By Rob Wilhite
This tool uses similar electrical, mechanical or motordriven technology as found in collared (behind the meter) devices today. Further, this feature is provided (or is expected to be) by all major meter manufactures as an integral part of their emerging and future AMI solutions, with most devices limited to 200 A maximum service. The purpose of this article is to outline important features, functionality and benefits of deploying remote disconnect/ reconnect switches and to review the key market risk factors that may be found in pursuing its application.
Over the past few years, the integrated remote reconnect/ disconnect switch has become one of the most desirable features in utility AMI specifications. In its “Advanced Metering Infrastructure July 2007 Semi-Annual Assessment Report”, Pacific Gas and Electric Company suggests that:
Also known by several other names, such as remote turnon/ turn-off or service relay switch, this metering functionality is being specified in many of the larger AMI procurements in North America today. Investor-owned utilities such as Southern California Edison, San Diego Gas & Electric, and Duke Energy have incorporated this feature into their requirements and specifications in recent requests for proposals or quotes. For the first time, utilities are seeking to deploy integrated reconnect/disconnect switches across the entire eligible metering population. The Texas Public Utility Commission is also specifying this capability as a requirement for all jurisdictional electric distribution companies in their planned AMI deployments.
The economics and associated benefits for incorporating this metering functionality can be compelling. The value of an integrated, remote service switch could be realised in several areas. Selected key features of the remote service switch and the potential AMI benefits that may be achieved through its application are outlined in Table 1.
The attractiveness and realisation of these particular benefits will vary from utility to utility and can be subject to regulatory policies affecting their application. As further evidence of its application, Duke Energy believes the versatility in creating energy efficiency and operational programmes based on the remote connect/disconnect functionality make it an indispensable feature of a meter. According to Duke’s Matt Smith, Director – Utility of the Future programme,
MARKET TRENDS AND EXPECTATIONS
Based on recent KEMA research, the growing interest in the remote service switch is expected to translate into accelerated market demand. In the US alone, annual device shipments will quickly escalate into millions of units, when considering the largest 35 utilities’ announced or projected plans for AMI. During the next six years we could expect total shipments of 25 million or more units, as shown in Figure 1.
These values could expand, as this functionality gains the interest of other utilities (e.g. municipals, cooperatives) and policy makers. The secondary market for collared solutions will still remain, but could expect to decrease over this six-year period. When considering the interest across several global markets, these projections increase considerably, as shown in Figure 2.
Six-year projections indicate that nearly half of worldwide installations could occur outside of the US. European interest is driven primarily by the larger European Union countries, whereas South American interest is driven principally by Brazil, which is piloting the technology. Australian values also include potential for New Zealand.
One key element that is fuelling this increased demand is a current declining price trend. Based on KEMA’s discussions with key relay switch manufacturers, price points at $120 per unit in 2006 could decline to $25 per unit by 2010, as illustrated in Figure 3.
As of this writing, none of the North American electric meter manufacturers is known to directly produce these switches, but instead source them from a handful of OEM suppliers. Selected costs of the relay switch to meter manufacturers are currently in the range of $16 to $24 per unit. One switch manufacturer recently contacted expects that these prices will decline to $10 to $12 per unit over the next few years, given sufficient order volume for the devices. Anecdotal and selected pricing points also indicate that switch device margins may also be declining for the OEMs.
The declining price trend is reaching an inflection point in utility cost effectiveness projections. According to trends and recently published and KEMA-supplied AMI business cases, the projected benefits will readily exceed incremental investment levels. Figure 4 provides an illustrative view of the resulting trend, based on present values over a 15-year expected service life.
Even if the functionality is not expected to be deployed on every eligible meter in a particular utility’s population, the “option value” of installing an integrated switch for future use is likely to become a prudent business decision. Once an AMI meter is installed, the labour and associated deployment costs may not warrant a replacement for many years, in order to maintain a positive economic outcome for the business case. In the absence of plans for prepayment or reductions in field collection actions or service orders, utility managers can consider whether the incremental switch cost today is sufficiently amortised by the potential value associated with emergency load reductions for grid reliability within the service life of the integrated meter. In addition, today’s rate engineers may not have a need for remote switch capability, but may want the option to incorporate its use in future pricing options not yet conceived of or available to market participants.
SUPPLIER TRENDS AND POTENTIAL RISK FACTORS
Even though the remote relay switch is proving to be cost effective for many utilities seeking its deployment, there are only a few manufacturers of this product, with most producing and shipping from outside of North America. Relay switch manufacturers that are partnered with North American AMI metering manufacturers include AMPY Metering, Dialight BLP, Gruner and KG Technologies. Other international manufacturers include Shanghai Wanjia Precision Components Co. and ISKRAEMECO. Production facilities for all of these firms are located mostly in China, the UK, or in Germany.
BLP is the predominant supplier cited by major metering providers in North America. However, it is interesting to note that nearly half of North American meter manufacturers have also indicated an interest in securing a second supplier of switches to meet increased demand. This suggests that it may also be feasible for alternate suppliers to consider entry to the market, subject to sufficient margins for investment. It may also be feasible for meter manufacturers to design and develop their own integrated switch device.
One emerging trend, as an outcome of recent conversations with switch manufacturers, is that current annual production levels are typically in the 100,000s of annual units. This is certainly adequate, given the current low volumes of AMI meters and orders for these devices today.
However, with the rapid rise in market demand, these manufacturers have stated plans to also rapidly increase annual capacity (either internally or through third party outsourcing arrangements) to millions of units by late-2008 and beyond. However, with any significant change in manufacturing processes and systems, we must consider the potential introduction of risk factors associated with future device shipments. As utilities seek to perform due diligence in their AMI planning and review of candidate suppliers, there are a number of key questions that should also be carefully considered in these reviews.
Some of the risk elements that should be considered, or directly addressed, would include (but not be limited to) the following:
- Will regulatory acceptance for the remote service switch become more common, thereby increasing market demand even further?
- As several switch manufacturers’ production capacities are greatly increased over the coming months, how do we ensure quality levels to validate a positive outcome for the AMI business case?
- As some meter manufacturers may seek to produce these switches directly, how well will their design and production capabilities and quality levels extend into relay switches?
- What impact on market supply, pricing and quality levels would occur with the introduction of new switch suppliers?
- Is there enough utility demand to warrant development of a 400 A switch for larger C/I loads?
- What standards are appropriate for testing and certifying an integrated AMI meter with reconnect/disconnect switch? (e.g. IEC 62055-31, electricity metering – payment systems)?
The integrated remote relay switch offers a significant opportunity to positively impact utility operations and add value to customer relationships. When considering the overall functionality of the remote reconnect/disconnect switch, it has become a more cost effective option for AMI deployment considerations. Given current pricing trends, the business case is quite favourable and should accelerate market interest and demand. As production levels increase, manufacturers and utilities will need to carefully consider supply chain impacts and quality assurance of these devices at greater volumes.