Navigant Research Blog

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.

 

India: An Emerging Smart Meter Superpower

— March 16, 2017

The global smart meter market has experienced a number of transformative events over the past decade. In North America and Europe, the Smart Grid Investment Grant and European Union Directive 2009/72/EC helped jump-start relatively minimal markets into the behemoths they are today. In Asia Pacific, China took the reins as the global leader in smart meter deployments, due in part to a state-sponsored rollout. As more developed markets reach higher penetration levels, the question becomes: Who’s next? India’s recent emergence onto the smart grid scene and ambitious smart meter targets may solidify the country as the next smart meter market superpower.

Background

As China’s massive 2017-2018 deployment winds down, India is quickly emerging to lead the regional marketplace. India represents the largest untapped smart meter market in the world with over 290 million traditional electric meters nationwide. Given the country’s historic challenges with grid reliability and loss prevention, the Ministry of Power (MoP) is advancing an aggressive smart meter rollout. The country’s current smart meter mandate applies to all customers with monthly consumption in excess of 500 kWh by December 2017. This requirement drops to 200 kWh by December 2019 and would apply to approximately 40 million to 45 million customers. The rollout scope was expanded in August 2016 following the MoP approval of India Smart Grid Forum recommendations, and now it will provide smart meters for all customers on a feeder by the year 2032.

Outlook

These targets seem ambitious for a country that has traditionally struggled with financial constraints and project delays. However, robust growth is still expected as the MoP forms relationships with meter manufacturers and the price of meters falls as a result of high volume purchase orders. Until now, activity has been largely limited to a set of 14 ongoing pilot projects sponsored by the MoP. Yet, planned deployments from private distribution companies like Tata Power help to move the needle toward additional on-the-ground activity. Regarding communications, while a number of solutions are currently being tested, industry sentiment has favored radio frequency (RF) mesh as the prominent solution of choice, with cellular and power line communication (PLC) being used to a lesser extent.

India’s decisions around smart meter deployment will go a long way to determine the overall global market outlook. Smart meter vendors are investing in India because they see ample possibilities in the future. With strong government support and a clear desire by private utilities to pursue smart metering, India is primed for the next smart meter revolution.

More information on India’s smart grid market, including detailed analysis and forecasts, can be found in Navigant Research’s report, FutureGrid India.

 

First Signs of the 2G Smart Meter Movement

— December 5, 2016

ControlsSince the initial installation of smart meters in Italy began in 2001, the adoption of these smart devices has grown rapidly among industrialized nations throughout the world. Traditional electromechanical meters, along with automatic read meters, are now quickly being phased out in lieu of this newer technology. Italy, through its monopoly utility Enel, helped pioneer this movement through the deployment of 32 million smart meters across the country. Now, 10 years after the initial project completion, Enel is set to roll out a fleet of second-generation smart meters that will help kick-start the nascent upgrade and replacement market.

First Generation

Enel began its foray into smart meters back in 2001 with the commencement of its Telegestore project. Completed in 2006 at a cost of $2.87 billion, this project saw the installation of approximately 30 million smart meters for Italian households and businesses. Additional deployments have brought this total to approximately 32 million today. The success of the project contributed to the advancement of the smart meter movement, as it provided a valuable template for other utilities looking to get their feet wet. During implementation, Enel reported that 80 utilities had visited the company to gain insights into the Telegestore project. Ultimately, this project helped demonstrate the feasibility and financial and operational benefits that smart meters can provide to the utility industry.

Second Generation

In the fall of 2017, Enel will begin the process of replacing its fleet of 32 million smart meters with its new Enel Open Meter. This decision is being driven by increased smart meter performance and functionality, as well as dramatically lower costs since Enel’s initial go-around. This new technology will offer faster changes of supply, the elimination of fixed time bands, and the availability of data on electricity use. Also under the umbrella of this project is Enel’s fiber-to-the-home initiative, which will see 224 towns across Italy connected to ultrafast broadband at a cost of over $2.8 billion. The utility is beginning to invest in this innovative communications solution due to the vast reduction in fiber thickness realized over the past decade, meaning Enel will mostly be able to avoid digging up streets for installation.

Looking Forward

The smart meter market is still primarily driven by first-generation installations. Global penetration of smart meters is expected to hover around 30% by the end of 2016, leaving over 1 billion traditional devices still in the field. That said, the combination of shorter smart meter lifecycles and rapidly growing penetration will help advance the update and replacement market in the coming years. Some activity is already being seen with utilities like Arizona Public Service and Salt River Project, but until large volumes of smart meters near the end of their lifecycles, the market will remain limited. Italy, through this large-scale upgrade project, should provide a valuable case study for other utilities to examine the costs and benefits of a relatively early replacement project.

 

Unraveling Germany’s Smart Meter Strategy

— November 4, 2016

Power Line Test EquipmentWith smart meters quickly becoming the norm for grid operators and utilities, Germany presents an interesting case study given the country’s hesitance to adopt this smart grid technology. Western Europe has distinguished itself as one of the global leaders in smart meter deployments. Buoyed by nationwide deployments from countries like France, Italy, Sweden, Spain, and the United Kingdom, the region is quickly advancing the business case for smart meter technologies. While many of the most affluent nations within Western Europe have initiated large volume deployments already, Germany has been largely hesitant to jump on the bandwagon.

This changed in July 2016, as legislation was passed that will kick-start smart meter activity within the country, though careful attention must be paid to the details, as this rollout deviates significantly from traditional deployment strategies seen elsewhere in the region. According to the recently enacted Digitisation of the Energy Turnaround Act, Germany’s smart meter rollout is finally set to commence. Years in the making, the country’s approach is unique given its selective deployment and tiered installation schedule.

Starting in 2017, large consumers with average annual consumption in excess of 10,000 kWh will be required to install smart meters. This threshold will be lowered to 6,000 in kWh in 2020, which applies to approximately 15% of electricity consumers. The majority of German households will remain unaffected given that average consumption hovers around 3,500 kWh. For households where smart meters are not required, utilities will still maintain the option to supply this technology to its customers, though the meters are subject to a cost price cap of 40 euros per year. While the overall program is set to last until 2032, some types of consumers and operators will be required to have rollouts finished before the end of 2024.

A Considered Approach

This resolution is long-awaited as Germany has struggled to justify the need for smart meters. In the summer of 2013, Germany’s Federal Ministry for Economics and Technology contracted with Ernst & Young to perform a cost-benefit analysis relating to a nationwide deployment of smart meters by 2020, in line with European Commission target deadlines. The study concluded that such a mandate was not economically beneficial and instead recommended a selective rollout similar to the country’s aforementioned strategy. While industry advocates may view Germany as dragging its feet on the issue, the country is taking its time to carefully study the implications of installing smart meters in a country with over 50 million households and businesses.

One of the benefits to this approach is the availability of more technologically advanced smart meters on the market today relative to the more primitive smart meters installed in Italy and some of the Nordic countries during earlier rollouts. Given the typically shorter lifespan of smart meters relative to traditional electromechanical meters, some of these European countries are already expected to be looking at upgrades or replacement units in the coming decade. While many in the industry have long touted the benefits of smart meters, Germany is taking a responsible approach in studying the overall implications and has a clear and rational basis for delaying nationwide implementation.

 

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