By Howard Scott
At its most basic level, automatic meter reading (AMR) is the collection of massive numbers of meter readings. The data is exhaustive and repetitive-not what most people would consider “fun.” So to suggest that this industry is interesting and “hot” is amazing. Yet, market data shows that, despite the current economic recession, the AMR industry is enjoying extraordinary growth as utility deployments of AMR technology are on an upswing.
The AMR industry started in the United States about 20 years ago. Most of the early industry participants left the business years ago, and there are even a few that left, returned, moved around, left again, etc. For the few of us who have stayed since the industry’s early days, the current growth is more than good news. It’s like returning from a long quest that after years of difficulty has proved to be successful.
AMR Shipments Surge
This article summarizes new data from The Scott Report: Insights on AMR Deployments in the United States, which was released recently. It shows that U.S. deployments in 2001 were 40.2 percent above the year 2000 figures, which at that time were considered strong because they were up 26.9 percent over 1999’s numbers. The surge in shipments occurred across the board, with almost all vendors reporting a growth in business. Enthusiasm within the industry is high as vendors rush to take advantage of the new demand, and utilities recognize that AMR is now a mature, reliable technology that is here to stay.
This article provides two forms of information:
- An overview of the known deployments of AMR systems, and
- A description of new parameters that may help observers better understand the extent and manner in which AMR systems are deployed.
Table 1 shows the performance of the active AMR vendors in 2001. Note that Teldata restructured its businesses in 2001 and did not report any activity. The chart is in decreasing order for the total number of AMR units ever shipped. The annual shipments are a challenge to list because SchlumbergerSema divested itself of Neptune during 2001, and Itron sold many units through Badger and ABB. This list shows SchlumbergerSema as the 2001 leader in units shipped by a vendor, but other equally valid definitions of the word “vendor” could list Itron as the leader. Despite the ranking uncertainty, both vendors had a superb year.
Figure 1 shows data on the annual shipment of units to the United States, broken down by the type of communication technology employed. Note that the RF shipments dropped significantly in 1998 but have recovered strongly since. Powerline communications (PLC) shipments have grown steadily over these years, with the only variable being the rate of growth. In contrast, telephone shipments suffered a major decline in 1998 and have only gotten worse since then. The charts show that RF dominates the marketplace, followed by PLC and then telephone. However, telephone is currently the technology of choice for reaching commercial and industrial customers.
The same data is presented differently in Figure 2 to show how the AMR projects are distributed among the different utility types. The data is dominated by electric utilities, whose numbers have been growing steadily each year except 2000 when shipments were level. In contrast, the water utility market has been climbing steadily. At the beginning of this study period (1997), the gas utilities were at about the same level as electric utilities. Yet while the electric market grew, the gas market shrunk, tried to recover, failed, and has not yet re-achieved what it accomplished in 1997.
Insights from the Data
We are still learning how to characterize the AMR marketplace. Deployment numbers, both cumulative and annual, are obvious parameters, as is growth, but beyond that the parameters become more elusive. Because we have detailed information about the number of utilities in the U.S., we can calculate the penetration into that marketplace. Similarly, we can also calculate how many meters have not been served, which we call Potential. In the course of this analysis, we learned that the data could be segmented by a parameter called “committed,” which describes whether a utility has made a commitment to use a specific AMR product.
Beyond those parameters, the quest to find underlying factors within the data has been more elusive. We have been able to characterize the extent to which utilities are switching AMR vendors (the answer is, so far, not much). One would hope that segregating the data into states that are deregulated and those that are not deregulated would highlight useful information. Unfortunately, most of those results have been inconclusive. We are currently trying to identify how to characterize customers that “need” AMR. The long-term goal is to improve how we characterize the AMR industry.
In many parts of the United States and in many segments of the industry, AMR deployments have reached such high penetration levels that it is the norm, not the exception. Although the overall penetration of AMR is now at 13.2 percent in the United States, the percentage of utilities with some form of AMR gives a very different impression. Research completed for The Scott Report indicates that, 54.8 percent of all IOUs have some form of AMR deployed, as do 54.0 percent of all co-ops. There are states where the AMR penetration is 100 percent of all gas meters.
