Why American utilities will overpay $2 billion for smart meters
Jan 18, 2011
.
Why are American utilities spending twice what the Europeans do for smart meters? Why aren't they using joint standards and joint procurement to achieve economies of scale and drive down prices?
This screw-up will squander at least $2 trillion over five years. Who will foot the bill? As the old joke goes, one of three groups – ratepayers, consumers or taxpayers.
$2 billion may be understating things
An American friend working in Europe tells me the typical cost there is $40 per meter (plus $15 for the communications by the way). In America, he says, typical prices are $110 to $120 per meter (and about $50 for the communications).
To make the math easier, let's say American utilities will install 50 million smart meters over five years. And let’s say they will spend $40 more than the Europeans. (My friend says it’s more like $70 to $80 more.) On my calculator, that comes out to $2 billion.
Municipal and co-op organizations such as APPA and NRECA often do joint research and sometimes joint buying. Federal agencies such as BPA and TVA have run a few buying programs over the years. But for the most part, American utilities can’t be bothered to cooperate and collaborate, even with $2 billion at stake. One example: Despite a few early conversations, the big three California utilities couldn't successfully collaborate on a joint procurement strategy for the millions of smart meters they are installing.
Joint standards and joint procurement have certainly worked in other industries. The telecommunications industry had a Joint Procurement Consortium in the mid-90s. And the cable industry’s CableLabs consortiumhas been going strong since 1988.
Some people say joint procurement slows things down. Or even stifles innovation. But come on… are we really looking for radical changes to the guts of electric meters? The innovation will come in the software, not the hardware.
So help me out figure this out, using the Talk Back form below. Why can't American utilities use the same tactics that have been so successful for European utilities and for other American industries? Are there joint procurement programs of which I’m not aware? Are there any justifications for this (what appears to be) selfish insistence by utilities to go it alone, even if it saddles ratepayers with huge extra costs?
Please share your thoughts and solutions. It could save us all a few billion dollars.
6. Wounded by Wireless Smart Meters (14 minutes, 19 seconds)
http://eon3emfblog.net/?p=8403.
7. Top EMF scientists in the world reporting at the Commonwealth Club in San Francisco on Nov 18, 2010: cell damage, DNA breaks, blood/brain barrier breaches.
Stop being so alarmist! - don't worry about squandering $2 trillion over five years.
Let's plan ahead for the five years that follow afterwards - coz that's when we'll be negotiating pricing to replace them all again. Modern technology doesn't last forever you know!
Is the fed still creating enough money to keep this party going? Hurray!
Left Goldblatt - 01/19/2011 - 04:35
Costs of SM in the US vs Europe
To be fair, cost of the meters is not the only parameter. In Europe, from 30 to 35 euros per meter (for a very large utility), you add installation (30 to 40 euros), concentrators, IS etc. you reach 120 euros overall capex (overall total cost of Smart Metering project divided by number of meters). I still think this is lower than in the US, but tell me.
Then you have opex. The Europe has an advantage with PLC from meter to concentrator, as we have 50 to 90 meters behind a transformer. In the US, it is less than 10, therefore, no PLC, but direct GPRS, and this is more expensive.
Pierre Marlard.
Atos WorldGrid, based in France
Pierre Marlard - 01/19/2011 - 04:44
There is another way
Jesse, I'm sure you're right. As a Euro, though, I still think our utilities are missing a trick by tendering purely to trad meter manufacturers, where actually they could acquire the exact features they need, at lower cost and with greater timeliness by tendering out their design to volume contract manufacturers. After all, what we're talking about here are volume electronics products.
Hermione Crease - 01/19/2011 - 04:54
Smart Meter Costs
One key issue that you (and possibly your friend) didn't bring up is the service difference in North America and Europe. In Europe the service size is on 100 Amps and the IEC meters are correspondingly smaller then our typical 200 Amp ANSI meters. For basic safety reasons the size of current carrying parts is larger, and components require higher over current ratings. North America has a common standard although I agree that they do not have the buying leverage in all situations. If we are overpaying for smart grid the meter by itself is not the sole culprit.
