By Paul Harris and Peter Guttmann

Major smart electricity metering programmes are underway in Europe, North America and Australia that are designed to support the efficient use of resources and investment. In Victoria, Australia the issues of climate change, population growth, security of water supply and empowering customers – and the opportunity to leverage a smart electricity metering network – have encouraged consideration of smart water metering in the Victorian urban water sector.

To facilitate the Victorian urban water sector’s analysis of smart water metering, the Victorian Department of Sustainability and Environment (DSE) commissioned Marchment Hill Consulting (MHC) to investigate, with industry collaboration, whether smart water metering could benefit the water industry and community.

The study demonstrated that smart water metering capability could provide quantitative benefits. It also highlighted many potential qualitative benefits. This article describes the collaborative approach adopted in the study, the key findings, and the study recommendations.

The DSE-commissioned study to investigate the potential costs and benefits of implementing automated meter reading (AMR) or smart water metering (SWM) in the Victorian urban water sector, was driven by: 

  • An opportunity for the water industry to leverage Victoria’s investment in smart electricity metering (SEM) 
  • Increased interest of many utilities across the world in smart metering 
  • A variety of challenges arising from climate change, population growth and security of water supply 
  • Improving delivery of potable water and associated services, and enhancing other water efficiency initiatives 
  • Empowering customers to better manage consumption 
  • Providing valuable demand information to water sector stakeholders, and 
  • Stimulating innovation in water management to achieve long term Victorian water industry reform objectives.

The study recognised the environment in which the urban water sector across Victoria operated, considered the relevance of smart metering to a future Victorian urban water sector, and analysed the quantitative and qualitative costs and benefits of AMR and SWM to determine their net benefit.

The outcomes of this study will be used to stimulate policy discussion and consideration of next steps amongst a broad stakeholder community.

The Victorian electricity AMI programme
Major SEM programmes being conducted in Europe and North America provided impetus for the federal and Victorian governments to conduct studies to determine the potential net benefits from implementing SEM to approximately ten million electricity customers across Australia.

In 2007, the Victorian government mandated that electricity distribution businesses install SEM to all residential and small businesses in Victoria by the end of 2013 (approximately 2.9 million meters). In mandating the installation, the government set advanced metering infrastructure (AMI) functionality and minimum AMI services to be made available to consumers.

These smart electricity meters include functionality to establish a Home Area Network (HAN) by acting as an energy services portal (ESP) as defined by ZigBee protocols. Within a customer’s premise other HAN devices such as a SWM could connect to the ESP, therefore allowing device data to be sent to a customer’s in-home display and across AMI backhaul communications.

The Victorian urban water sector anticipates that enabling the AMI HAN (no dates have yet been set for HAN functionality to be activated) access to smart water meters and water meter data via AMI backhaul communications will be critical to obtain the full benefits of SWM.

Information was gathered through a literature review of international AMR and SWM initiatives. This literature review was supported by consultation and interaction with the Victorian urban water sector. The DSE facilitated the collaborative involvement of the Victorian water corporations and key industry stakeholders (representing policy, regulation and consumer advocacy) to achieve broad consensus of the study findings through data collection, peer review and formal comment.

Feedback from water corporations, academics, government and consumer representatives was addressed in the draft and final study reports.

Types of meters
To date, water meters in Australia have been accumulation meters, yielding a single value per read and being suitable for AMR. SWM could record consumption data in two ways, either: 

  • Pulse: a metered consumption data point is recorded when a certain volume is consumed (e.g. 1 l, 10 l, 100 l, and the time and date), and 
  • Interval: a metered consumption data point is recorded at specific time intervals (e.g. 15 minutes, 30 minutes, hourly, daily, and the volume of water consumed to that point).

The differences in accumulation, pulse and interval metering are depicted in Figure 1.


Figure 1 – Types of water metering

The Victorian electricity industry has decided on time-based measurement of consumption using interval metering. This decision is based on historical practices in remote metering of electricity consumption, and for alignment to the measurement standards of the National Electricity Market, which is half hourly based. Interval metering is crucial to the national electricity market for the following reasons: 

  • Electricity wholesale market trading is conducted on a half hourly tariff basis. Therefore, measurement of customer energy consumption on a half hourly basis will facilitate wholesale market trading activities, and 
  • Electricity infrastructure is constrained, particularly during periods of extreme heat. Half hour consumption data allows the grid manager to balance supply and demand during these critical peak periods.

