Navigant Research Blog

Smart Meters Industry Consolidation Continues with Xylem’s Sensus Acquisition

— August 25, 2016

MeterOn August 15, Xylem, a global water technology company, announced that it had acquired Sensus in an all-cash transaction worth $1.7 billion. Sensus is a global provider of smart meters (with 80 million metering devices in the field), network technologies, and advanced data analytics, with a focus in North America. The company’s roots lie in the smart water metering business, though it maintains a significant installed base in electric and gas utilities. Some of Sensus’ notable electric advanced metering infrastructure (AMI) deployments include Southern Company, NV Energy, Portland General Electric, Alliant Energy, and Cleco Power LLC.

Industry Consolidation

As markets have matured and smart grid technologies have evolved, new industry motivations such as interoperability and deep integration among technologies have emerged, as evidenced by a string of recent industry consolidation transactions. Aclara made headlines in December 2015 with its acquisition of hardware provider GE Meters. This was quickly followed by another acquisition of Tollgrade communications earlier this month. Additionally, Honeywell completed its acquisition of Elster’s metering business in January of this year. The Xylem/Sensus transaction is just the latest example of industry consolidation, and it sets the company up to be a major player in the smart water market.

Smart Water Market

While smart electric meters have traditionally maintained the lion’s share of smart meter coverage, higher penetration rates and increasing concerns over water security offer growth potential for smart water meters and associated technologies going forward. With the low cost of water that many of us experience today, it’s easy to take this increasingly scarce resource for granted. Yet, the United Nations is expecting a 40% shortfall in water supply by 2030. This alarming prediction is the product of a variety of factors—growth in energy and food consumption, wasteful irrigation practices, inefficient pricing, industrial growth in emerging economies, and pollution and water quality issues, among others. All of this is suffice it to say that responsible water management through the use of smart meters and advanced data analytics among other technologies is going to play an increasingly vital role in global security—an opportunity that Xylem is now primed to take advantage of.

Sensus has traditionally been focused on North America with limited international deployments; nearly 70% of the company’s 2016 revenue was generated in the United States. This may be set to change as Xylem has highlighted its expansive customer relations and ability to extend the reach of Sensus’ technologies to new global markets. Combining the capabilities and scope of these two companies sets Xylem up for strong growth potential and the opportunity to be a global leader in smart water technologies moving forward.

 

Middle East Set to Embrace the Smart Meter Revolution

— August 5, 2016

ControlsThe smart electric meter market has largely been centered in North America, Europe, and isolated pockets of Asia Pacific since the technology’s inception. As more countries within these regions reach high smart meter penetration rates, the focus will soon turn to areas with less established markets such as Latin America, wider areas of Asia Pacific, and the Middle East & Africa.

The Middle East in particular is forecast to see a significant increase in smart meter installations over the next several years. With a population base of over 315 million, the region presents a lucrative market opportunity for smart meter vendors, meter data management software providers, and system integrators, among others. While this market currently remains in its infancy, an array of projects and initiatives across the Middle East are quickly addressing this untapped potential.

Projects Across the Region

One of the larger projects in the Middle East comes from Lebanon and its state-owned utility, Electricité Du Liban (EDL). EDL has announced plans to covert 1.2 million electric meters to smart meters as part of a $200 million modernization and expansion plan. Iran is expanding upon a limited smart meter trial with an additional 360,000 smart meters. Announced in April of this year, this project will provide smart meters to high demand customers and will contribute to the country’s ultimate goal of installing 33 million smart meters. It’s also worth noting that the region’s neighboring country of Egypt has announced plans to convert up to 4 million electric meters per year to smart meters until 2024. This nationwide transition plan will see an estimated 30 million smart meters installed over a 10-year period. Other Middle Eastern countries with smart meter projects or plans include Pakistan, Kuwait, Saudi Arabia, and Iraq.

It’s clear that the smart meter market is set to grow significantly across the Middle East in the near term. There are a variety of market drivers behind this, such as theft and revenue protection, rising urbanization rates, improved operations and reliability, among others. While the rise in smart meter installations is valuable in its own right, this activity also lays the foundation for additional smart grid and distribution automation technologies. While the majority of the Middle East still relies on traditional grid technologies, the region has now reached a point where a smarter and more reliable grid is both feasible and within its grasp.

 

Brexit and the Future of Energy in the United Kingdom, Part 1

— July 12, 2016

Energy CloudThe world is still reeling after the United Kingdom’s shock vote to leave the European Union (EU). So what does this mean for the country’s energy policy? And what does this mean for companies seeking to do business in energy in the United Kingdom?

