we’ll come out of this economic mess, although it will take a while. But utilities still have to move forward and many are saying that one of ways to assure their rate of return is to do efficient things – smart systems take people out of equation and provide data that helps them operate more efficiently.
What are the key challenges facing the industry?
That’s easy right now. A lot of utilities have deployed a whole lot of stuff but they have yet to prove to their regulators and consumers that it was worthwhile. It’s that simple. And by the way, it was worthwhile, so quit carping about it and figure out how to communicate appropriately to show the evidence!