Navigant Research Blog

From Ownership to Outsourcing: An Evolution of AMI

— April 10, 2018

More than a decade after the earliest models of smart electric meters were deployed, the market for advanced metering infrastructure (AMI) is undergoing a major shift. Utilities have historically preferred to acquire their own physical assets and any software required to manage these assets, store all related data in house, and use their own staff to perform related business processes.

However, numerous utilities do not have capital to finance a full-scale deployment or lack the internal skills or IT infrastructure necessary to support smart meters. With utility revenues flattening around the globe, these financial concerns are only increasing. Some of these utilities—particularly smaller companies—are now looking to service-based delivery models to implement smart metering.

Market Landscape

Utilities are increasingly turning to these flexible deployment models to help them mitigate technology risks and reduce costs. In North America, Wisconsin Public Service and the City of Roseville, California recently contracted with Landis+Gyr and Itron, respectively, to manage various aspects of their AMI deployments. Internationally, energy retailers like Solarplicity (UK) and Trustpower (New Zealand) are demonstrating the demand for as a service solutions in deregulated markets.

Regarding these service-based delivery models, there are a number of potential configurations including:

  • Data services: The collection, storage, and analysis of data in the cloud.
  • Cloud-based software: The delivery of software as a service or enterprise-hosted software.
  • Fully managed services: The delivery of physical assets and business processes as a fully managed service.

While the assets (meters) themselves will largely remain within the utility domain, there are a number of AMI operations being outsourced to third parties, including:

  • Smart grid communications (Silver Spring Networks, Sensus, and Trilliant)
  • Network headend systems and meter data management software (Itron, Landis+Gyr)
  • Smart meter data services (Opower, DataRaker, Trove, SAP, and C3 IoT)

Growth Enables Growth

Looking forward, the market for service-based delivery models will remain strong. This comes in part from three market growth considerations: new smart meter growth, replacement smart meter growth, and growth from emerging markets.

  • New: Navigant Research expects the smart meter market to remain strong and grow over the next decade, with global penetration expected to climb from approximately 39% at the end of 2018 to 57% by the end of 2027. These new deployments will facilitate higher levels of spending around smart meter communications and management; this leaves considerable upside in the market for service-based delivery models.
  • Replacement: The market for smart meters as a service is not just limited to new deployments. The earliest smart meter deployments will soon enter their first replacement cycle, as seen in Italy and Sweden. After a decade of direct ownership, some utilities are looking to the as a service model as a way to flexibly introduce new technology (e.g., the migration from an owned radio mesh network to public cellular).
  • Emerging Markets: In the US, most major investor-owned utilities and cooperatives have or are in the process of rolling out smart meters. This leaves an untapped market of primarily smaller public utilities, which to date have shown a propensity to adopt service-based delivery models for the ongoing management of those new meters. Emerging markets, including Eastern Europe, Asia Pacific, Latin America, and the Middle East & Africa, will account for the majority of new project growth; utilities in these markets are more likely to lack the requisite human and financial capital to deploy and manage their own smart metering network.

Considering the Future

When considering these market drivers, it should be noted that vendors are also paying attention and adjusting their product strategies to this changing business landscape. Perceptions and demand for these service models have changed at a pace that is truly astounding. While not the norm quite yet, the future of service-based delivery models is bright.

 

China Cements Its Role as the Undisputed AMI Leader

— November 30, 2017

In terms of volume, China continues to preserve its status as the undisputed global leader in advanced metering infrastructure (AMI). Since 2012, State Grid Corporation of China (SGCC) has been deploying smart meters to each of its customers at a feverish clip. SGCC has installed more than 400 million smart meters across China over the past 5 years as part of this unprecedented project.

While utilities in countries like Italy and Sweden have succeeded in converting all their electromechanical meters to smart devices, the scale and execution of China’s nationwide project are truly unmatched. It is worth noting some of the unique characteristics of SGCC’s project and what’s in store for the future of the overall Chinese smart meter market.

How Is This Possible?

