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.

 

Where Are All the Meter Manufacturers in Transactive Energy Projects?

— December 7, 2017

That’s a question I’ve been asking myself recently. The answer seems to be “nowhere.” In the 110 or so trials of utility industry-related blockchain and transactive energy (TE) Navigant Research has identified, meter vendors are at best the silent, invisible partners of other companies. When asking leading blockchain and TE startups about the meter hardware in their trials, the stock response has been “nothing is available that supports our requirements, so we built our own.” So, why aren’t meter vendors making more noise about a potentially significant growth opportunity?

Blockchain is the hottest, most hyped technology in the energy industry, and TE is its hottest use case. If current TE trials prove successful, I expect rapid adoption, particularly in countries with high penetration of solar, supported by ratepayer-funded incentive mechanisms. TE’s market-based incentives could replace subsidies. Large-scale, fully automated TE platforms have a number of requirements, as discussed in Navigant Research’s Blockchain for Transactive Energy Platforms report:

  • TE pricing requires visibility into local network conditions, including network assets and distributed energy resources.
  • Smart contracts—which determine when transactions are opened and closed—must be hosted locally and fed with market data.
  • Meters measure and record all TE power supplied and consumed.
  • Communication networks will transport data to interested parties.
  • Transactions must be recorded to the blockchain.
  • Significant distributed compute power will support automation of the TE platform.

Meter Vendors Can Support Many TE Functional Requirements

TE markets will have to be settled in much the same way as wholesale power markets are today, in accordance with strict market regulations and technology standards. This is a complex system, where a lot of trust will be placed on the technology platform. Meter vendors have many capabilities that could put them in a commanding position to lead the TE space:

  • Smart meters already provide visibility at the point of consumption.
  • Advanced metering infrastructure communications could provide the data networks on which TE runs.
  • Smart meter data concentrators could be used as nodes for the blockchain, store smart contracts, provide compute power for localized pricing calculations, and so on.

There is another feature that meter vendors have so far overlooked: it is difficult to amend records already committed to the blockchain. Consequently, it is vital to ensure that transaction data is correct before it is recorded. This will be a difficult task in a largely automated TE platform. While smart meter accuracy is generally high—between 99.5% and 99.9%—a validation algorithm is run regularly to estimate missing or erroneous meter readings. In TE, a similar algorithm must run on transaction data. However, it is likely that validation will be distributed alongside the ledger, rather than a centralized batch process. Most meter vendors also offer a meter data management system with an associated validation algorithm.

Despite meter vendors’ requisite hardware and software, they are nowhere to be seen in the TE world. There are many reasons: ongoing major smart meter rollouts command a lot of attention, and there is little money to be made in TE right now. However, I would have expected at least one vendor to have taken the leap into the world of TE. The biggest risk is that meter vendors are trapped in the old utility world, where metering innovation was driven by utilities—with whom meter vendors have decades-old relationships—and adoption of new metering technologies was slow and incremental.

TE adoption will be different. It is driven by startups that have no previous relationship with meter vendors. These startups could develop their own validation algorithms; they could choose to use public 5G networks for data communications; or they may decide to deploy their own distributed compute. If this happens, meter vendors will miss out on potentially billions of dollars of value created by TE. Meter vendors must wake up to the reality of TE and the opportunities and threats the market presents.

 

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.

 

AMI Data Brings New Possibilities for Energy Efficiency Measurement and Verification: Part 2

— August 4, 2017

Coauthored by Emily Cross and Peter Steele-Mosey

Part 1 of this blog series covered operational improvements and provided background on the role of advanced metering infrastructure (AMI) data in energy efficiency program evaluation, measurement, and verification (EM&V). This blog continues the discussion with a focus on program impact evaluation. Navigant Research examines these topics in detail in its report, Utility Strategies for Smart Meter Innovation: Energy Efficiency Measurement and Verification.

Program Impact Evaluation

The use of AMI data for program evaluation has the potential to substantially reduce evaluation costs. A major cost associated with the evaluation of large customer (commercial and industrial) energy efficiency program evaluation is onsite verification and metering. For some programs, it is possible to reduce the number of site visits required or reduce the frequency of site visits. Another opportunity for faster program evaluation using AMI data is large-scale validation of coincident demand savings for energy efficiency programs. With AMI data, it is a straightforward matter to isolate demand impacts occurring during utility system peak performance hours.

Programs operating in utility services areas with full penetration of smart meters, deploying energy efficiency measures with consistent load reduction patterns, are excellent candidates for evaluation using hourly or subhourly AMI data. Energy efficiency impact analysis using utility data assumes enough of the program participant savings are above a minimum measurable threshold. That is, the signal-to-noise, savings-to-baseline ratio must be high enough to see the savings in the meter data for a substantial number of participants in the program. Otherwise, program savings estimates may be statistically non‑significant even if savings are being achieved.

A hybrid EM&V approach, using a combination of advanced, automated AMI data analytics and targeted in‑depth evaluation, provides the most value to utility clients and regulators. Automated impact analysis using AMI data (M&V 2.0) can serve as an initial screening of participants. It can quantify realized savings measured at each participant meter using high accuracy pre-post time-of-week/time-of-year and temperature normalized savings models. Participant projects screened out of the automated analysis can be identified and sampled for deeper analysis, providing targeted insights to utility clients and regulators for more complex projects.

Where automated screening methods provide sufficient program feedback without further investigation into the reasons for measured savings, evaluation costs could be reduced relative to traditional methods. Automated M&V2.0 screening provides a high level, statistically significant measure of program performance without the need for follow-up evaluation for programs with established performance. The evaluator using such methods must demonstrate there is no bias introduced by using only projects with measurable savings to characterize program performance.

For mass-market (residential and small commercial) programs, traditional evaluation often involves the application of survey findings to validate and update deemed savings values. In many cases, an empirical econometric approach can deliver an answer with just customer AMI data and program tracking data if the key question to be answered is simply: how many kilowatt-hours (kWh) and kilowatts (kW) is this program giving me? Such empirically-based savings could reduce program implementation and evaluation costs by streamlining or eliminating the ex ante customer application process, provided savings are measurable at the meter.

 

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