Looking into the future of smart grids

18. April 2013 By:  Neha Vikash, Energy & Power Systems Group of Frost & Sullivan

Advanced meter infrastructure (AMI) technologies are a cornerstone and one of the most visible elements of the smart grid, writes Frost & Sullivan’s Neha Vikash. Overall, the AMI market is expected to grow at a CAGR of 26.9% and revenues are forecast to reach $3.7 billion in 2016. Despite this, Vikash argues that the transition towards smart grids and meters is not progressing as fast as necessary.

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Smart meters have been introduced as a means to modernise the grids and to bring about operational changes such as reduce nontechnical losses, introduce remote reading and switching or simplify the billing procedures.

The utility industry is in the midst of grid modernisation efforts to bring a secure, cost-effective, environmentally compatible power grid that can be tackled by intelligent solutions and innovative technologies.

Utilities in Europe have begun to feel increased legislative pressures to transform the existing grid infrastructures to intelligent or smart grid infrastructures. This transformation involves sectors with utmost potential such as advanced metering infrastructure, distributed generation integration, sensors, advanced transmission technologies and electric vehicles.

The next generation of metering and data-exchange technologies, known as advanced meter infrastructure (AMI) technologies are a cornerstone and one of the most visible elements of the smart grid. Member states, such as the Scandinavian countries and Italy have taken early smart metering moves for a nationwide roll-out.

Smart meters have been introduced as a means to modernise the grids and to bring about operational changes such as reduce nontechnical losses, introduce remote reading and switching or simplify the billing procedures. Europe is now gradually drifting towards introduction of the latest generation advanced metering infrastructure technologies and the integration of information and communication technologies, to best support the strategic objectives in development of smart grids and the benefits sought over time.

Advanced metering infrastructure: Route to smart grid development

Smart grid cost recovery is focused on the installation of AMI, as it offers a number of cost saving measures such as improved billing, reduced outages, and better load forecasting and management. Cost reduction by avoiding manual meter reading and real-time information on consumption and billing has been possible by the two way communication in AMI.

The major contributing driver for Europe wide implementation of smart grids is due adoption of the third internal energy market package in 2009. This directive requires all member states to have 80% of consumers to be equipped with smart metering by 2020. Member states and competent authorities need to prepare a timetable with a ten year target for smart meter implementation. Not meeting the EU target is associated with a high penalty fee.

Governments of a few member states are still not aware of such a high obligation. By September 3, 2012, each member state was required to conduct an economic assessment of the long-term costs and benefits of installing smart meters.

However, more than half of the EU countries did not meet that target date. The European Commission is likely to issue a benchmark report on the costs and benefits of smart meters by mid-2013, in an effort to urge member states to carry out cost-benefit analyses (CBAs) for smart metering and inform their roll-out plans.

Promoting investments in smart metering deployment requires a thorough assessment of what aspects of smart meters need to be regulated and standardised and what can be left to the market. The Commission is working towards implementing further measures to ensure that smart grids and meters bring the desired benefits for consumers, producers, and operators just as in terms of energy efficiency.

Despite the expected benefits of smart meters and the policy measures in place, both at a EU wide as well as regional level regulations, the transition towards smart grids and meters is not progressing as fast as necessary to reach the EU’s energy and climate objectives.

There are several road blocks impeding the growth of smart metering implementation on a large-scale. There is reluctance towards adoption of open registered standards and there is uncertainty around them for the function of metering, communications, and network.  Interoperability issues and incapability of utilities for successful deployment of new technologies are major concerns restraining market growth.

Following these, there is lack of clarity on the appropriate business model by different market participants in the value chain as several market bodies involved in smart metering share direct or indirect benefits from the mandatory implementation, but may not share costs and benefits equitably.

AMI – Extending intelligence beyond smart meters

The AMI typically refers to the full measurement and collection system that includes the meter hardware at the customer site, communication networks between the customer and a service provider, such as an electric, gas, or water utility, and data reception and management systems that make the information available to the service provider.

Most companies in the AMI space are not just the hardware (meter) providers, but combine them with important services and appropriate functionalities in communication infrastructure and data management, which are the key technologies for the deployment of innovative solutions.

Installation of hardware does not generate a constant stream of revenue and higher margins can be gained in providing the software and network. The meter data management (MDM) vendors are now expanding their offerings into meter data analytics and provide utilities additional capabilities to process the data, to analyse, discover and report trends which add more value than just uploading a lot of data.

Meter data analytics (MDA) provides utilities with a platform to avoid forecast failures, rather than respond to them. MDM is much more than metering. It is a key component of advanced metering, and holds a critical stance in delivering benefits from advanced metering. MDM systems provide a database repository that automates and streamlines the complex process of collecting large amounts of time based interval meter data from multiple collection technologies and delivers the data in an appropriate format to a utility billing system. 

