By Helen Bremner
Regulation has historically been the primary driver for investment in basic advanced metering (AMR and half hourly data) either through specific regulatory mandates or broader governmental stimulation. Why this has been the case for so long is probably a moot point but the fact that this is rapidly changing demonstrates a shift in the industry thinking and approach.
Observations from working with energy utilities in countries including the United States, Canada, Australia and New Zealand are that a significant number of them are now either committing to advanced metering or are well down the track to doing so, and that many of these utilities are doing this based on a new vision and internal business drivers rather than just external regulated drivers.
In New Zealand’s case, these decisions have been driven by energy companies’ internal commercial assessments, recognition of the positive value of advanced metering, and the transformation opportunity enabled for both the utility itself and ultimately its energy consumers. In the case of the other countries, it can be argued that regulation is still providing impetus for change.
However, a vision of the future energy company is influencing not only the regulatory requirements, but also utility activity driven from a commercial perspective. These companies are now balancing commercial decisions with regulatory requirements and taking active roles in influencing and developing requirements and regulation. Many are also actively pursing AMI initiatives prior to regulation. Some may argue that this is merely a case of the old adage that the threat of regulation is often more effective than actual regulation. But the real point is that these utilities are now making the decision to adopt advanced metering and they are making these decisions with open eyes and on a commercial basis. So why is this trend of such importance to the metering industry?
Our belief is that it means a significant change in the dynamics of the metering market, with energy utilities (effectively the market “buyers”) moving from a position of reluctant buyer via a regulated decision, to an active buyer through a commercially driven process. In the past many utilities taking on advanced metering have been told that they must buy, told what they must buy and told when to buy – the only question being left to them was who to buy from.
In contrast, many utilities now are actively taking ownership of all aspects of these important decisions. This means a literal reversal of industry mind-share, with utilities committing key people resources to actively assessing the wider opportunities enabled by advanced metering. Even more, some utilities have a whole new vision for their business that is largely enabled through the successful adoption of advanced metering and all the broader capabilities provided by AMI solutions.
This means that the days of procurement processes designed to yield the lowest cost for a mandated low level solution are numbered. Energy utilities have recognised both the significant opportunities and the importance of the decisions to be made. And they are looking to understand the costs and benefits, and the strongest value propositions delivered through advanced metering.
They are also creating a market-led metering industry by pushing the boundaries around both the scope and level of applications supported by advanced metering infrastructure, and they are starting to demand these new capabilities from the industry. In many respects the word “metering” in isolation is quickly becoming a misnomer for the rapidly changing industry and applications it represents.
So the advanced metering market is effectively moving from predominantly supply-driven to a more complex demanddriven one. And this is a significant shift for the current metering industry. Given the history of a predominantly regulated driver for advanced metering, and the resulting limited engagement from utilities, many metering businesses have geared their businesses accordingly. This has meant that the industry may be viewed as having:
- A strong marketing focus on lobbying regulation
- Lower investment in R&D
- Limited real innovation
- Slow product change and long lifecycles
- A sales focus on boxes rather than solutions
- Pricing for lowest cost rather than best value
- Tactical rather than strategic customer relationships.
This is far from a criticism, and more a reflection of the industry aligning itself with market needs. But recognition that the market drivers are significantly changing, leads to necessary change within the metering industry. Metering businesses that either fail to recognise this, or do so but are unable to transform their current approach, may struggle in this new market dynamic.
Key changes are starting to take place and some metering businesses are already emerging at the forefront. These businesses have placed the greatest focus on working with utilities that have a vision and a commercial driver, striving to assist them in defining new propositions and assessing the cost/benefit trade-offs to ultimately deliver the best value. To support this, these metering businesses have established a business culture that supports change and innovation, and places higher value on innovations, successful solutions and partnerships than on “kit sales”.
Whilst a business with this culture, capability and approach requires greater upfront investment, these businesses will ultimately succeed in the market by best meeting utilities’ changing drivers, needs and ways of working. Utilities are increasingly recognising the value of this approach and focusing on innovative solutions with a partnership approach. It will be interesting to see how the advanced metering industry evolves to meet the market.