Smart Metering – the next Y2K bonanza?

At a number of smart metering and smart grid conferences that I’ve been attending recently, it’s be interesting to note the number of fifty and sixty-something consultants who are looking suspiciously like cats who are overdosing on cream.  What has brought the smiles to their faces is their belief that the rush to deploy smart meters is considerably ahead of any solidification of standards, or even an understanding of what to do with them.  That means that there will be lots of work to try and make the current generation of meters work, only to do it all over again in five years time, when the industry finally decides what the standards should be.  If that’s how it pans out, then smart metering may pay their pensions in the same way that Y2K worries provided a happy retirement for a previous generation of engineers.   It might be in their interest, but it’s a game-plan that is definitely not in the best interest of the industry.

Within the more general subject of smart grid, media coverage is centring on smart meters and the impact they will have on the consumer.  That’s resulting in some aggressive battles between competing standards groups, a growing level of negative publicity for utilities that are being portrayed as greedy ogres trying to get more money out of the consumer, and the appearance of ever more flamboyant futurologists who believe that the utilities will control all of the appliances in our homes.

That level of noise has the effect of making smart meters look as if they are the lynchpin of the smart grid.  Hence every utility is rushing to deploy them, backed by willing legislators showering them with stimulus funds.   It’s not difficult to see why we’re in this topsy-turvy state.  Underlying improvements to the grid don’t have a direct impact on consumers, or only do when the lack of them means that the consumer’s power disappears.  Which makes it boring.  In contrast, home automation offers the science fiction vision of devices that turn themselves on or off to minimise our energy bills and save the world.  But does it help the industry?


I’d like to hope that’s not the real reason that governments around the world are legislating and pouring money into smart grid evolution.   For utilities, the real job ahead is slightly different depending on where you look.  In the US, it’s about the need to understand far more about the state of every mile of the grid in order to upgrade it to maintain service.  Within Europe there’s less focus on the grid itself, as there’s a greater degree of confidence (or smugness) about its resilience.  Instead there’s concern is about the potential shortfall in generating capacity and how the utilities will manage to balance demand.

That difference in perspective across the Atlantic has resulted in some interesting differences in the approach to smart metering.  Certain countries have had AMR for years – Italy is a prime example, where its first generation roll-out was justified by the astronomical levels of customer fraud.  They’re just starting their second generation of “smart” meters and the general consensus it that they’ll be onto their third by 2015.  All three of which will be mutually incompatible.  That is not a sustainable business model.

The question of business model for smart meters is an interesting one, as it goes to the heart of who pays for the meters.  That’s something that has just become even more important, as Maryland has turned down Baltimore Gas & Electric’s request to get customers to fund their meter deployment through a retrospective surcharge.  What is difficult is to work out is exactly what the business model is?

Number one business model is that by providing customers with more information, it reduces their energy bill.  But that means a utility pays money to reduce its revenue.  So that doesn’t work.

Ah, says the industry, energy prices are going to rise, so it will help stop your bill growing.  It’s the old “jam tomorrow” argument, which has a bit more logic to it.  However, prices need to rise a lot to make consumers change their behaviour en masse.  When it costs ten times as much to do the laundry, users will do it.  When it adds 20 cents to a wash, it’s not going to happen.  So the question moves to being how quickly Governments will allow that level of price hike.  And the answer is probably not in the timescales in which they want smart meters deployed.  It would be too much of a vote loser to allow that.

Then there’s the populist vision of selling the convenience of automating the home.  That one’s been around since the 1950s and is still struggling.  It’s a geek play and will probably remain so.  It might be possible to sell the cost of smart meters to this demographic, but it’s barely a scratch on the surface of smart metering.

Once these have been dismissed, the business models turn towards improving efficiency of the utilities’ billing cycle.  These range from improving the ability to send accurate bills instead of estimates (and look what that did for PG&E), through to making it easier to send a consumer their final bill when they move house.  How any of these fund the cost of deploying and servicing a smart meter eludes me.

I don’t think I’m alone in this scepticism, as I see a significant number of utilities asking “What can a smart meter do for me”, particularly within Europe.  That’s in contrast to the more common question being asked in the US of “what can a smart meter do for the customer?”  The difference is probably a result of the lower level of media interest in smart metering within Europe, where there’s less discussion of the possible customer “benefits” of smart metering.

The problem with a high media and (by association) investor interest in smart metering is that it rapidly dominates the thinking of what smart grid is all about.  You can take the view that it’s no bad thing if it generates more attention, as underlying funding will grow for all parts of the picture.  However, if it sets unattainable expectations for consumers, deepening the subsequent “trough of despair”, which will then have a knock on effect across the whole industry.  So to some degree, the fortunes of the smart grid are being held hostage to the behaviour of the smart metering sector.  It’s a case of the tail wagging the dog.

Unfortunately, in concentrating on the gee-whizz aspect of meter applications, we may be losing sight of some of the more interesting things that smart meters can do for the grid.  Instead of the current fad of concentrating on an iPad (or should we call it an iHoD?) on every living room wall to help consumers reduce their utility bills, (and where is the business model in that?), smart meter deployments could be telling the grid useful things like outage information.  Of course, for that to work they need a gateway that works when the power fails.  I’m sure that someone is manufacturing and shipping meters or gateways that can do that, but I’ve yet to see one deployed that actually has a battery in it, as opposed to an empty battery compartment. 

Instead the smart meter industry appears fixated on consumer technology trends, with their associated short term attention spans.  Today it’s ZigBee smart energy (would that be version 1.0 or version 2.0, sir?).  Tomorrow it will be Bluetooth, so you can control it from your smartphone and the month after that we’ll have Dash7 connecting it directly to your local military nuclear reactor.  Which is enough to make any consumer want to forget energy conservation and turn up the air conditioning.

Incidentally, there was a refreshing blast of sanity in the recent Public Service Commission of Maryland’s Order 83410 turning down Baltimore Gas & Electricity’s proposal to fund a deployment of smart meters by adding a customer surcharge.   Their adjudication included the observation that “If it turns out that appliance manufacturers decide to adopt some alternative to ZigBee technology, the expectation that the proposed “smart meters” will one day be capable of communicating with a customer’s “smart” appliances evaporates.  BGE ratepayers will then be stuck paying higher rates for a white elephant, while customers of utilities that prudently waited to allow the industry to mature will enjoy the benefits of a wiser and safer “smart grid” deployment.”

I doubt that the ZigBee Alliance will appreciate being categorised as a potential white elephant, but it’s a true statement, regardless of which of the current wireless standards are chosen.  We’re currently several years away from deciding what the industry will choose.  Making a decision now is perilous.  The approach of groups like UMI – the Universal Metering Interface and the U-SNAP Alliance, which both build in upgradability to different standards, look as if they deserve rather more attention from the industry than they are getting.

Utilities and grid sections of the industry need to start to think far more clearly about how a smart meter can complement and enhance the performance of the grid.  Rather than adding more customer centric “features”, it’s important that the meters and gateways can tell the grid how it’s working.  At the end of the day customers want a reliable grid first and foremost.  Shouldn’t we be specifying meters to achieve that, making them a true component of the smart grid, rather than turning them into another techie toy?

We need to step back from some of the more outlandish ideas and make sure we understand the basics.  That may mean a delay in deployments.  It may mean a generation of consultants will have a slightly more frugal retirement.  But, with luck, it may also mean the industry only has to do the job once.