Smart Meters: Gateway to a better grid
Itron, a pioneer in traditional utility meter technology, is laying the groundwork for the IoT of the utility industry with its Smart Meter products.
The Next Generation of Power: Smart Grid
The Internet of Things (IoT) – defined broadly as the embedding of physical devices and infrastructure with electronics, software, sensors, and network connectivity that enable them to collect and exchange data – is one of the most powerful trends in digitization. Powered by decreases in the cost of sensors and breakthroughs in processing power and bandwidth to connect devices, it is expected to provide massive gains in operational efficiency and economic benefit1. One industry that is especially positioned to gain from this trend is the utility space. Referred to as the “Smart Grid”, the IoT of the utilities industry has gained a lot of attention for its potential to transform this capital intensive, geographically dispersed industry. At the heart of the Smart Grid concept is the Smart Meter, a building block for this connected network that allows for two-way communication between consumers and utilities2. Itron – a longtime leader in advanced meters – is helping lay the framework for the Smart Grid.
Background
Itron was founded in 1977 in a garage in northern Idaho. It began when a team of engineers set out to develop computers and software to greatly reduce the labor intensity of meter reading techniques used at the time. Its first breakthrough came in the 1980s with its Electric Meter Reading (EMR) products which allowed utility workers to log meter readings electronically rather than by paper. This brought the dual benefit of substantially decreasing labor costs associated with meter readings while enhancing the accessibility of data collected. In the 1990s, Itron again pushed the frontier of metering technology by introducing Automatic Meter Reading (AMR)3. AMR improved on EMR by equipping electric, gas, and water meters with a meter module to transmit data to collection systems. This bypassed the need for visual inspection, thereby completely automating the process4.
Itron in the Digital Era
In keeping with its tradition of innovating meter technology, Itron ushered utilities into the digital age with its development of the OpenWay Smart Meter in the mid 2000s (see Figure 1 below for a present-day example of an Itron Smart Meter).
Figure 1: Itron’s OpenWay CENTRON Smart Meter
These Smart Meters built upon AMR technology by recording consumption of electricity in short intervals – typically an hour or less – and communicating this back to the utility. Unlike traditional AMR, Smart Meters, the main hardware component of advanced metering infrastructure (AMI), enable two-way communication between the meter and the utility. AMI offers huge promise for consumers and utilities as the foundation for the Smart Grid5. The Energy Independence and Security Act of 2007 provided an early outline of benefits of the Smart Gird, as seen in Figure 2 below.
Figure 2: Characteristics of a Smart Grid as described by Title XIII of the Energy Independence and Security Act of 20076
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Implications of Smart Grid
To many, the Smart Gird offers many advantages over the traditional grid structure. These include real-time, flexible incorporation of new energy technologies such as renewable energy sources – whose intermittent supply profile necessitates constant monitoring of production levels – energy storage and advanced energy management systems. Another key aspect of the Smart Grid is its demand response capabilities through which utilities communicate with customers to jointly decide how and when to consume and produce power. While utilities receive real-time data on consumer consumption and send time-based pricing data, customers (and their energy management systems) can use this data to make decisions such as to voluntarily reduce consumption, switch to on premise generation, or program smart appliances which react to changes in pricing6,7.
Path Forward
Itron has expanded on its legacy of manufacturing traditional meters to become a leading player in the development of Smart Grids, partnering with many utilities to deploy Smart Meters throughout the world. It has partnered Cisco to leverage the networking veteran’s wireless communication technologies and grid routers into its own products. The two companies first partnered in 2010 to advance Smart Meter technology and develop a network to facilitate communication between Smart Meters, distribution networks and customer interfaces9. Recently, the two designed the Itron Riva platform to deliver advanced computing power for control and analysis applications for end customers to better meet the technological demands of the Smart Grid10.
Despite promising developments in Smart Meter technology by Itron and other vendors, the Smart Grid has been slow to take off for many utilities due to the highly regulated and capital intensive nature of the industry which makes it slow to innovate. As it looks to solidify its future success in the Smart Grid space, Itron needs to build the market for its technology with utilities. It should continue to develop its software and analytical capabilities related to Smart Meter data collection as well as its utilities consulting arm to convince key decision makers of the business opportunity. For utilities, Itron technology may offer a gateway to productivity improvements, revenue gains and increased reliability and safety12. The challenge now is to convince utilities to unlock this potential.
