Meter manufacturer Landis+Gyr (L+G) struck gold last week with a mammoth deal valued at $956 million for the delivery of more than 10 million smart meters to British Gas (BG) during the next 6 years. The nearly $1 billion contract provides L+G with a well-defined runway for its business and pressures competing meter manufacturers to come up with similar transactions in the deregulated energy market in the United Kingdom.
Under the terms of the deal, L+G will be the majority supplier of smart meters to BG, the leading energy supplier in the United Kingdom. BG plans to install a total of 16 million smart meters in customers’ homes by 2020, the deadline year imposed by the U.K. government for all homes throughout Great Britain to have smart meters installed.
With the announcement of this deal, both companies will be adding employees. L+G, which is owned by Toshiba Group, expects to double its U.K. workforce to 1,200, as well as expand its manufacturing facilities. For its part, BG will hire 500 additional workers to install the meters and provide energy efficiency advice to customers.
British Gas has installed more than 1 million smart meters in homes so far. It leads its rival energy suppliers as it tries to solidify its position as an innovator ahead of the massive rollout of smart meters set to begin in 2015. The strategy seems to be working, as suppliers I’ve talked to say BG has seen a reduction in customer churn because of the new meters, which tend to increase customer engagement. Also, the company estimates customers save about 5% on annual energy bills after the new meters are installed.
The deal between BG and L+G was not a big surprise; the companies have been working together on smart metering for a couple of years. Competitors like Itron, Elster, and Sensus will have to continue looking beyond BG for smart metering deals in the United Kingdom. Energy suppliers like E.ON UK, npower, ScottishPower, and SSE will be the likely targets for these competing meter makers hoping to win a share of a market that will eventually total some 50 million smart meters by the end of 2020.