When looking at the Chinese market for smart meters, it becomes clear that all meters are not created equal. More often than not, smart meters deployed across China lack the full capabilities of a basic smart meter common in Europe or North America, such as hourly interval measurements or reasonably symmetric two-way communications. Yet, the Chinese meters still provide significant capabilities beyond traditional automated meter reading systems, including very low speed or potential short-range communications.

These limited capabilities are one of the primary drivers behind the radically different price points of Chinese smart meters, which are typically around 50% less than typical US or European prices. In addition, the monopolistic nature of Chinese utilities leads to high volume purchase orders from domestic suppliers, further reducing average meter costs.

What Is Happening on the Ground?

Over the course of 2016, SGCC deployed 70 million new smart meters, with the installed base reaching approximately 400 million devices. SGCC expects full deployment by the end of 2017.

China Southern Power Grid, the country’s other state-owned electric utility, was primarily involved in pilot-scale projects prior to March 2016, at which point the utility began its large-scale commercial deployment. China Southern expects full deployment by 2020, which should account for more than 80 million meters.

Improving Technology Shows Promise for the Market

While initial indications would suggest a significant market downturn in 2017 and 2020 given the rollout conclusions, the emerging second-generation smart meter market should help placate any potential concerns. According to China’s national regulations, meters must be replaced every 5 to 8 years. With the lifespan of SGCC’s deployed meters running between 1 and 5 years, the mega-utility will now begin looking into second-generation upgrade meters, which often carry a higher cost along with increased capabilities.

This emerging second-generation market is expected to help sustain the strong revenue and growth profiles that have characterized the Chinese market for years. As other major markets like Brazil, Egypt, India, and Turkey begin their forays into large-scale smart meter projects, lessons can be learned from the impressive scale and execution of China’s rollouts.

 

Harvey and Irma Highlight the Need for Advanced Outage Communications

— September 14, 2017

The impacts are devastating. Across Houston and larger parts of the Southeast, citizens are reeling from the extensive damage caused by Hurricane Harvey. Meanwhile, across the gulf, Florida was just hit by Irma—one of the strongest hurricanes on record.

For utilities, the wave of powerful storms not only means a rush to restore power as quickly as possible, and to as many customers as possible, but also highlights a measurable need for sophisticated outage communication and response capabilities—both before and after the storm.

Harvey Hit Hard While Irma Approached

As of Monday, September 4, roughly 280,000 customers across Texas were still without power, and utilities including CenterPoint Energy, AEP Texas, and Entergy were exhausting all possible resources to get the lights back on. And because service restoration could take weeks or months in some parts of Texas, outage communications are critical.

For example, in advance of Harvey, CenterPoint was marketing its Power Alert Service. With this free opt-in tool, customers automatically receive notifications via text message, email, or phone call whenever a power outage or other power problem is detected at or near their address. This advanced outage communications capability is enabled by the over 2.4 million smart meters installed in CenterPoint’s service territory.

Meanwhile, following Irma’s landfall in Florida, crews at Florida Power & Light (FPL) are coordinating with other state utilities to secure sufficient workforces and are commencing a military-like operation to restore power to at least 5 million affected residents. This is familiar territory for FPL, which has invested more than $3 billion toward grid modernization and storm preparedness since 2006, including the installation of 4.9 million smart meters and 83,000 intelligent devices that can help predict, reduce, and prevent power outages, and restore power faster when outages occur.

FPL customers should benefit from a multipronged outage communications system, allowing them to receive outage notifications via email, voice, or text, or view/report outages via an outage map tied to FPL’s website. The company also offers a mobile application where customers can access information about their account or local outages.

Outage Communications Best Practices

While there is no standard for outage communications across the industry, best practices include maintaining some form of basic outbound communications, including outage notification, restoration time estimates, and outage cause information. The use of web-based outage maps has grown in popularity in recent years, though the deployment process can often be resource-intensive. These tools can provide customers with a convenient and efficient means of disseminating and reporting outage information, while also preserving call center resources.

