Smart Meters : Only smart Telcos can play this game !!

Presentation1Next generation utility meters – or ‘Smart Meters’ – are a good example of the transformative potential of M2M technology. They will empower consumers by providing them with feedback on their energy usage, helping them to monitor, manage and – should they wish – reduce their energy consumption. Smart meters will also help reduce or end estimated readings, and make it easier for consumers to change tariffs and switch between suppliers, increasing market competition.

For the neophytes a smart meter is usually an electronic device that records consumption of electric energy in intervals of an hour or less and communicates that information at least daily back to the utility for monitoring and billing purposes.Smart meters enable two-way communication between the meter and the central system. Unlike home energy monitors, smart meters can gather data for remote reporting. Such an advanced metering infrastructure (AMI) differs from traditional automatic meter reading (AMR) in that it enables two-way communications with the meter. Smart meters are invariably part of an integrated program that pays for itself through reduced theft of electricity, energy savings,and operational efficiencies.

Equipping households and business with smart meters and collecting data on energy use enables better balancing of the network and a live view of grid activity, including technical failure. Granular, aggregated and analytical data generates information for better network planning and optimization to reduce losses.Data from the meters can be analyzed to detect unexpected consumption patterns, which can also indicate potential theft.Tamper controls can be built in to smart meters to alert utility companies to power theft.

The world’s largest smart meter deployment was undertaken by Enel SpA, the dominant utility in Italy with more than 30 million customers. Between 2000 and 2005 Enel deployed smart meters to its entire customer base. These meters are fully electronic and smart, with integrated bi-directional communications, advanced power measurement and management capabilities, an integrated, software-controllable disconnect switch, and an all solid-state design. They communicate over low voltage power line using standards-based power line technology. Consumers are able to access their energy consumption and billing data online, and new methods of payment will be possible.

The overall revenue opportunity in smart electric metering is substantial, amounting to nearly $57 billion over the coming years, Navigant Research forecasts annual revenue will grow only fractionally, from $5.2 billion in 2012 to nearly $5.3 billion in 2022, with a compound annual growth rate (CAGR) of 0.1%. The Western European and Asia Pacific markets represent healthy growth potential, both in installation of new smart electric meters and upgrades to existing smart meter technologies. Driven primarily by China, the forecast penetration rate in Asia Pacific will reach nearly 70% by 2022. Growth in Europe is due largely to the EU smart metering policy which calls for 80% of households to have smart gas and electric meters installed.

The World Bank estimates that Africa needs to build an additional 7,000 megawatts of new generation capacity each year to meet suppressed demand, keep pace with projected economic growth and provide additional capacity to support the rollout of electrification.A push to introduce smart meters could help to relieve Africa’s stressed power supply and bridge this investment gap in the region’s electrical infrastructure. Put simply, installing a prepayment smart meter guarantees that cash can be collected from a customer. This could provide the necessary missing link to secure revenues, thereby attracting global investors in new generation capacity and allowing investment in other critical energy infrastructure.

Modern energy systems built on top of smart meters offer enormous opportunities to nurture smart grid (a smart grid is a modernized electrical grid that uses communications technology to gather consumer data in an automated fashion to improve the efficiency, reliability, economics, and sustainability of the production and distribution of electricity ) , smart home and e-health solutions, all currently in their infancy. As a result of these new solutions, there’s a need to scale effortlessly to cope with new and unpredictable innovations in services and products, and thus data traffic. Cellular is a technology that has proved that can scale economically future-proof smart energy systems. It’s secure, open and interoperable, and cellular’s clear roadmap and continued development will support the Smart Metering deployments as the technology continues to evolve to focus on high-speed capabilities and rich data services.

A D Little point out rightly that in a saturated market, smart Telcos are now starting to move from mass-market products to more sophisticated and vertically integrated solutions as a means of addressing declining revenues in the residential telecoms market. However, their existing core competencies seem almost predestined for expansion into certain areas of Smart Grid allowing them to gain a foothold in the electricity market. The existing automated meter reading business has not tempted telcos, since the low level of data traffic on SIM-enabled meters makes average revenue per user (ARPU) unattractive. To address this, the fundamental business model for automated meter reading needs to be broadened to include billing and management services for the energy market and the end-customer. Moving from a connectivity-oriented business, which represents only 10–15% of the value generated in this field, to a service provision model would allow operators to extend their share in the value chain up to 60–70%. As telecoms operators are currently developing their skill sets and platforms, it seems it will be only a matter of time before they move en masse into this highly attractive area.

Deutsche Telekom is counting on getting an extra €1 billion in revenue annually by 2015 from networking services targeted specifically to the energy, automotive, health and media industries. Deutsche Telekom’s plan is to sell a fixed-price service that includes installation and operation of a communications box that transmits the smart-meter data to a secure data center every 15 minutes, computes it and then forwards it to the utilities. It also provides utility customers with the ability to view their power usage via a secure Internet site.

The UK’s Smart Meter Implementation Programme is a major national infrastructure project that will involve the roll out of 53 million gas and electricity meters across the UK by 2020. Telefonica’s proposed communications solution for the smart metre network is based on its existing cellular rollout, supported by am IPv6 based wireless mesh solution which will connect meters in areas without cellular coverage. The system is based on the 6LoWPAN initiative founded by an IETF working group dedicated to pushing IPv6 over Low power Wireless Personal Area Networks under the idea that “the Internet Protocol could and should be applied even to the smallest devices.” The IPv6 mesh network can then be established over any available carrier, including but not limited to, 2G/3G cellular, wifi, power line IP, and Bluetooth.

Telcos face an interesting business opportunity and they can become one of the few players able to gain access to a share of the entire energy management market. Their ability to utilize their existing network infrastructure and enabling capabilities to manage critical applications much more effectively will be a strong point of differentiation compared to application providers without their own network infrastructure. In CRM and billing, there are many similarities between telcos and utilities, particularly when smart meters and flexible tariffs are taken into account. Moreover, existing customer relations can be exploited as a sales channel, and bundling electricity metering with other telco products would be feasible (e.g. home or office automation, remote-management-over-mobile devices etc.). However, telcos would need to develop competencies in grid connection, utilities tariffs etc. The greatest challenge for telcos is to formulate a robust strategy and appropriate processes that allow them to act quickly and flexibly in response to the changing economic, technological and regulatory environment.

The bottom line : smart meters can create a “virtuous circle” linking energy companies, investors, customers, communities and regulators . With prepaid smart meters in place in homes and businesses, investors will be reassured that cash can be collected from customers to pay for investment in generation. Governments and regulators can fulfill their targets of controlling and optimizing energy consumption. Energy companies can improve customer service, run efficient network operations and dynamically manage supply and demand. And Telcos can utilise their vacated GPRS / Edge channels as their smartphone customers clog up the 3 G LTE bearers.

Sadiq Malik ( Telco Strategist )

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