Within the next decade, every home in the UK is due to have smart meters installed . Across Europe, utilities are testing smart meter implementation plans if they haven’t launched them already. These deceptively simple devices could generate a flood of information – but what everyone wants to know is: what are the utilities going to do with it?
Smart meters are set to revolutionise the energy and utilities sector, capturing data on energy and water use and transmitting it remotely to utility companies.
According to a report by global research firm Frost & Sullivan published in February 2012 , “the European smart meter market is at a growing stage. While smart meter developments are taking place in countries like Denmark, Finland and Norway, large scale rollout has been planned in countries such as UK, France, Spain and Portugal to meet the energy targets and environmental policies set by the EU. Currently Sweden and Italy are the only mature markets in Europe.”
Because it’s still early days, of course, and there are challenges to be overcome, as Nick Kamen, head of Energy & Utilities Industry (Industry Solutions & Marketing) at Vodafone Global Enterprise (VGE) points out.
“There are still questions over the cost of installing new wireless smart meters that use machine to machine (M2M) connectivity versus a system based on the existing infrastructure, in the form of power line communication (PLC) which can cost less in the short term,” says Kamen. “The trouble is, PLC isn’t futureproof – the system will need to be able to cope with increasing levels of two-way data traffic in years to come. While it may be tempting to opt for the less expensive solution, it risks costing customers far more in the long term.”
Nonetheless, smart metering will mean consumption data will flow with far greater frequency than ever before – by the minute, as opposed to monthly or quarterly. What does this mean for the energy and utilities sector as a whole?
First and foremost, it means finding ways to better understand, analyse and use that data in order to make more informed decisions. For utility companies, this detailed view of customer behaviour offers an opportunity to tailor their pricing models while improving services across the board. For customers, it means greater transparency in their energy and water costs and the chance to change their behaviour in order to influence those costs.
But that’s only the beginning – smart meters have the potential to shake up the power and water supply chain from end to end.
Much of the drive to install smart meters is being prompted by regulation. As Frost & Sullivan research analyst Neha Vikash points out, "The smart meter market is expected to prosper, owing to the recent impetus from renewable energy and smart grid implementation. Smart meters are required for integration of renewable energy. Europe is focussed on meeting the 20-20-20 targets, which is a necessary driver for increase in renewable energy and the third energy directive targets 80 per cent smart meter penetration in the residential sector by 2020."
Consider the situation in the UK: more than 30 per cent of its electricity supply could come from renewable, low or zero carbon sources such as wind, tidal and solar power by 2020. And because renewables such as wind and solar are weather dependent, they introduce an element of unpredictability into a system where stability of supply is essential.
Introducing more renewables into the energy mix requires greater control over distribution. Having been built to handle input from a limited number of oil & gas power suppliers, the UK's current grid does not have the capacity to store and distribute energy from a large number of intermittent sources. Achieving that 30 per cent supply from renewables is going to require effective analysis of smart meter data to monitor and help control the flow.
The shift to renewable modes of generation is the most profound change the electricity industry has ever faced. Smart meters offer a big-picture solution that takes every part of the value chain into account, including millions of potential micro-level inputs. By integrating short and medium-term demand data – everything from meteorological information to TV schedules – it will be possible to fine-tune generation and distribution.
For the water industry, population growth and rising consumption are putting the finite supply of this precious resource under similar pressure. Sustainability is a real concern, as clean water could become increasingly scarce, with river flows in some parts of the UK predicted to drop by 15 per cent before 2050. And according to the UK's Environment Agency, 72 per cent of the nation's 18-24 year olds are serial wasters of water.
There is an urgent need to reduce water consumption, but it’s a difficult message to sell when most consumers have no way of knowing how much they’re using. Only a third of homes in England have water meters at the moment – and those meters are more likely to be under the pavement than under the stairs. Accounting for every drop will be the key to attracting future investment – and again, smart meters will play a critical part in addressing this challenge, capturing the data for analysis and improved long term decision making. They can monitor and control every point in the value chain of production, from power station to plug and from reservoir to the kitchen tap.
As with electricity, increasing the visibility of water consumption could reduce domestic demand. In the case of water, it’s estimated that metering can reduce consumption by between 10 and 15 per cent.
