With Preparation, Utilities Can Capitalize on AMI
IT must lay the foundation, and marketing must motivate customers
Utilities face a complex set of challenges and opportunities around the rollout of the advanced meter infrastructure (AMI). The two-way communicating meters that define AMI are already installed in nearly half of U.S. homes, but their potential is barely tapped in many locales.
AMI got a huge boost from the American Recovery and Reinvestment Act, which allocated $3.4 billion for 32 Smart Grid Demonstration Projects (SGDP) starting in 2009 and subsidized millions of smart meter installations. Utilities in many states are reaping significant savings from the elimination of meter readings and the capability to connect and disconnect service remotely, but that is only the beginning of what AMI can deliver.
Vendors have developed powerful solutions that leverage smart meters to create new value in operations, analysis and customer relations, and many utilities have implementations in place. Before the full range of benefits can be realized, however, there is a lot of work to do.
The first question for many utilities is how far to go with AMI. Demonstration projects show that smart meters quickly pay for themselves, but the return varies according to the situation and the sophistication of the deployment. Smart meters cost $130 to $1,895 per meter deployed, according to the U.S. Department of Energy, and they deliver operational savings immediately when they replace meters that require on-site reading. To justify installing AMI meters as replacements for automatic meter reading (AMR) units, however, utilities need to target values beyond that low-hanging fruit.
Creating those additional values is not easy. The big payoff from smart meter data is predictive analysis that can reduce capital expenditures and support efficient use of distributed energy resources (DERs), but those pursuits depend on extensive data integration and the use of sophisticated analytics applications.
Data management is major challenge at virtually every utility, regardless of size, and smart meters are hardly the only issue. Utilities are collecting data by the terabyte from devices such as transmission and distribution sensors, and they must modernize their processes to make the data useful beyond its original application.
Meters, sensors and other devices produce data in diverse, incompatible formats, and organizations must deploy data management solutions to prepare the information for analysis. The data must be ingested, verified and cleaned, and then managed in data warehouses and other architectures that make it available to analytics applications.
Like data integration, analysis doesn’t come cheaply. Utilities must deploy complex applications and strike a healthy balance between in-house expertise and vendor support. Data science experts are in high demand in many industries, and the competition to hire the best is intense.
With smart meters, usage data flows from each location many times a day, but any customer engagement must be created through the use of applications and devices. Utilities can, theoretically, engage with customers to create a rich relationship around energy management, but the obstacles to successful implementation are considerable.
For a customer to see value, the utility needs to provide them with meaningful control over their energy usage, such as the ability to control devices in the home automatically to take advantage of off-peak rates. It’s an idyllic outcome, but utilities cannot achieve it without help from devices and applications on the customer’s side of the wall — a domain that is largely beyond utility control. Applications from utilities can interact with smart thermostats and home area networks, but a lot of development work is needed, and return on investment can be hard to predict.
Even where there is a feasible plan for engaging customers around energy management, utilities must invest heavily in marketing to raise awareness and educate customers about how to use the functionality. A 2016 study from the Smart Grid Consumer Collaborative (SGCC) indicates that consumer awareness of smart meter capabilities is low, even in states with large AMI rollouts. The survey also indicates that consumers are spooked by any perception that the utility might have control over their power usage.
If customers are to buy in, they must perceive AMI as a consumer-friendly solution instead of a Big Brother-style intrusion, and there is already negative publicity in play regarding privacy, data security and even possible health impacts related to meter transmissions. Utilities need to address the authentic security issues by deploying strong data protection —another significant cost factor — and the marketing departments must work hard to promote a positive outlook on AMI.
Despite the obstacles, experiences shows that utilities that plan smart meter deployments effectively can derive substantial benefits within a few years.
—John MacKenna, Energy Writer