The short answer to the first question is nobody knows, but it will either stay the same or get worse. Only a few short weeks after the world woke up to the reality of Brexit, there is far too much uncertainty to form a considered opinion about the extent to which the United Kingdom’s energy sector will be affected by the vote. However, it is worth taking a step back to assess the different scenarios that may evolve during the Brexit negotiations.

Period of Uncertainty

Until the U.K. government invokes Article 50 and formally notifies the EU about its intent to leave, the United Kingdom remains a full member. Article 50 will not be invoked until the new Prime Minister Theresa May enters Downing Street; however, there may be legal hurdles and a vote by Parliament before Article 50 can be invoked. There may even be a snap general election, further extending the period of uncertainty.

Brexit will either look very similar to the current state of affairs (although the United Kingdom will no longer participate in the European Parliament, it will still enact its laws), or the United Kingdom will cut itself off completely and face many years of trade renegotiations. So what can we expect the impact of Brexit to be on the U.K. energy market?

A Potential New Direction

The United Kingdom’s energy policy has been closely tied to wider EU policy for the last couple of decades. EU policy is heavily influenced by a low-carbon future and a pan-European energy market. The United Kingdom’s renewables, smart meter, and air quality targets were all set by Europe; a full departure from the EU via Brexit would mean the United Kingdom could tear up its commitments and choose its own direction.

Given the impending start of the United Kingdom’s smart meter rollout, this is probably an unstoppable train that has already left the station. However, if Brexit leads to a recession and higher fuel bills, there will likely be pressure on government to delay the smart meter deployment or rescind the legal obligation that forces suppliers to deploy meters. The United Kingdom has lagged behind many European countries in its commitments to improve air quality; a full Brexit from the EU will likely see the country delay further, given a likely shift back to fossil fuel-powered generation.

The short answer to the second question of what Brexit means for companies doing business in energy is “wait and see.” Look for more on this topic in the next post in this two-part series.

 

Why Even Have Meters?

— May 17, 2016

MeterFor as long as utilities have existed, they have created ways to have their customers pay for what they use.  The meter has traditionally been that tool, and many have looked to the newer iteration, the smart meter, as the nexus to enable the next evolution in the way utilities perform. Smart meters have been deployed for water utilities and gas utilities with recent fanfare. Most significantly, smart meters have been deployed by electric utilities, which are using advanced metering infrastructure as a pillar for new programs for a cleaner grid with more efficient use of power. The electric submeter is a part of that plan, enabling a finer grain look at who uses power with a tenant-by-tenant view. But is it time for us to rethink meters? Are they going to be a part of our digital future?  Certainly, we have to keep measuring use—having customers pay for the resources they use is critical, regardless of how low the cost. But with Internet of Things (IoT)-enabled devices, we need to rethink how resource use is reported, whether it be gas, water, or electricity.

A Clearer Picture through IoT

IoT-enabled devices—think cable boxes, commercial HVAC units, large factory machines, and data centers–are already deployed in the marketplace. To date, most of the IoT buzz has been associated with control or information flow, like a building automation system controlling an HVAC unit or a cable company sending over the latest prime time drama. With little modification, IoT-enabled devices can share how much power, gas, or water they are using at the place and time of their use. If all new devices were shipped with this technology, it would be possible to have a clearer picture of how those resources are being used than by using the aggregation tool that is the meter.

Utilities would not want meters to go away. They are a key cornerstone of how they work and, in some cases, are required by law. But as utilities strive to keep pace of the fourth industrial revolution, they may need to rethink how they want to provide better services for their customers. Approaches like circuit-level or plug-level energy reporting are not new, but if the entire electric, gas, or water system was reporting on how much it used in real time, it would provide a much clearer picture of the state of the system. This reporting could also shine a light into how much waste is present due to things like vampire loads or leaking pipes.

We’d need to have permissions and payment mechanisms resolved, and prototypes are already in development for microgrids. We’d need to have assurances that device reporting is reliable and secure, something that has already been proposed though the use of blockchain. The biggest obstacle is our existing infrastructure. At this point, it may not make economic sense to remove or even turn off meters and submeters, even as IoT devices are shipping. But there will be a time in the not-to-distant future where the meter will be viewed as redundant. It may be in a microgrid, or on a university campus.  There will be a tipping point where, for some new commercial, residential, or industrial facility, it will be cheaper to have no meters at all. On that day, we stop using the end of the buggy whip as the prototypical example of obsolesces, and we will instead recall the era of the meter.

 

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