Unlocking the power of smart metering

Unlocking the power of smart metering 

Will Smart Meters save the world from environmental disaster? Not likely. But they will set off revolution.

The truth is that Smart Meters are actually not as smart as people would like to think. In reality, today's Smart Meters do little more than provide really granular data on energy use (although, from a distribution perspective, they also reduce the company's cost-to-serve and bill settlement processes).

And there is lots of evidence that shows that measurement alone is actually a very weak motivator for behavioral change, particularly the kind of change that will need to happen if the world hopes to meet global carbon reduction targets.

Money, on the other hand, has always been a very strong motivator (that is, as long as the money keeps flowing). Some jurisdictions are already moving their rate systems towards a time-of-day billing scheme that rewards customers for shifting their power use to 'off-peak' hours. And while this will certainly help to balance out the energy grid, it does not actually reduce energy consumption. Achieving that will take a much more complicated change.

Not another technology install

To start, governments and power companies will need to evolve the way they think about their Smart Metering program. All too often, Smart Meter programs are seen as a simple technology project (installing millions of new meters and hooking them into the network), rather than a way to fundamentally transform the energy market.

In fact, the really exciting thing about Smart Meters isn't the meters themselves; it is what they will enable: the Smart Grid. In a Smart Grid, the meters don't just collect and communicate data on customer usage and times. They also let distributors - and even upstream generators - track overall grid capacity and network activity. This will help power authorities to not only integrate new power sources (such as wind and solar) into the system, but also reduce their long-term infrastructure build costs. And at the end of the day, both of these outcomes have the potential to enable significant carbon reduction.

But this will take a significant change in national energy strategies. One of the biggest challenges involves ownership. Somewhat counter-intuitively, most governments have put the task of rolling out Smart Meter programs on the distributors themselves. And since most incumbent power companies earn their revenue from running high volumes on existing infrastructure, they may not immediately see the benefit of spending lots of capital - particularly up front - on a system designed to reduce volumes. As a result, many Smart Meter programs are making slow progress.

No clear path to enlightenment

Smart Meter programs also tend to suffer from disconnects in government energy strategy. This is because carbon reduction policies tend to focus on two main goals: reducing consumption and 'greening' generation. But energy policy usually prioritizes energy security and affordability. As a result, energy policy and carbon reduction policies do not tend to be natural bed-fellows.

So on the one hand, most governments are involved in a massive drive to add all sorts of renewable and green energy sources to their generation mix. But on the other hand, few are putting the necessary thought into the changes that need to happen within the grid to make efficient use of that power. For example, on a number of occasions, the UK has been forced to pay windfarms to switch off their turbines because of an inability to effectively distribute the power they were generating.

The winds of change

What's more, renewable sources often deliver intermittent power, meaning that distributors will need to find more flexible ways to manage power and bill for consumption. In a (as yet theoretical) renewables-reliant Smart Grid system, real-time prices may actually peak at night when solar generation sources are offline, or during calm summer days when windfarms are sitting idle. Financing is also a constant challenge.

Financing is also a constant challenge. Since most Smart Meter programs are funded from the balance sheets of the power companies themselves, one would assume that the cost of the program will eventually be passed on to consumers. But at a time of austerity and high unemployment, power companies (many of whom are already vilified by consumers) will have a tough time explaining this to their customers.

Indeed, the consumer is the real lynchpin here, and nobody can be quite sure how they are going to react to Smart Grids. Anecdotal evidence seems to show that UK consumers are at best ambivalent, and at worst outright hostile towards the Smart Metering program. In the Netherlands, consumer concerns related to privacy have all but scuttled the planned Smart Meter roll-out. Programs in Victoria, Australia are also under review as a result of negative consumer reactions.

The key to evolution

Clearing all of these barriers will require clarity of vision, particularly from government. All too often, well intentioned politicians set lofty targets for their countries and then leave the detail and the legacy to the market to sort out. But to achieve the kind of change that must happen, government must take a stronger hand.

This means creating an environment that supports the entry of new players in the energy market who - without the legacy of capital-intensive infrastructure - are more likely to see the Smart Grid as a source of opportunity and therefore drive the market forward. A number are already shaking up the traditional markets, including First Utility in the UK, and Red Energy in Australia.

But most importantly, governments need to clearly articulate their vision of the 'end state' and work with power companies, regulators and consumers to communicate the goals, roles and costs that they are being asked to take on.

Having spent billions to install Smart Meters around the world, governments and power companies must now turn their minds towards building the right environment to make the Smart Grid into a reality. And with that, we can look forward to a new, smarter and potentially greener era of energy generation and consumption.

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