The above practices and drivers of interval metering are not universally established within the water industry: 

  • Water wholesale market trading does not exist 
  • Water can be stored, and 
  • Given recent changes in customer behaviour and decreases in water consumption resulting from prolonged water restrictions, periods of peak demand are now less of a problem in the water industry.

AMR and SWM definitions
Driven by electricity investment, metering in the past decade has evolved from interval meters with simple communications to advanced or smart metering with an increased range of metering and communication functionality. AMR in the water industry could, at a minimum, enable: 

  • Remote recording of water consumption from an accumulation meter on a weekly basis, and 
  • Identification of network and household leaks.

SWM could additionally enable: 

  • Remote recording of water consumption from a pulse or interval meter on a daily basis 
  • Two-way communications between the water utility and the water meter 
  • Notification of abnormal water usage 
  • Control of water-consuming devices within a customer’s premise, and 
  • Messaging to the customer.

Figure 2 depicts the high level relationships between customers, the household (or metered site), and water corporations for AMR and SWM.


Figure 2 – AMR and SWM logical architecture

AMR and SWM implementation options
Six alternative metering implementation options, depicted in Figure 3, were considered for the quantitative and qualitative analysis. These covered the range of possible smart meter functionality. Each approach, beginning with the most basic, adds incremental functionality to the last.


Figure 3 – Implementation options

Existing arrangements in the Victorian urban water sector form the base case against which the six implementation options have been compared.

Quantitative results

The study considered key cost and benefit elements including: 

  • Meter procurement 
  • Installation and maintenance 
  • Meter reading and communications 
  • IT systems 
  • Customer service, and 
  • Asset management.

Annual net benefits
With increasingly complex implementation options come increasing upfront costs and a lengthening period before positive annual net benefits are realised. All of the implementation options selected eventually show positive annual net benefits by year 9 at worst, near the completion of the first meter rollout.

In implementation options 1 to 4, positive annual net benefits are realised by years 5 or 6. By year 9, the ongoing net benefits for options 1 to 4 are broadly similar at $15 million to $16.5 million per year.

In implementation options 5 and 6, the positive annual net benefits take longer to offset the heavier costs of interval metering and AMI capability – by years 8 and 9 respectively. By year 9, the ongoing net benefits for options 5 and 6 are $6.5 million and $0.5 million respectively.

Summary of quantitative analysis
The relative NPV for implementation options 1 to 6 are represented in Figure 4. The cost of meters (including communications and IT infrastructure) increases with: 

  • Transition from accumulation meters to pulse meters, and then to interval meters, and 
  • Transition from drive-by meter data collection to use of the electricity AMI network (options 4 and 5), and then to a standalone AMI communications network for water (option 6).

Figure 4 - Summary of quantitative analysis

The benefits derived from reduced meter reading costs are greatest if an AMI network is used (implementation options 4 to 6). The benefits from improved asset management (including leakage detection and improved leak management) are roughly constant for all pulse or interval data implementation options.

The key findings of the quantitative analysis were: 

  • NPV positive outcomes can be demonstrated for implementation options 1 to 4. 
  • Collection of interval metering data via implementation options 5 and 6 is NPV negative – the meters and associated systems are more expensive and the information is no more valuable than the pulse information. 
  • Variations of up to 30% in the cost elements (i.e. cost of meters, scheduled and special meter reads, and IT systems) were examined in a sensitivity analysis. These variations do not significantly impact any base case NPV results. 
  • Variations in the benefit elements (i.e. price of water, rate of reduction in network and household leakage, and degree of improvement in capital efficiency) were also examined. In extreme cases, these variations did drive negative NPV results for implementation options 2 to 4.

In summary, quantitative analysis has shown that implementation options 1 to 4 appear to provide the most viable cases for further consideration by the Victorian urban water sector.

Qualitative results
The study considered customer, societal, policy and environmental qualitative impacts.

Customer impacts
The most significant qualitative customer impact comes through enabling SWM customers to make informed, proactive decisions about using water, in particular through the ability to track water consumption against mandated targets.

A survey of Australian consumers2 highlighted their belief that ensuring adequate supplies of water for both consumption and the health of the environment is the most important issue in society. The same survey showed that 42% of individuals cannot determine whether they are effective in reducing their own water usage. Therefore, consumers are likely to benefit from technology that allows them to monitor and understand their water usage. By providing consumer education it may be possible to establish a generational and societal change in attitudes towards water efficiency and consumption.