Michael Mayer - 01/19/2011 - 05:27
Apples and Oranges
The N.A. and european comparison is really not a fair one.
1) Meters in North America have been built to the standards of ANSI C12 and Measurement Canada, who have worked together to develop proper performance standards, which are different from europe.
2) The meters are two totally different form factors, and many would argue that the european design does not provide the same worker safety.
3) There is no standard measurement function for American Meters, every utility wants to do something different, but there is not a standard measurement profile for the meters. I believe that NIST SGIP PAP 5 is set to address this.
4) Lastly, I hardly believe that any American meter vendors will want to standardize anything...they make to much money on meter "upcharges" to utilities. After all, the meters are only sampling voltage and current, and those measurements can only be used in so many ways to bill and monitor customers. Like so many other American commodity businesses, their focus on short term profits vs. working toward standardization of a common meter profile will be their demise. The market is clamoring for a return to the days of the commodity meter that is easily interfaced to multiple communication platforms at a reasonable price. The first vendor to get their will dominate the market.
Atlas O. Klein - 01/19/2011 - 06:06
NA vs EU meter costs
My company sells several different types of electrical components to the major meter vendors in both NA and EU. While the meter differences stated above of ANSI vs IEC and 200A vs 100A are true, they don't seem to make much difference in what we see. The price paid by the major meter vendors in EU is similar or the same as the price paid in NA for the same or similar components. The typical volumes in the EU are smaller than in NA because the EU is still doing mostly small field trials, not complete mass replacements of mechanical meters. Based on the EU and NA meter requirements there should be only a few percent difference in cost.
However, we need to remember that cost is a fact, price is a decision. NA utilities may be willing to pay higher prices decided by the meter vendors in NA.
Meter pricing to utilities is a closely guarded secret. I would want to know the source of the data on NA vs EU meter pricing before giving it creditability.
Bruce123 - 01/19/2011 - 08:18
NA vs EU meter costs
You need to be sspecific about price vs cost. US citizens pay higher prices for cell phones, credit transactions and many others. Gasoline and other energy costs and food have subsidized prices.
Robert Bachrach - 01/19/2011 - 10:35
the real cost of SmartMeter project
The real cost of SmartMeter project is the Software System, System Integration, and the meter Installation. For example, the budget for Southern California Edison to install 5 million meters is 1.6 billion dollars. Yes, we don't know the life cycle of these meters before we have to upgrade to the next level of SmartGrid technology
Lilian Gong - 01/19/2011 - 16:19
Smart Meter Costs
Utilities aren't incented to save money since they're still rate regulated; telecom innovation accelerated as rate caps were adopted (meaning savings beyond target accrued to shareholders). In fact, ROIC incents utilities to invest more capital such as for smart meters in order to earn the allowed return. Once motivated, utilities could easily save by expanding EPRI or other groups into buying consortia or buying Telcordia (the former BellCore buying coop) which is for sale.
Bill Blessing - 01/19/2011 - 16:27
NA vs EU Smart Grid projects cost
I agree that cost comparison between NA and EU is almost not significative as standard and functionality are not the same. NA standards products are often expensive to manufacture.
What is important is the global cost of a project, including adjacent application. For instance in EU, some uitilities are thinking about integration of Smart meters concentrators into the feeder automation RTU, allowing cost reduction and extra advanced function.
Patrick Pipet
Schneider Electric
Patrick Pipet - 01/20/2011 - 06:23
My Data Shows U.S. Numbers Generally Lower
Jesse,
I have tracked deployment numbers mostly from utility regulatory filings and find the U.S. numbers are mostly lower than Europe's. My method differs - it is based on all-in capital costs rather than just the meter cost. The U.S. average is $222; the European average is $270, though that is heavily skewed downward by ENEL's cost of $100 per meter.
Thanks for raising the issue. -Chris
Chris King - 01/20/2011 - 08:54
Market forces override all
To those who comment here that, in effect, there is some overriding profit motive that is preventing the setting of standards, I say think more deeply. Of course profit is the driver. However, given that there is competition for meters, and also given that forecasts set a near 20% CAGR and a near $20 billion capital value on the smart meter industry, it is nearly impossible to think companies would leave even a small portion of such money on the table. Standards are more often a benefit to product design and sales.