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- The Internet of Things: Making Sense of the Next Mega-Trend. Retrieved Nov 16, 2016 from Goldman Sachs website, http://www.goldmansachs.com/our-thinking/outlook/internet-of-things/iot-report.pdf
- Top 10 Trends Shaping the Utility Industry in 2016. Retrieved Nov 16, 2016 from Gartner website, https://www.gartner.com/doc/reprints?id=1-3IA02R0&ct=160922&st=sg
- Our History. Retrieved Nov 16, 2016 from Itron website, https://www.itron.com/na/about/history
- Advanced Metering Infrastructure (AMI). Retrieved Nov 16, 2016 from Federal Energy Regulatory Commission website, https://www.ferc.gov/EventCalendar/Files/20070423091846-EPRI%20-%20Advanced%20Metering.pdf
- Itron Becomes World’s Largest Metering and AMR/AMI Company: With Purchase of Actaris. Retrieved Nov 16, 2016 from Metering and Smart Energy International website, https://www.metering.com/itron-becomes-world-s-largest-metering-and-amr-ami-company-with-purchase-of-actaris/
- Smart Grid. Retrieved Nov 16, 2016 from Federal Energy Regulatory Commission website, https://www.ferc.gov/industries/electric/indus-act/smart-grid.asp
- Assessment of Demand Response & Advanced Metering. Retrieved Nov 16, 2016 from Federal Energy Regulatory Commission website, https://www.ferc.gov/legal/staff-reports/12-08-demand-response.pdf
- Smart Meters. Retrieved Nov 16 2016 from Victoria state government website, http://www.smartmeters.vic.gov.au/about-smart-meters/reports-and-consultations/advanced-metering-infrastructure-cost-benefit-analysis/2.-background
- Cisco, Itron partner on smart grid networks. Retrieved Nov 16, 2016 from ZDNet website, http://www.zdnet.com/article/cisco-itron-partner-on-smart-grid-networks/
- Itron Launches Its Grid Edge Intelligence Platform to Merge Meters, Comms, Apps and IoT. Retrieved Nov 16, 2016 from Green Tech Media website, https://www.greentechmedia.com/articles/read/Itron-Launches-its-Grid-Edge-Intelligence-Platform-to-Merge-Meters-Comms
- Adapt and Adopt: Digital Transformation for Utilities. Retrieved Nov 16, 2016 from Bain website, http://www.bain.com/publications/articles/adapt-and-adopt-digital-transformation-for-utilities.aspx
- The Digital Utility: New Opportunities and Challenges. Retrieved Nov 16, 2016 from McKinsey website, http://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/the-digital-utility-new-opportunities-and-challenges
Andrew – thank you for this interesting post. I felt that your ending sentence “the challenge now is to convince utilities to unlock this potential” captures the reality very well. In Japan, it has been more than a couple of decades already since the last innovation occurred in meter industry. As far as I know, meter industry is protected by its “industry standard,” which essentially prohibits an innovative new product or a cheaper version of overseas product to come in. Also, utility companies are often incentivized to protect their employment by not introducing innovative meters which could make metering labor force unnecessary. I believe that in smart meter industry, US (with some European) companies are leading the world (e.g. Itron, Sensus). Although US itself will be a huge smart meter market, if we think about expanding globally, dealing with local politics such as above will be critical in many countries. Before coming to HBS, I met a country manager of Sensus in Tokyo, a Japanese, who told me that one of his most important tasks is relationship management with relevant governmental agencies. In this regard, your idea about having a utility consulting arm will be effective, especially when equipped with local professionals.
Andrew, great article and completely agree with the increase in smart technology when it comes to utility grids. While the use of technology like you mentioned allows utilities to have a better picture of the demand side and maybe drive pricing or the more effective use of different power sources, does this technology provide any application on to the rest of the grid at this time? Some of the major limiting factors, particularly in the electric grid are transformers and substations. Many of which are part of an again infrastructure that do not incorporate modern solid state electronics in their operation and still have to be switched on and off manually. Is Itron doing anything to develop truly smart and integrated substation or transformer technology to improve the maintenance and reliability of systems, to allow them to have greater control of the flow of power based on demand, or to better respond in the event of disasters? I think the last part is where we can benefit most from smart grids. Having the ability to have every point of the grid interconnected so you can automatically know which transformer is out or the like could greatly reduce repair times in disaster aftermaths. With all this and your last comment, have then done anything to promote the adoption of this technology from a capital investment side?
Andrew, thanks for this great post! I’ve been hearing about smart meters for quite some time and wondered how come it hadn’t been implemented in a widespread manner since it seems to be beneficial for all parties involved. In addition to the regulation and limiting infrastructure in the form of transformers and substations, I wonder if these meters need to be installed in an entire subdivision before consumers and utilities can reap the benefits or would it be possible to install them in a phased manner? A phased installation would likely help the feasibility of such a project over a one-time major capital and labor investment.