By F. Garrett Johnston, Chartwell Inc.
San Francisco-based Pacific Gas & Electric Co.’s recent decision to deploy a two-way powerline carrier system from St. Louis-based Distribution Control Systems Inc. (DCSI) on 5 million meters will no doubt accelerate the deployment rate for automated meter reading (AMR) modules in the United States over the next five years. But will the largest North American deployment announced to date drive other utilities to install more advanced fixed networks?
The answer is yes and no.
The PG&E deployment, which is likely to include an additional 4 million gas meters, is a good sign for the AMR industry as a whole-and for fixed network vendors in general. Fixed networks generally are more expensive, but provide more benefit than mobile (drive-by) technology. Fixed networks can transmit daily reads that can help various utility departments, including customer service and engineering, while mobile systems automate the meter reading process.
PG&E is the most willing of California’s three investor-owned utilities to listen to state regulators’ advice to deploy advanced metering. But Chartwell research indicates utility commissions in other locales are not rushing to follow California, Idaho and Ontario in pushing utilities toward advanced metering. Chartwell talked with regulators in 30 states and found most are not mandating investigations or installations into AMR and instead are waiting for utilities to bring business cases to them.
Still, it seems utility interest in advanced metering is rising, and the deployment at PG&E can only help. The AMR industry grew 20.1 percent in 2004 according to Chartwell’s 2004 AMR survey of 119 utilities. In all, Chartwell estimates that about 55 million, or about 20 percent of all North American meters, are automated and that the industry will grow at least 20 percent over the coming years. AMR deployments are expected to grow to more than 66 million in 2005 and 77 million in 2006.
The question is how many deployments will be fixed network vs. basic mobile technology. Mobile technology accounts for nearly three-fourths of all AMR modules deployed in North America, while one-fourth consist of more advanced metering technologies, according to Chartwell’s 2004 AMR survey. (Chartwell defines advanced metering as any system that can effectively provide a daily read. That generally includes powerline carrier and wireless networks, but excludes mobile and handheld systems.)
Raleigh, N.C.-based Progress Energy, which tested both wireless and powerline carrier AMR systems two years ago, recently surprised industry experts by opting for mobile technology on all its 2.6 million meters in North Carolina and Florida in lieu of a more advanced system. The conservative nature of many utilities will likely continue to drive them to choose drive-by systems over fixed networks.
In evaluating advanced metering strategies, utilities must answer three questions:
1. Should we install a fixed or mobile system?
2. If it is fixed network, how much do we need?
3. Should we use one or multiple technologies for most of our territory?
About one in three utilities say they have installed or are installing advanced metering throughout their territories, according to Chartwell’s 2004 survey. However, it appears the actual number of utilities with fixed networks already installed for most of their service territory is actually lower.
This is probably for two reasons: some utilities are still in the midst of installations, and it is possible that Some respondents may have misinterpreted the question. About 14 percent say they are piloting or planning to deploy an advanced metering system throughout their utility while 18 percent are considering it (see Figure 1).
Interest in More Advanced Networks on the Rise
Still, anecdotal evidence suggests that several large utilities-many of which have studied AMR business cases multiple times-are seriously considering advanced metering. And, if a small percentage of them move forward with large-scale deployments, the advanced metering segment will enjoy more than robust growth.
As it has over the past decade, cost savings and a drive to improve customer service continue to be main reasons utilities install or consider AMR. But utilities are increasingly interested in using AMR to meet requirements for daily or at least more frequent reads. The percentage of utilities interested in AMR for these reads jumped from 2 percent in 2003 to 11 percent in 2004. In addition, when addressing secondary reasons for installing AMR, more utilities-17 percent-cited daily/more frequent read requirements than any other reason.
If this trend continues, it will only further increase the popularity of fixed networks. But cost remains the biggest obstacle to advanced metering. The government of Ontario, Pacific Gas & Electric and Southern California Edison, each estimate it will cost at least $1 billion to install advanced metering in their respective territories. Ontario estimates smart meters will cost customers $3 to $4 per month.
Customers may be willing to pay a little extra for smart metering under the theory that it decreases the need to build power plants, but they may not like it enough to pay significantly higher bills.