The 40.2 percent growth rate for all AMR in the United States is impressive, but within many segments of the market, it is quite higher (see Table 2). Among ownership types, the highest level is for co-ops, where the growth rate was 54.6 percent. For all electric utilities, the growth was 80.6 percent and for electric IOUs it was 109.8 percent. However, not all the news was positive. Shipments to gas utilities dropped 16.4 percent.
Potential is the measurement of the number of meters that have not been served. Mathematically, it is computed by subtracting the number of AMR units from the number of meters. In practice, it sets the upper limit of the size of the future marketplace.
The concept of Potential has (so far) not included whether utilities will switch vendors and buy a new AMR system. In reality, vendor switching is beginning to appear, but not in large numbers. The most notable example is Atlanta Gas Light, which has purchased a new AMR system from NexusData and Invensys. Across the entire industry, the number of such replacements to date has been no more than 6,000 units.
Using research from The Scott Report, we have been able to plot the AMR Potential curve over the past six years for electric, gas and water utilities. The research indicates that all three curves are dropping as fewer sites remain with no AMR. Gas potential is dropping the slowest because it is growing the slowest.
Of note, we have found that the trend lines for each set of data are dropping almost linearly. The change in Potential is so gradual and consistent that it is an ideal parameter for projecting future industry growth.
Several years ago, we invented a parameter called “Committed,” which identified those utilities that had deployed 25 percent or more of their meters with one AMR technology. Over the past several years, we have learned about the usefulness of that parameter. In the most recent Scott Report, the data was separated into “Committed” and “Not Committed” projects, thereby producing the data presented in Table 3.
Table 3 shows that the number of AMR units deployed by committed projects (# Projects times Project Size) is far higher than for not-committed projects, even though the committed projects are much fewer than the not-committed ones. For committed electric projects, the total number of units is 913,290 ± 275,226, whereas for not committed projects the number of units is 566,420 ± 53,340.
Figure 3 below is the culmination of a detailed analysis of the historical AMR deployment data. The data collected by The Scott Report was coupled to historical data from Itron (which had deployed more than 70 percent of all AMR units prior to 1996). Our projections are appended to the historical curve.
Figure 3 shows a gradual growth of the AMR industry until the mid-1990s when several large projects were completed. Then the AMR industry suffered a decline (1998) followed by an industry recovery that grew in intensity. We see three possible scenarios for future growth. Those three scenarios are depicted graphically in Figure 3:
- The upper curve, which continues the massive growth seen in the past three years,
- The lower curve, which is projects forward using all historical data, and
- The middle curve, which tempers strong growth with the possibility of some slowdowns.
We believe that the middle curve provides the most likely scenario, but the actual growth could be anywhere between the upper and lower curves.
The AMR market is undergoing extraordinary growth and is quickly establishing itself as the preferred way to read utility meters. Though significant penetrations are being achieved nationwide, there is still ample opportunity for new products to achieve a large market share, though they will have to compete with well-established products that are well-understood by the marketplace.
The Scott Report: Insights on AMR Deployments in the United States has shown the success of AMR in a variety of ways:
- Deployment data-AMR deployments have reached 36.6 million units in the United States. In 2001, 7.7 million units were shipped to U.S. utilities.
- Market penetration-13.2 percent of all meters in the United States were served by AMR on Jan. 1, 2002.
- Market growth-U.S. AMR shipments in 2001 grew by 40.2 percent over year 2000 shipments, and 757 new projects were started.
- Potential for future growth-The potential for future deployments in the United States is 241 million units.
- Committed status-Far more units are shipped to utilities that commit to an AMR product than to utilities that do not make a commitment, even though most projects are of the not committed type.
- Market Projections-AMR shipments are projected to reach 15.3 million units in 2006 from 7.7 million in 2001.
The collection of this data shows an industry that is healthy and growing rapidly. Despite a recession, the AMR industry is “hot!” Unless a major economic downturn occurs, this growth is expected to continue for the next several years. By 2006, the penetration of AMR into all meters in the U.S. is projected to reach 35 percent.
Howard A. Scott holds a doctorate in physics from the University of Rochester and is a Managing Partner of Cognyst Consulting, L.L.C. He is the author of The Scott Report, a series of studies that document market activity in the AMR industry. He is a charter member of AMRA and was the first recipient of AMRA’s Outstanding Contribution Award in 1994. Dr. Scott has conducted scientific research with three major universities and corporate research with Bell Labs and Bellcore. More information on The Scott Report, including ordering information, is available at www.thescottreport.com.