The business case for AMR
AMR will play a more dominant role in water utilities’ future planning, as the cost of water treatment and distribution continues to rise. Metering and AMR have a vital role to play in the network management responsibilities of utilities and in modifying the behaviour of consumers.
The drought orders recently imposed on the south-east of England have once again made water management and measurement a significant political issue. Unlike continental Europe, the UK does not possess a culture of metering for water consumption. But with plans to build an estimated 200,000 new homes in this part of England over the next 5-10 years, metering looks set to play an increasingly important role in the way utilities manage supply and the way consumers modify their behaviour. Today it is estimated that fewer than three in ten households in the UK measure and manage consumption through an installed water meter – and this takes into account the fact that all new properties are automatically metered for water.
But the water meter, though important, is just one element in the management cycle. Its true value lies in the information that it can deliver to utilities – and this has yet to be fully exploited, both in terms of operational efficiency and management effectiveness. It is only through the adoption of advanced automatic meter reading (AMR) technologies that utilities can hope to enhance overall operational efficiency, manage supply in response to demand profiles, and convince a sceptical public that metering is the fairest means of assuring the supply of this most vital of all resources.
For utilities, there clearly needs to be a business case for the investment in AMR, not just from a financial viewpoint but also from a water management perspective.
The key issues that need to be considered include:
- Infrastructure and architecture costs.
- The associated costs of moving from manual reads to AMR.
- The ability that AMR provides to increase operating margins by reducing meter reading costs.
- Opportunities to use AMR and associated technology to manage demand better and to detect leakages (through piggy-back technology).
- The ability that AMR gives to improve leakage control by cross-referencing district meter readings with metered customer consumption.
- How AMR can improve customer relationships through greater financial accountability and leakage control.
- The ability to use tariffs to better manage demand and to enhance revenue opportunities.
particularly heavily in its AMR position over continental Europe with regard to all these issues – not as a result of its water network infrastructure and architecture but, somewhat ironically, as a result of its position as a low user of water meter technology. The costs associated with moving to AMR systems are insignificant when compared to other European countries such as Poland, Germany, France and Italy, where there is almost 100% water meter deployment.
Put bluntly, the UK does not have the huge legacy cost involved in changing current meter reading operations, as is the case in continental Europe. It is in a position to take a quantum leap that embraces both metering and AMR – if the political will exists.
There does appear to be a climate of change in the UK as a result of water scarcity issues and the increasing costs associated with ‘manufacturing’ potable water. There is pressure on utilities from consumers, government and the media to improve leakage control. More than ever before, there is a now a focus on how to manage water supply in the future, how to minimise the impact of leakage, and how to force the consumer to modify his or her behaviour to contribute to the better overall conservation of the resource.
From a consumer’s viewpoint, metering is an obvious way to challenge current behaviour and to move to a point where water is viewed alongside gas and electricity as an energy source. And metering provides a unique chance for utilities to put in place the AMR technology that will deliver the information needed to improve overall performance.
BETTER MANAGEMENT THROUGH AMR
There are three key elements in any AMR system – consumption measurement; the meter reading and data transmission process; and data processing and billing. It is the second of these processes that is most valuable from a utility perspective, because this is the process that can add significant value to the bottom line, to overall operational effectiveness and to relationships with customers.
First, AMR can help to deliver network control and management. Real time information collected from meters will enable utilities to open and close valves to meet demand and to shut down a complete district if a leak is detected.
AMR will help utilities to deliver control, offering commercial and industrial users tariff incentives in order to balance the network demands. All this is available online in real time.
AMR also has the potential to transform the relationship with customers. Currently in the UK, around 70% of consumers pay a fixed charge irrespective of consumption. The trend for the metered population, in common with most European countries, is to pay a fixed amount each month or quarter, and then for a reconciliation to take place following an annual reading of the meter. The customer is effectively acting as the bank for the utility.
AMR enables utilities to generate a stable cash flow (intake) by reading meters at the end of a defined period (daily/wekly/monthly/quarterly) and charging customers for the volume consumed. That’s a real benefit to the utility, because of the huge savings over manual reading costs and the lower reconciliation costs. There is also a much greater sense of trust between consumer and supplier. So what are the ground rules for successful implementation of an AMR system?
Very few utilities will have a business plan that includes 100% AMR implementation in a single hit – much will depend on topology. A successful AMR system must also guarantee to provide almost 100% of the captured data, and it must be easy to maintain, a factor often forgotten in a business case analysis. Utilities must also weigh up cost efficiency – not only how much the AMR device costs per point, but also what the life cycle costs of the system are over 1, 5 and 20 years.
technology will largely depend on environmental issues. Historically, rural areas have not been easy to address in terms of AMR fixed radio networks, but the radio walk-by system (developed 20 years ago in the US) remains valid for these areas – it wouldn’t make financial sense to install expensive AMR technology.
Where fixed radio technology really scores is in densely populated areas, which can be defined as where just two meters are installed across a 100 metre distance. Today’s AMR systems can use the same radio transponder for both walk-by and fixed radio fixed network meter readings. There is no change required in end-point technology – the data can be transferred via a handheld device or a fixed network installation. Data routing is either walk-by or fixed radio, from a meter transponder to a repeater to a gateway (GSM or GPRS) and from there to any data management point in the world. Moreover, the data interpretation software does not differentiate where the data has come from.
The main focus in making any AMR system cost-efficient is in the endpoint technology – the radio device installed with the meter. The cost of the backbone architecture for the remote reading system is very little compared to the endpoint. Increasingly the data capture and radio devices are in the same unit.
The advantages of AMR are proven time and time again on the ground. This can be demonstrated by analysing the results of a 20,000 meter AMR installation, where 40% of meters were in single dwellings, 59% were located in multiple occupancy units and 1% were in commercial buildings. Regardless of the actual building-type allocation and topology, the cost ratio between the different reading methods remains as shown in Figure 1. On cost grounds alone, the case study demonstrates the significant advantage of fixed radio AMR over other methods of reading.
In this instance, research shows the fixed radio network readings costs per meter to be running at 0.00250 euros, compared to up to 10 euros for visual read and .50 euros for walk-by radio reading. Even taking account of the investment in end-point technology (data capture, inductive head, radio transponder and network backbone/handheld), the ultimate costs per reading per end-point are dramatically lower for quarterly, monthly and weekly reading frequencies.