The Dangers of Advanced Metering

This is a dangerous time to be a metering buyer or vendor.

Don’t get me wrong – I consider advanced metering essential to the Smart Grid. Today’s products can provide remarkable benefits and a quick payback... if you get a system designed with the future in mind.

And there’s the rub. The sector is in such turmoil – and so many people are blind to what’s around the corner – that a utility can easily end up with a dead end system. With technology that cannot expand to give you the full benefits. Or a pricing model that gouges you for years. Or a proprietary system that puts you at the mercy of a single vendor. Or a vendor that doesn’t survive the coming consolidation, and strands you without adequate support and upgrades.

Everything in this sector is changing – regulations, pricing, business models and, of course, technology. It’s exciting, but confusing and risky as well. Out of the several dozen findings from our research, let me highlight the top seven and then suggest a few ways to mitigate the risks.

The vendor landscape is chaotic and misleading. Almost all top-tier vendors underwent an ownership change in the last five years. Meanwhile, several dozen upstarts have muscled their way into contention. Picking the right supplier is fraught.

Metering hardware is undergoing several transitions. The changeover from electromechanical to digital is well established and well understood. Two other transitions are now underway, even though many market participants seem unaware of the implications: a) from separate to integrated and b) from custom-built to commodity.

Metering hardware prices are headed down. In line with my “commoditization” prediction above, I believe North American prices for advanced meters will drop 50% by 2009.

One-way mobile AMR is a dead end. It may be cheaper to install, but it locks you away from the many benefits of true, two-way advanced metering.

Meter data management (MDM) is key to getting full value so you can expect any vendor with half a brain to add MDM software and solutions to its product line.

Open standards in general (and the Zigbee wireless standard in particular) will disrupt business as usual. Utility buyers are coming to understand that standards bring lower prices and greater choice. Vendors who drag their feet will lose market share.

It is still too early to predict a winner on the communications side. Although I have my favorites (Zigbee for residential, for instance), it is still too early to know which communications network will become the preferred option. Choices range from cellular to BPL to GPRS to satellite and a dozen more, each with its pros and cons.

Navigating the Mine Field

Despite the confusion, I do not advocate waiting. Advanced metering is too important and too empowering. But I do suggest looking for a system that can accommodate the future. In particular, be on the watch for:

·         Low total cost of ownership. A low first cost can mask higher lifetime costs. Some systems charge for every read, making it expensive to poll meters as often as you might want. Some make it expensive to add new capabilities. Some have hidden maintenance and upgrade needs.

·         No ceiling on expansion. Most buyers wisely start with a just few core applications. Eventually though, you’ll want to expand. To new customer classes. To new neighborhoods. To other kinds of meters if you also handle water or gas. To new applications such as outage management, load profiling, remote connect/disconnect, and many more. Some choices lock you away from easy expansion or make it too expensive.

·         Communications flexibility. Do not try to guess which communications technology will be the ultimate winner. Instead, buy a system that can communicate through any major network, without the need to rip out the meters and start over.

·         A single place to point your finger (aka one @$$ to kick). It may be tempting to buy the pieces and assemble them in house. But given the complexity and state of flux, I suggest instead that you look for a vendor that can (by itself or with partners) create a turnkey project team. Make sure meter data management is part of the package.

There is no shortage of articles touting the benefits of advanced metering. Few, if any, point out that this sector will change more in the next three years than in the past twenty. In this atmosphere of flux and volatility, you must consider more than today’s needs. You must also keep the door open for tomorrow’s revolution.

In that spirit, I have listed three sites that can help you assemble your own tools for monitoring and profiting from this important sector.

  MADRI Advanced Metering Infrastructure Toolbox

   Southern California Edison Advanced Metering Infrastructure program

   AMI / MDM Working Group

   Email Jesse with comments