Are European utilities ready to invest in AMR systems?
In Europe AMR is still in its early days. It might seem unlikely that we will see large deployments of AMR systems in Europe, taking into account:
- The ongoing deregulation of the energy market and the structural changes this brings.
- The fact that standards for communication systems are as yet undefined.
- The low frequency of readings for most customers.
However, the market situation and drivers for AMR systems vary a lot, depending on the end customer segments and utility profiles and countries. The former include industrial and commercial and high end residential where AMR systems can be cost justified, and basic residential where only electronic meter reading (EMR) systems can be justified. The latter include different types of deregulation, different standards, different end customer behaviours and expectations in north, south and east Europe.
Taking into consideration these differences and others which make up the `European puzzle', this article tries to propose answers to the following questions.
- When will the market for AMR develop?
- What can make it happen?
- What will be the key technologies or systems?
Many European utilities, through strategic programmes and trials of AMR systems, have already begun to look towards the upcoming deregulation of electricity and gas distribution. Some are aiming at short term investment with higher visibility on profitability, for example walk-by or drive-by readings also called off site meter reading systems (OMR). The main objective here is cost reduction, and installations are mainly focused on hard-to-read meters.
Others, with a view not only to reducing costs but also to modernising their existing DA/DSM systems and diversifying their business through new services for the end customer, have started more ambitious programmes. They often require the implementation of fixed networks with two-way communication, implying higher investment and risk evaluation as regards technological obsolescence and ownership of the communication networks. Only a few utilities (such as ENEL in Italy, using PLC technology) have decided to do this and are pursuing large deployments of meter communication systems, including residential customers.
These two approaches - OMR and AMR - have come up against common restraints and problems. Common concerns include questions like: "How can I justify the cost of such a system with an average cost-reading close to $1? What are the other applications I could implement, at what pace? What should be my technological choice in order to be able to take into consideration my different topologies (PLC, TP, RF, telephone)? How can I protect my investment against changes in communication network ownership or in regulations (e.g. changes in radio frequency allocation, dependence on telephone companies, ownership of electricity network in the case of PLC)? What are the alternatives - self-reading by the end customer, prepayment, outsourcing of activities, offering services with less technological content but with higher importance to the end customer (consolidated billing)?
More uncertainties than opportunities
At this stage, upcoming deregulation is presenting more uncertainties than opportunities as far as utilities are concerned. Success stories related to investment for residential customer satisfaction programmes and business diversification are still expected. One major difference between North America and Europe is the fact that North American utilities started investing in AMR and OMR, targeting cost reduction systems, long before the arrival of deregulation.
Deregulation in Europe has started opening some market opportunities for AMR systems, where the exchange of information becomes compulsory (for example industrial customers with frequent readings for energy balancing purposes) or when activities are outsourced (service companies requiring at least an electronic meter reading solution). Nevertheless large deployments for `basic residential customers' are still being questioned or explored.
However, some economic solutions can be developed and thereby justify investment for AMR systems. Unlike the American market, western Europe has on average a very high percentage more than 60% of indoor and inaccessible residential meters. This average can be higher than 75% in southern Europe. The annual reading cost is sometimes higher than $15 in large cities or remote areas.
Another element for cost justification is the unusually high percentage of estimated invoices. In western Europe more than 70% of electricity bills are based on estimated readings. In this case, most of the invoices are either clearly underestimated and lead to financial costs, or perceived as not accurate, resulting in customer complaints, late payments and additional administrative costs. To these costs must also be added losses related to fraud (particularly high in southern Europe) and field intervention for contract or tenant changes.
Thus, instead of considering just the average reading cost, it is more realistic to evaluate the average annual service cost per customer. This cost has been assessed in the USA at $80 per year, with only $9 for meter reading (AMRA Department of Energy). In Europe, although statistics are not always available, the annual service cost per customer is estimated to be as high, and the implementation of multi-tariff schemes will increase costs still further.
In order to optimise the investment in AMR systems and take into consideration the different topologies and regulations, it is clear that approaches proposing different technologies or combinations of technologies are the most appropriate for energy utilities. As such, power line carrier solutions are often very competitive in densely populated areas for utilities distributing at least electricity and requiring two-way communication. Twisted pair solutions are typically of interest for new construction requiring local communication. Walk-by or micro cell RF configurations appear to be most interesting for water and gas utilities targeting hard-to-read customers. And telephone systems or radio telephony offer one of the best solutions for remote and low density areas.
Very often, OMR solutions (RF walk/drive-by, PLC or twisted pair with reading from a concentrated point) allow utilities to meet the requirements of hard-to-read customers, offering a progressive way of automation for reading and facilitating the acceptance of AMR implementation by meter readers.
In summary, the AMR market in Europe should benefit from deregulation, as well as from the high annual service costs incurred per customer. This can already be seen in the deployment of AMR solutions for the industrial sector, electronic meter reading solutions for basic residential customers and OMR solutions for hard-to-read residential customers.
The deployment of AMR extended solutions for high-end residential customers, offering a wide range of applications, will be the subject of cost justification models established through business pilots and strong partnerships with the system and solution suppliers. The main solution providers will be those offering multi-technology solutions, committing and demonstrating their multi-vendor approach, and able to make flexible offerings with related services.