Domestic and industrial water users alike want clearer information about water and wastewater, and customers eventually expect to be able to choose their water supplier. Smart meters meet the need for better customer information and support liberalisation of the supply market by offering a clearer picture of what is produced, how it is distributed and how it is used.
The greatest beneficiary of a smart meter revolution is the customer. Instead of monthly or quarterly readings followed by bills are adjusted retrospectively, as well as frustration regarding a lack of clarity in pricing, consumers will have a clear view of the part they’re playing in the bigger utility picture. As a consequence, they will also have an opportunity to change their consumption patterns and, ultimately, save money.
For example, energy company Nuon based in the Netherlands launched a pilot programme among 500 Amsterdam households back in 2009 to test a new power management system for consumers . Energy use was monitored, targets set and consumption patterns were influenced by various "beyond the meter" services. The monitoring system included a device placed between the sockets and appliances that showed energy use and offered advice on how to reduce consumption. Heating could also be turned up or down via the internet or mobile phone, and the system included a special button for switching off all unnecessary appliances.
Based on the results from an earlier test, the anticipated average savings in Amsterdam were approximately €200 per year for an average household.
Smart metering can help alter consumer behaviour by providing real-time, accessible information in a form customers can understand. They show savings in cash rather than kilowatt-hours. It’s the dawn of the smart home, with real time information enabling the consumer to understand the peaks and troughs of their demand and usage, and therefore the best way to regulate their own particular behaviour and patterns of using energy.
Changing consumer behaviour will become increasingly important as the pressure mounts to manage our increasingly expensive and finite resources. The public is increasingly hungry for other energy-guzzling electrical appliances. Despite efficiency improvements in consumer devices – from televisions to domestic lighting – we’re now buying larger devices, and in greater numbers. At the same time, the IT industry is an increasingly significant energy user. In Europe, power-hungry data centres now use more than 40 terawatt hours of electricity a year. Already enough to supply the UK with all its electricity needs for about 40 days, that figure is rising rapidly.
This situation is only going to grow more complicated with the rise in electric vehicle ownership – it is estimated that by 20 per cent of Europe’s cars will be electrically powered by 2020, either fully electric vehicles or hybrids.
From an energy perspective, the key question is how are we going to recharge those vehicles? What happens when 1,000 people simultaneously plug in an electric car? Today’s substations and local networks are not configured to handle this demand.
Smart meters will help to support the intelligent management of such loads and reduce the stress on local distribution networks. What’s more, they could make it possible for non-vital loads – such as overnight battery charging – to be switched in and out automatically, allowing a balance of supply with demand.
How big a change do smart meters represent? Quite simply, the utilities landscape could be completely unrecognisable within a decade. For example, smart meters enable suppliers and consumers to make sense of decentralised and variable power generation, with data integrated from a wide range of sources to provide seamless monitoring and control of electricity, no matter who is generating it or where it is being used. This is achieved by embedding sensors and communications in every part of the value chain:
- Smart meters generate detailed, real-time consumption data for every consumer, allowing an unparalleled ability to match supply with demand.
- They take account of the fact that energy can be generated as well as consumed anywhere, at any time.
- Every kilowatt-hour counts. Zero waste technology linked to smart meter data could direct surplus power into storage connected to a smart grid. This could include everything from electric vehicle batteries to domestic water heaters, flywheels or super capacitors.
They will also help utilities predict long-term trend with greater accuracy, something that has been notoriously difficult until now. For example, the UK’s National Grid’s peak demand forecasts suggest that electricity demand will fall in a range of from 33 to 88 gigawatt hours a year by 2020, with an overall central case of 58. Warmer winters and a prolonged downturn would reduce demand, while a resurgent economy, cold winters and hotter summers, with increased uptake of air conditioning, would have the opposite effect.
But peak output and peak demand for renewable resources also seldom coincide. The anticyclonic winter weather systems that produce the UK’s coldest days – and therefore highest demand peaks – usually fall on the days when the wind blows least. They also occur at a time of year when the sun is at its lowest angle.
Ultimately, smart meters will help the energy and utilities sector make sense of the peaks and troughs in a world where production and consumption can often be out of sync.
“It’s not going to be easy, of course,” says VGE’s Kamen. “The UK government announced recently that it was shelving plans for mandatory installation of household energy smart meters due to ‘health and privacy fears’ but the momentum seems to be gaining ground and, based on the results to date, that’s a very positive thing.”