The second most significant impact is in allowing customers with pulse or interval metering to identify and rectify household leakages sooner than is possible with accumulation metering.

SWM may also provide additional customer and/or water corporation benefits through innovative water retail tariffs, support for more frequent customer billing, or enhancing customer relationship management. The benefits in these areas were small in the current water sector environment.

Societal impacts
It is likely that the societal benefits from SWM will be smaller than the customer benefits. The main qualitative societal impact comes from supporting a broader approach to limiting demand during periods of supply shortfall beyond prescriptive controls in mandatory water restrictions. Other societal benefits may arise through improving inter-generational equity, and reducing social stress.

Policy impacts
Information from SWM could assist in customer segmentation, and could help the water industry, government and academia to better understand the broad range of factors affecting urban water use, in order to influence public policy development.

Environmental impacts
Improved management of downstream water supply and usage through SWM should lead to improved hydrology, and better management of upstream resources, including rivers and other environmental flows.

Reductions in the carbon footprint of the water industry through decreases in water and sewerage pumping (as a result of more efficient water and wastewater use, and reduced water leakage), and reduced vehicle travel for manual meter reads.

If SWM enables the removal of water restrictions for private and public urban outdoor use, it could ultimately promote improved urban landscapes of parks and sports grounds.

Summary of qualitative analysis
The aforementioned impacts mainly apply in implementation options 2 to 6 (see Figure 5), based on the availability of more frequent pulse or interval data allowing customers to monitor their water usage and diagnose leaks. More frequent date will also promote societal, policy and environmental benefits. Accordingly, overall qualitative benefits increased progressively between implementation options 2 and 4 and then remained the same for implementation options 5 and 6.


The consolidated quantitative and qualitative results are contained in Figure 6.

The analysis has demonstrated that for a number of options, benefits exceed costs. Accordingly, there appears to be value for the Victorian urban water sector to further evaluate smart water metering. Importantly, such evaluation should not only develop the quantitative information available to hand, but also provide greater evidence of qualitative costs and benefits.

On the basis of the quantitative analysis, it would appear that AMR services (implementation option 1) should be deployed. However, this would provide minimal customer, societal, policy and environmental benefits in comparison to the other SWM options (notably implementation options 4, 5 and 6).

The cost of deploying interval meters (implementation options 5 and 6) is unwarranted: it provides no additional qualitative benefit over pulse metering.

Each of the SWM options involving pulse metering (implementation options 2, 3 and 4) warrant further detailed consideration by the water corporations. The NPV for each was positive in each case, and supported by qualitative benefits.

This study demonstrated that, on the basis of operational costs and benefits alone, the Victorian urban water sector should consider implementing SWM. However, ongoing industry support and additional information is required to ensure that any implementation delivers optimal benefits for customer, societal, policy and environmental consideration.

An investment to deliver additional information on SWM will help quantify the qualitative impacts and better define relative net benefits that could be achieved from each implementation option.

The study recommended that in order to progress SWM in the Victorian urban water sector the following next steps be initiated: 

  1. Analysis of pulse-based SWM – Review the functionality, costs, and implementation models for successfully implementing pulse SWM. 
  2. ZigBee™ Smart Energy Profile – Review and contribute to the development of ZigBee™ as a potential communications protocol to support SWM. 
  3. Market research – Research the value that customers place on SWM and what their responses to different tariff pricing regimes might be. 
  4. Smart water metering trials – Commence coordinated SWM trials to validate the costs and benefits of SWM. 
  5. Policy development – Make available and use the data generated from market research, SWM trials or actual operation in the development of urban water policy to help address the variety of challenges faced with respect to climate change, population growth and security of water supply.

A group representing the urban water corporations across Victoria is developing a plan for coordination of these next steps.

MHC continues to take an interest in SWM and planning of the next steps beyond this study.

1. AMR – Based on an accumulation water meter with communications capability, which are automatically read (generally on a weekly basis) by drive-by data collection.
SWM – Based on remotely read, pulse or interval metering, which is capable of more granular (within a day) water usage data, two-way communications between the water utility and the water meter, and potentially include communications to the customer.
2. Newton Wayman Chong & Associates, 2001, System Security Standards Study Group: Customers Value Study – Quantitative Stage – A Research Report