If there is a "clamoring" for new/different/improved technology, either entrenched players will be obligated to respond, or start-ups will emerge.
Government through regulations, and utilities through collaboration, have the power to force technology, on the other hand. That is where the proper focus lies.
John OSullivan - 01/20/2011 - 10:01
Zigbee radio
Does the Zigbee radio found in most of these meters distort the cost higher than would be the case if an open IP standard was used for communications?
Bill Henry - 01/20/2011 - 10:35
myths
Here are the top 5 smart meter myths: http://www.energyinyourlife.com/article.php?t=100000066
Toddley - 01/20/2011 - 18:10
What SMART meter?
Smart meters are not smart( any one knows why do they call it smart? Isn't this simply communicating digital meter?) and would be thrown out in no more than a decade then will be replaced by smart utility management systems that can automatically and intelligently measure and bill on dynamic rate/load basis and adjust the consumptions as consented by consumer and recommended by regulators. So $40 or $140 is waste of ratepayers money.
R. Baraty - 01/20/2011 - 18:12
deliberately crippled meters vs. Verizon and P1901 PLC
Agreed that most "smart meter" deployments in North America are a waste of money which end up as junk.
But we must look deeper at new laws, regulatory decisions and federal programs in the US to find motives. The US National Broadband Plan's "Goal 6" (http://broadband.gov) is for all Americans to share their energy usage data with third party providers in time to save them money.
Counting on this promise of fedgov backing, Verizon announced its move into the home energy, security and "smart home" sectors. Evidently it believes it is guaranteed access to raw real-time data or it would not be making the promises it is. So goal 6 is now a de facto reality where the outside service provider is a big incumbent broadband provider with its own backhaul. Where it isn't, precedents set by Verizon's access will be cited to regulators to pry open unwilling or autistic meters.
Given a "threat" of third parties reading "their" data, utilities to quickly install crippled devices that would help themselves bill for time of use, do nothing to help consumers track and alter habits, and give them excuses to delay or block advanced conservation services that cut into sales of watts. In their rush to cripple smart metering before regulators could figure out it was to pre-empt competition and continue to sell watts for waste not use, utilities used a patchwork of wireless radio standards rather than a unified powerline networking (or "PLC") approach as in Europe.
Technology: IEEE 1901 PLC is just fine for small deployments of 10 meters per transformer, in January many under-$200 routers were released based on the Atheros and Gigle chipsets that support 450mbps of IEEE P1901 based powerline networking simultaneously with four gigabit ethernet connections and two simultaneous dual band WiFi at 2.4 and 5.8 GHz - these chips could just as easily show up in a "smart meter" deployment or let PLC-based software running on a ruggedized router do the job that "smart meters" are proposed to do - acting as a general purpose PLC/ether/WiFi/fibre gateway as well, which will not be obsolete soon).
Thankfully the public realized the meters were not for their benefit, the regulators in some states rejected plans where the backhaul was too patchy for utility-grade service (notably in Maryland) or where customers paid for the distributor's benefits (Colorado). Now Verizon is calling utilities' bluff.
Re: Europe see Greenpeace's "Battle of the Grid" report.
Craig Hubley - 01/22/2011 - 12:25
utilities losing monopolies should open up & invite in
Given the action at CES, it seems traditional N.A. "utilities" have lost the monopoly mandate through inaction. Now they see competent communications providers (some who know high security networks) coming in to displace them from any role in energy demand management. This is inevitable to some degree due to conflict of interest and a utility culture that has always been about sale of watts and building up baseload capacity. But once the public realizes how much money it is forced to pay for big baseload facilities (or their emissions) while big industries pay nothing for the watts in the middle of the night, they will get very angry. The time-of-use pricing debate will turn around as it becomes clear that the public can get very cheap watts at 4AM to charge batteries or electric cars.
