Buying 140 Million Smart Meters a Year from the Lowest Bidder
Each year, utilities purchase some 140 million electric meters, worldwide. The vast majority of them are electromechanical "dumb" meters or their simple electronic equivalent.
By Peter Hillen
Each year, utilities purchase some 140 million electric meters, worldwide. The vast majority of them are electromechanical "dumb" meters or their simple electronic equivalent. In most cases, these meter purchases are for replacement or extending a service area because of growth. Like clockwork, a utility releases a tender. The bids come in, and, all else being equal, the winner in most cases is the low price bidder. Only 5-10 percent of these are smart meters. At current prices, smart meters are only for utilities with deep pockets and a vision, a mandate or other requirement.
Why can't the reverse be true? Why can't most meters purchased annually be smart? The fact is, most meters purchased annually can be smart-and the trend is rapidly moving in that direction.
Before going further, let's make the distinction between dumb meters and smart meters. Dumb meters are electromechanical or simple electronic meters that need to be read manually, either visually or by infrared (IR) remote. Smart meters can be read remotely over an advanced metering infrastructure (AMI) network, with the smartest meters capable of sophisticated two-way communications.
The price of the old standby electromechanical meter is rising. Materials cost are going up, particularly copper. Labor costs are moving up, even in the world's lowest cost manufacturing centers. Shipping costs are rising. Mechanical meters are relatively big and heavy compared to their electronic counterparts.
On the electronic meter side-simple or smart-the cost is going down. Moore's law, that seemingly unstoppable trend that makes semiconductors less expensive and more functional, is affecting smart meters' electronics costs. The pace of progress in semiconductors is so fast that the cost of two-way communicating smart meters is quickly approaching the cost of simple electronic electromechanical meter versions. An example of a high-capability but low cost smart meter is the NEXGEN International Electrotechnical Commission (IEC) smart meter from Glen Canyon Corp. See Figure 1. All electronics are on a single printed circuit board mounted inside a module that can go either into an American National Standards Institute (ANSI) or IEC form factor case. Low cost electronics, efficient mechanical design and high-quality manufacturing techniques make the NEXGEN meter near price parity with an electromechanical meter.
|Figure 1. Exploded view of Glen Canyon's NEXGEN smart meter|
This is made possible by the paradigm shift taking place in how smart meters are perceived and subsequently implemented. Until recently, smart meters have been viewed as an electricity measuring device with added communications capability. This has caused a focus on the implementation of the meter's metrology portion. Communications are an add-on, usually as a module. The inefficiencies of this approach, magnified by the desire for one-size-fits-all mix and match interfaces, results in a needlessly high-cost solution.
The new smart meter view is as a node in a communications network-just like a cell phone or netbook computer. The electronics are communications oriented. Metrology, which dominated old designs, is handled with a single integrated circuit-accuracy exceeds ANSI or IEC standards as well as existing discrete electronics designs. Any microcomputer processing power necessary to handle metrology is easily handled by excess computing capacity in the communications oriented part of the design.
|Figure 2. Smart meter pricing is coming to parity with electromechanical meters|
As shown in Figure 2, electromechanical meters are slowly rising in price while their simple electronic equivalents are reaching cross-over pricing. Smart meter pricing has declined but has been significantly too expensive to compete with the others. The discontinuity in their cost timeline comes from the paradigm shift in how smart meters are designed and manufactured. Now they are approaching and, in some cases, becoming lower in cost than both electromechanical and simple electronic meters.
This, however, is only part of the story. When any electricity meter is purchased, it must be maintained. Operating cost considerations are as important as the upfront capital cost to procure the meters.
Electromechanical meters have little or no ongoing maintenance. Some meters have been in place for more than 30 years. The motto in the meter shop is: "If it's not broken, don't fix it." There is, however, still the cost of reading the meter monthly. These costs can widely vary, but typically are about 54 cents per month. There are also the costs of periodic service visits such as disconnect or the additional costs of being unprepared when there is a power outage or other problems. Simple electronic replacement meters have a similar maintenance cost profile, except their monthly read may be lower, facilitated by IR or drive-by technology.
Smart meters eliminate the monthly cost of manual reading; truck rolls for service disconnect and help mitigate the expenses of power outages. But, smart meters have on-going operating costs to maintain the network, software and computer servers where they run. Even here, though, technology advances are significantly reducing or eliminating these costs. There is no network infrastructure or associated cost necessary if using wireless mesh technology and cell phone infrastructure. The meter data management (MDM) software, applications and the computer servers they run on can be eliminated by putting them in the cloud. The rush to the cloud by other industries is not without good reason. Lower cost, higher reliability, higher security and easier operation is attractive to everyone, including utilities.
Without the network infrastructure, computer software and hardware to purchase and maintain, a smart meter doesn't have the overhead operating cost that makes it uncompetitive with dumb meters. But, access to the data comes at a price-in the case of Glen Canyon's NEXGEN system, the monthly service fee is about one-half the price of a monthly manual meter read.
|Figure 3. Current cost benefit model for smart meters|
So what is the hesitation to switch to smart meters? To date, the smart meter business model is based on providing tangible as well as intangible benefits to justify the high capital cost and operations cost. Many utilities have hesitated because the break-even calculation is too hard to quantify and substantiate. Figure 3 shows an example of the current investment and benefit calculation to justify smart meters. Will consumer driven savings, new services, utility automation, demand response and avoided costs really result in payback? It is hard to tell if you are going to be above break-even. If the same calculation is done using the next generation of low cost smart meters, coupled with their use of free existing network infrastructure and service fee-based cloud computing, the break-even is lower and easier to see, as shown in Figure 4.
|Figure 4. Next generation smart meter cost benefit using low cost meters, existing communications infrastructure, and cloud-based meter data management and applications software|
But, there's more. The smart meter design is being looked at in a new way, as is the purchase and maintenance business model. The low cost of next generation smart meters has encouraged manufacturers such as Glen Canyon to offer its NEXGEN meters free to utilities. In exchange, utilities pay a monthly service fee for the meter lease as well as cloud-based MDM and applications software. The total fee is approximately the same as a monthly manual meter read, which brings us back to parity in acquisition cost and operating cost of an electromechanical meter. Capital expense payback is easy to justify because it is minimal.
So, can those 140 million meters purchased each year all be smart meters? The answer is yes. Next generation smart meters are already the same price as electromechanical meters, and monthly operating costs are equal. New business models even make them free. And, with the additional benefits smart meters deliver-such as automatic meter reading (AMR), remote disconnect, power outage reporting, data analytics and more-it becomes an easy choice, affordable for all.
About the author
Peter Hillen is director of marketing at Glen Canyon Corp. He has more than 20 years experience in marketing and sales of high technology products, from consumer electronics to nanotechnology.
He holds BS and MS degrees from the University of Southern California.