By Fabio Dominguez
Latin American countries are showing an increased interest in AMI systems because of the economic growth and real development these countries are seeing in the 21st century. Much of the economic growth is being propelled by world demand for commodities such as oil, copper, gold, and corn, and by citizens working or doing business in developed countries and moving money back into their country. In turn, the economic growth is providing a better standard of living in these countries, whose leadership understands that an abundant and reliable source of electricity is essential for businesses to compete in the world economy. As energy costs continue to increase along with demand, utilities and governments are looking to AMI to help manage demand and improve profitability. Utilities that deploy an AMI system will typically see a solid return on investment within months of system installation through reduced operating costs and increased revenues.
Technologically, there are no obstacles to the introduction of smart metering in Latin America. Nevertheless, two important issues hamper the general introduction of smart metering. First, there are many parties involved, and the benefits of smart metering may accrue to certain parties that do not bear the costs. Second, as practical experience and historical data are lacking for these countries, there is still much uncertainty about the quantification of the benefits smart metering delivers.
WHY AMI CAN HELP LATIN AMERICA
Economic growth in Latin America is not limited to the traditional countries that have been emerging markets for years such as Chile, Mexico, Argentina and Brazil. Smaller Latin American countries are also seeing economic growth and they are now competing in the global economic market.
Countries such as Guatemala, El Salvador, Honduras, Costa Rica and Panama in Central America, took critical steps ten years ago to ready their economies and infrastructure for globalisation. They have increased their competitiveness in areas such as specialised agriculture, textiles, transportation, commerce and tourism. Costa Rica, for example, has tapped very successfully into eco-tourism and high-tech manufacturing. Panama is positioning itself to be the next financial centre in Central America, just as Hong Kong and Dubai have done in Southeast Asia and the Middle East. Countries like Peru, Venezuela and Argentina have maintained a respectable economic growth for the last six to eight years. Colombia, the third most populated country in Latin America, has sustained a dynamic economy even in the midst of an internal conflict. Brazil, the giant, has been a leader in poverty reduction and in providing healthcare to a large sector of its population. Chile and Mexico have maintained a very stable commercial relationship with the United States, and together, enjoy the highest per capita income in the region.
In spite of the many advancements and economic growth achieved by these countries, there are still lingering concerns about energy. Continuous development, coupled with population increases and current energy costs have put tremendous pressure on local governments to provide the electricity needed to maintain a rate of growth that will ultimately improve the quality of life for their people.
The dual challenge of managing ongoing growth and meeting the demands of high energy costs have prompted several countries to consider energy conservation plans as a solution. Currently, more than seven Latin American countries, including energy-rich Venezuela, have implemented conservation programmes. Typically sponsored by the government, these programmes provide inexpensive credits allowing local municipalities to acquire energy efficient equipment such as light bulbs, refrigerators and motors, and they provide incentives to incorporate the use of alternative power generation sources such as solar, wind or geothermal.
Recently, the use of AMI solutions has been explored as a viable tool for encouraging energy conservation, and AMI is currently gaining momentum in many countries. These solutions have been implemented to help utilities reduce nontechnical losses, and implement prepayment and time-of-use (TOU) programmes in residential areas.
To help meet the demand for energy in the near term, there are several advantages of encouraging consumers to conserve energy through the use of AMI over building more generation plants. It is transparent to the existing level of infrastructure and requires a smaller investment of time and money compared to building new hydroelectric, thermoelectric and nuclear power sources. It also provides results more quickly. Some AMIs can be quickly deployed over a short timeframe and provide immediate results in reducing revenue losses and helping consumers conserve energy. Additionally, many AMI systems are scalable so they can be implemented in phases as the needed capital is available.
Several utilities have targeted C&I customers to initiate AMI projects with the main purpose of reducing non-technical losses. Utilities in Dominican Republic and Honduras have concentrated efforts on the residential side with the same purpose in mind. Other utilities are considering establishing TOU programmes for their residential customers, using AMI technology as a way to provide additional information and efficiencies for both the customer and the local utility.
In Honduras, the National Electric Company, Empresa Nacional de Energía Eléctrica (ENEE) has invested in AMI technology as a tool for energy conservation by reducing nontechnical losses in the residential and C&I sectors. According to the utility’s own calculations, it recovered US$12 million in the first four month period since implementing the system across only five percent of its customer base.
For some utilities, reducing non-technical losses may not guarantee a quick return on an AMI system investment. Those utilities are placing their bets on new tariffs such as TOU rates or prepayment schemes for residential users. The idea of prepayment has been around in Latin America for almost a decade. CNFL in Costa Rica, for example, implemented a TOU residential tariff more than five years ago, and other South American companies have been testing pilots in both TOU and prepayment for several years. Argentina, Peru, Ecuador, Colombia and several countries in the Caribbean have established prepayment systems with varying degrees of success. Some of those countries are seeing prepayment as a tool to promote and make electricity available to everyone – and also as a fairer system by providing an opportunity for lower income customers to administer their expenses and avoid service disconnects.
The lack of competitive tariffs and the high cost of existing equipment have rendered these programmes stagnant for some time. Now the availability of new AMI technologies is making these programmes viable again, because they allow the utilities to have prepaid and traditional customers in the same area.
The impressive growth of cellular phone usage and its rapid acceptance among the general population has paved the way for utilities to implement AMI technologies for prepayment electricity systems. AMI technology provides an alternative to traditional prepayment equipment and is a more sensible investment. With AMI systems, the same equipment can be used for a variety of payment programmes, eliminating the need to replace equipment every time there is a new requirement for a prepay account. This can save money for utilities by avoiding duplicate efforts in inventories, training and technical support.
The value of AMI is still evolving to its full extent, with new benefits being realised. Some of the most prominent benefits that utilities are focusing on include faster revenue realisation, lower reading costs, improved reading accuracy, elimination of estimated readings, instant access to new streams of data, quicker identification of outages and tampering, and value added services such as customer load profiling. If regulations are developed in Latin American countries we should see a movement towards AMI and prepayment technologies, just as has been seen in more developed countries. Each world market must take a co-ordinated approach to the development of policies for smart metering.
THE FUTURE OF AMI IN LATIN AMERICA
So what is the future of smart metering in Latin America? The challenges facing the widespread use of AMI in the region are immense, but there are indications that these are being faced head on. Investments in smart metering mean taking risks. In a liberalised market, these risks are weighted carefully. In a regulated market there are often no incentives to take risks. This sometimes leads to an impasse in the energy market. Currently, the way to break through this impasse is by setting international standards and adopting appropriate national and international rules and legislation based on a firm energy policy.
There is significant progress being made to introduce AMI technologies in Latin America. Nevertheless, it is the lack of government regulations dictating the implementation of smart metering and how it should be used for energy conservation and other customer services that may decide the future of the technology in the region. Similar regulations in countries such as Canada, the United States, Italy and Australia have been a catalyst to the rapid growth of concepts such as AMI, the smart grid and IntelliGrid, but they have been pushed by government initiatives. Governments, utilities, and other organisations in Latin America are beginning to recognise the need to have an energy plan for the future. Those utilities that have deployed AMI systems are seeing positive results in their efforts to provide reliable and abundant electrical power to customers, and others are taking notice.