Meanwhile there is no conflict of interest for ISPs like Verizon that will happily sell $10/month services to the customer who saves $20/month on a power bill (while to the distributor that's a $10/month revenue loss). A broadband provider will happily partner with vendors of LED lighting or LED TVs or smarter fridges and freezers, making a cut of the capital cost of these sales - not caring that the electric distributor gets less cashflow to maintain a more complex grid with rates under more pressure than ever with emissions pricing and aging populations that simply don't want to change habits.
The utility has really only one option if it wants to remain a unified transmission and distribution and retail business: It has to upgrade the links between customer premises and their utility sheds and closets to be capable of at least a gigabit of secure communications. At those closets it should be ready to let third parties rackmount equipment - and become an honest broker for Internet, voice, TV, home security and energy management services.
Wireless is only a stopgap: In the long run these sheds/closets must use fiber or outdoor powerline communication (like E-line http://corridor.biz) to the transformer. From the transformer to indoor devices, good old cheap consumer P1901 PLC will do - it will have to since every AC device is plugged in to talk to it, while that is not uniformly guaranteed for wireless or non-PLC networking. To demand fiber or wireless to every managed device is just another delay tactic that is unlikely to work as the public starts to use P1901 PLC in the home.
One advantage for utilities is redundant metering from multiple PLC capable nodes.
Craig Hubley - 01/22/2011 - 12:58
incorrect data
I'm not sure that you provide the correct comparison.
Typical cost per metering point requested by European utilities including all the communication hardware and software infrastructure is approx. 100eur. Generally it is very common to the declared cost in US.
Gediminas Eidziunas - 02/06/2011 - 22:57
European standardization
The article suggests that Europe has an advantage, both because of the use of common standards, and because of joint procurement.
I think neither are true, of course European standardization is on its way (cf. the Open Meter program), however a European standard for smart metering, ensuring interoperability, does not yet exist (neither functional nor technical), let alone there are smart meters available complying with such a standard.
Furthermore I don't see any large utility teaming up with other utilities for joint procurement. Some smaller utilities have started such initiatives, but this has not yet resulted in the purchase of substantial amounts of smart meters.
The argument that (some) European utilities are bigger and have larger bargaining power is true, but I guess the main argument is the difference in meter specifications in terms of functionality, quality and connection capacity.
Hans de Heer, KEMA
Hans de Heer - 02/10/2011 - 03:01
Ratepayers
The fact that cost can be handed to the consumer is the problem. Utilities are Guaranteed by 100 year old laws to achieve a fair return 10%, on thier business. So it is in thier interest to grow spending then pass these cost along. It reminds me of how IBM programmers used 5000 lines of code, because they would bill by the line. Along came Microsoft techs who could sizzle it down to half the size.
daniel breslin - 04/05/2011 - 09:03
There's More to be Done in Hardware
"The innovation will come in the software, not in the hardware"? Just saw this article as I was following up on annother question.
Innovation is desparately needed in hardware for so-called "AMI" and "Smart Meters". Given the level of error in "smart" meters and the real need for accuracy not only in total energy used, but in reactive power, phase and other measurements, its more than premature to suggest that the "hardware" doesn't need to change. The range of error alone makes it imperative that better means of measurement be deployed. My business is further up the chain, in HV transmission, but it doesn't take any insight to see that the real world levels of error (particularly over time) are a ticking time bomb when it comes to pricing, billing and costumer relations -- regulatory action is inevitable in this area, and the standards for measurement and billing are going to move rapidly closer to those in the telecom and IT services world. Forget the PR by the smart meter vendors and the invested utilities, error is significant, whether you want to use AMI information for operating management or billing. The excuse that its too difficult to measure customer use accurately over time no longer holds water -- there is technology out there that can be adapted to this purpose... but it will be slow and painful for many utilities, since they really have difficulty distinguishing between products and technology.
Three new demonstration projects caught our attention - a smart grid effort in Albuquerque's business district, a rapid recovery transformer study in Texas and a trial involving low voltage current sensor technologies in the UK. They also got us to thinking: At this stage in the smart grid build out, if you could design a demonstration project, what would it entail? That's our latest Tuesday Topic; click for the details.
Twitter
Facebook
Linkedin
RSS