Another big decision for utilities: How much advanced metering do we really need? First, any metering strategy must align with the company’s overall strategy.
Surgical deployments where utilities deploy fixed networks for only part(s) of their territory will continue to be a viable option for many. More utilities than in the past appear to be seriously considering full-scale deployments, but it is likely many in the end will revert to surgical strategies where they will deploy AMR only for niche applications, such as high-cost-to-serve customers.
The decreasing cost of fixed networks actually increases the feasibility of installing them on small segments. Wireless networks were traditionally seen as all-or-nothing investments, but no longer. Now utilities can deploy fixed networks for smaller customer segments, such as college apartments. The utility in Austin, Texas-home to the University of Texas and other colleges-is installing a wireless system from Atlanta-based Cellnet Technology Inc. on 123,000 of its 360,000 meters to eliminate special visits for college students who move in and out in the fall and spring.
Utilities installing fixed networks for a small customer segment could likely then install a mobile system for the rest of their territory, if they do not have one already. That is another decision utilities face: use one or multiple AMR vendors?
The majority of utilities appear to be leaning toward using one technology. About 65 percent of utilities using, planning or considering AMR say they plan to use the same vendor for urban and rural areas, according to Chartwell’s 2004 survey. When utilities with only urban territories are excluded, that figure rises to 80 percent.
Interest in AMR for Demand Response Still Mild
Pacific Gas & Electric’s main drivers of AMR are operational efficiencies and customer service benefits, officials say. Customer benefits include:
“- Elimination of access issues, such as not having to leave a gate unlocked on meter reading days or allowing someone into the house to read the meter;
“-Improved outage response; and
“-Ability to offer dynamic pricing.
PG&E states the powerline carrier network will help the utility save money on energy procurement. If customers shift electric load use to off-peak times through dynamic pricing, they reduce the cost of energy procurement and need for infrastructure capacity such as power plants and transmission lines, states PG&E. Customer behavior during California’s critical peak pricing pilots “show customers will respond” to dynamic pricing, PG&E states.
But despite PG&E’s intentions to use AMR for dynamic pricing, do not look for a rush of demand response programs from utilities. There are still many questions about whether AMR needs to be used to implement demand response or load control. Many in the industry question just how popular dynamic pricing plans would be since customers are used to paying the same rate for energy no matter when it is used. Some say the results of the California tariff were skewed because of the pilot’s voluntary nature, noting participants on similar pilots have shown a willingness to initially conserve, but then often return to old usage patterns.
Interest in using AMR for energy conservation and peak shaving continues to be mild at best. The percentage of utilities using or planning to use AMR for customer energy management doubled to 16 percent in 2004, and the number of utilities considering this application rose 9 percent. However, only about 9 percent of utilities use or plan to use AMR for load control and only 4 percent of utilities use AMR for automated demand response/curtailment. Utility interest in such areas has historically been cyclical.
One wildcard for advanced metering growth is executive support. AMR would gain an additional boost if more executives mandated AMR deployments, but it appears most utility executives are not pushing for AMR. Just 3 percent of utilities have an executive mandate to deploy AMR, and only 8 percent of utilities have a vision statement regarding AMR, according to Chartwell’s 2004 survey (see Figure 2).
Most executives continue to rely on business cases with tangible benefits instead of an overall strategy focused on automation. About half of utilities say the main evaluator of their AMR strategy/investigation is a team from various departments. Nearly 20 percent say the meter department is leading the AMR charge, while about 13 percent say customer service is heading-up AMR strategy development (see Figure 3).
No matter how you look at it. AMR is a hot topic at many utilities. The question moving forward for many utilities will be: Drive-by or fixed network? Or both?à¯£à¯£
Garrett Johnston has analyzed the utility industry for Chartwell since 1998. He has directed development of more than 30 reports devoted to the AMR industry, including Chartwell’s last four annual AMR reports. He is currently working on The Chartwell AMR Report 2005, 10th Ed. Garrett earned his bachelor’s degree from James Madison University in Harrisonburg, Va. in 1993, and is pursuing his MBA in marketing at Georgia State University.