Spokane, Washington-based Avista Utilities chose to upgrade its outage communications capabilities in October 2015. Avista employed iFactor (now owned by KUBRA) to develop a new power outage map, an outage reporting and status tool, and proactive outage messaging by email and SMS text. Following the brutal windstorm that swept across the region in November 2015, the tool proved its worth.

The outage map was visited 837,500 times, registered more than 13,000 contacts to receive outage alerts, and sent and received a total of more than 228,500 messages.

More Can Be Done

Looking to Avista and others as an example, there is certainly more that can be done with regards to outage communications. For utilities in the Southeast and across the United States, the importance of this capability becomes clearer as customer expectations grow and the frequency and intensity of natural disasters continues to rise.

While basic outbound communications are now seen as commonplace, investing in advanced capabilities around proactive and personalized notifications and outage map development can further enhance outage communications and provide customers what they truly need—information and awareness in times of confusion and chaos.

 

Five Key Smart Meter Markets to Watch

— June 27, 2017

The adoption of smart electric meters by utilities is part of a long-term technology transformation to create a more intelligent grid. While the rate of adoption will vary by region, over time, smart meters will become the norm. In the advanced metering infrastructure (AMI) landscape today, some countries already have nearly full penetration of smart meters (Finland, Italy, Sweden), some are in the middle of large-scale deployments (China, United States), and the remainder are just getting off the ground (Egypt, Malaysia, India). While this industry is in a constant state of change, taking a look at some of the more active markets can help paint a picture of what the future landscape may be. Navigant Research identifies five of these key markets and discusses why market players should be paying close attention.

China, Undisputed Leader in Smart Meter Installations

  • The country has installed over 400 million smart meters through its state-run utilities, State Grid Corporation of China (SGCC) and China Southern Power Grid (CSPG), since beginning the program in 2012. While SGCC will wind down its utilitywide deployment in 2018, CSPG just began commercial deployment in March 2016. Driven by a mix of new (CSPG) and upgraded projects (SGCC), the Chinese smart meter market is expected to continue generating billions in revenue. The interesting question now becomes whether project opportunities will be extended to non-domestic vendors as SGCC begins demanding more advanced replacement units.

United States, Late Adopters Drive Post-Smart Grid Investment Grant (SGIG) Activity

  • Significant market opportunities remain, as the US market reached just over 50% smart meter penetration at the end of 2016. The majority of these project opportunities will be at the cooperative or public utility level, opening the door for cloud computing and managed service providers. Additionally, proven use cases and lessons learned during the SGIG program should help mitigate some of the challenges realized during earlier deployments.

India, Largest Untapped Smart Meter Market in the World

  • While most public distribution companies are still in the pilot project stage, the country’s utilities and government have made clear their goals of installing 50 million smart meters over the next 4 years. Although Navigant Research forecasts a more conservative deployment schedule than current government estimates, robust growth is still expected as the Ministry of Power forms relationships with meter manufacturers and the price of meters falls as a result of high volume purchase orders.

Malaysia, Use Case May Help Support Growth in Southeast Asia

  • When completed, TNB’s nationwide smart meter deployment may be one of the largest of its kind in the world. This project and the utility are significant, with a consumer base of 9.2 million customers and an annual customer growth rate of nearly 4% (more than 300,000 new customers a year). A March 2017 Brand Finance report ranked TNB #24 of Global Top 50 Utility Brands (and the fastest growing).

Egypt, A Chance to Jump-Start the Nascent African Market

  • In August 2015, it was announced that the Ministry had actioned a plan to convert an existing 30 million electric meters to smart meters over a 10-year period; the primary drivers being incorrect meter readings and electricity theft prevention. This target has since been reduced to 20 million smart meters over the next 10 years. Africa needs these types of deployments to get off the ground before regional economies of scale and proven use cases can be realized.

More information can be found in the newly released Navigant Research report, Global AMI Tracker 2Q17, which provides an analysis of global utility smart meter projects.

 

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