THE SMART METER MARKET

Smart Meters; Smart Electrical Meters, Advanced Metering Infrastructure, and Meter Communications
Bob Gohn and Clint Wheelock, 4Q 2009 (Pike Research)

"The electrical metering industry is undergoing the largest transformation since its founding over a century ago…The transformation of the basic electrical meter, often still an electromechanical spinning disk, into a smart meter, an energy information gateway aimed at fundamentally changing how energy is consumed, is a major part of this task. And it comes with unique opportunities, new challenges, and unprecedented risks…Already, almost 3.5% of the world’s approximately 1.3 billion electrical meters
can be considered “smart,” and this is forecast to grow to over 18% by 2015…The six-year period of 2009 through 2015 will see shipments of over 200 million smart meters.

"Underneath a seemingly steady 19% compound annual growth rate (CAGR) for worldwide smart meter unit shipments lies a series of distinct regional growth waves with distinct ebbs and flows…North America will see a wave of smart meter shipments peak at over 15 million in 2012, while Europe, an early adopter with smart meters already making up over 12% of the installed base, will experience its own sustained peak in 2014-2015. Asia, with different drivers, is not expected to see significant growth
until approximately 2015."

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"The operational benefits of smart meters…have driven most mature deployments…Smart meters enable granular, real-time (or near real-time) energy consumption…Consumers will be incentivized and/or penalized through dynamic time-of-use rates into reducing and/or shifting their electricity use…[addressing] climate change, fragile energy supplies, and overall economic growth and security. Hence the adoption of smart metering systems is a high public policy priority in many parts of the world…

"Smart metering systems are composed of multiple unique technologies, including the meter itself (measuring and recording basic consumption and perhaps a bevy of other information), and a “network of networks,” connecting the meter and perhaps even in-home devices, to the utility’s enterprise IT systems…Despite the existence of plentiful, well-defined standards used in existing wireline and wireless voice, data, and video networks, the metering “network of networks” is a jumble of semi-proprietary, purpose-built, vendor-specific systems…The meter communications landscape, like virtually every aspect of smart metering, is also changing, as customer and government policymakers demand interoperable standards, presenting new opportunities and disruptive threats to the vendor community. Communications security also has emerged as a major issue, resulting in an additional push for comprehensive standards…[C]iting the unparalleled success of the Internet, and backed by government influence, [some] have successfully pushed for adoption (and where necessary, creation) of Internet Protocol-based standards throughout the smart metering infrastructure…This opens the opportunity for a reshuffling…"

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"…Significant consolidation aimed at both vertical systems integration and creating global reach in a market conditioned to regional specialists is proceeding apace…[E]merging standards-driven commoditization would appear to favor the integrated solution providers in the long term. New industry entrants, most notably Cisco, threaten to significant[ly] disrupt what has been a quiet and stable ecosystem.

"The implications of this smart metering boom are many. For consumers, the information and automation provided by smart metering systems offer a chance to reduce energy expenses, or at the very least, better absorb possible large energy cost increases driven by supply constraints and/or carbon taxation. For utilities, these systems offer a concrete way to drive operating efficiency and directly influence consumption patterns, though the complex regulatory and governmental environments often muddy the relative incentives. For smart metering vendors, these represent unprecedented and time-limited waves of opportunity that can make or break their futures, and are inviting unfamiliar competition. And for suppliers to these vendors and others along the food chain, this represents a similar opportunity with more than a few risks."