MDM is a flexible and scalable solution of AMI, and provides new ways to store, manage and integrate new data into existing systems. A smart meter is an advanced accurate technique to measure time of usage (TOU) of energy in real-time. However, understanding the transactional value of data in terms of optimisation, prediction and forecasting is critical. With proper analysis, the data can solve many business challenges that utilities face today.

Meter data management (MDM) is an attractive area of growth, as the next step following the installation of smart meters is to collect the meter readings and analyse them to implement demand response programmes or evaluate the usage patterns of consumers.

Where the opportunities are: Pockets of Europe cashing in on smart meters, while some hold back installations

In 2010 and 2011, countries like Scandinavia, Italy and Spain experienced higher smart meter roll-outs and AMI implementation. However, the installed metering points in Europe are still low with about 19.3% penetration rate until 2011. They are expected to increase after 2013 and reach its peak during 2014 to 2019.

The next five years are expected to pave the way for large-scale smart meter and AMI implementation. Europe has to meet the target of 202 million installed metering points by 2020, which is an ambitious case.

The situation in some countries is complicated due to lack of proper business model and deregulation. Countries like the U.K., Scandinavia, France and Spain are expected to witness high smart meter activity in terms of unit shipments and levels of deployments, due to strong regulatory mandates and timelines. Germany is expected to experience delays, mainly due to security issues and lack of regulatory push.

Meters that conform to the protection profile through certification are expected to be available by 2012 or 2013. Spain is expected to be on track with the roll-out plan, as major utilities like Endesa and Iberdrola are speeding up their installations.

Most of the countries in Central Eastern Europe (CEE) lack adequate smart metering activity due to no clear direction through regulation to mandate smart metering roll-out and lack of concrete utility planning and initiation to implement smart metering.

Hungary, Poland, Romania, and Slovenia have some level of smart metering activity and are well-positioned for large-scale smart grid deployments. The CEE region has strong potential for the roll-out of smart metering, but there is an ambiguity about how quickly the smart meters legislation will be implemented in the region leading to uncertainty in large-scale smart meter implementation.

AMI backs smart grid in making the smart energy benefits a reality

The thin line of difference between smart meters and AMI is extension of accessible data to actionable data which boils down to implementation of strategic IT infrastructure and MDM.

Software solutions that analyze data from smart meters and smart grids are continuously gaining importance. Meter data management (MDM) is an attractive area of growth and the next big market within the AMI space.
To gain maximum value and improved return-on-investment (ROI), several AMI vendors, utilities, and IT companies understand the need to get involved in the concept of an enterprise-integrated MDM system and are ready to invest millions of dollars in MDM systems.

Data from smart meters and other applications needs to be sourced and consolidated from disparate systems such as meter readings from MDM, operational data from SCADA, customer data from CIS and outage data from OMS.

Many early AMI pilot deployments have focussed on technical issues rather than on integration issues. This could have been manageable with a small group of customers, but with large scale AMI roll-out, the challenges faced by utilities are complex and there needs to be a seamless software stack from one end of the smart metering system to the other. Meter data analytics is an attractive area of growth.

The ambitious objectives of smart grid indicate that the role and complexity of IT is going to play a more prominent, if not dominant, role in making smart grid a reality. Some utilities are focussing on outsourcing their core activities and tasks to telecom companies, an independent software house or a meter manufacturer providing an end-to end solution to manage the AMI and provide tools and effective business models, expertise and services.

However, the biggest concern is the protection of consumer data due to which some utilities are not keen to outsource activities to another company.

Frost & Sullivan outlook on the European AMI market

Development of smart grids necessitates the implementation of AMI in Europe. The market is expected to witness higher growth not just in the smart meters and installation segment, but also in communications networks, MDM, along with customer and program data management segments.

However, smart meter and the communications technology accounts for the majority share of the AMI cost. According to Frost & Sullivan analysis, the AMI market is expected to grow at a CAGR of 26.9% and revenues are expected to reach $3.7 billion in 2016. Companies will focus on the development of smart meters to enhance the scope of smart grid businesses.

The EU member states that lack regulatory push for deployment will experience large-scale implementation after 2015, as they have to comply with the EU’s Third Energy Directive, or pay a high penalty fee. Government mandates will still be the main driver for AMI deployment.

It is expected that, once large scale roll-out activity begins in CEE, the pace of implementation will be faster compared to that of Western Europe. The smaller regions will complete roll-outs faster than the bigger ones.
Regulatory approval, along with increased competition, aging infrastructure, and new technology will continue to drive investments in advanced metering and intelligent grid technologies.

About the Author

Neha Vikash is research analyst in the Energy & Power Systems Group of Frost & Sullivan.

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Disclaimer: The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.

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