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Automated Meter Reading (AMR) - Are We There Yet?

Matt Chwalowski's picture
Energy and Utilities Expert PA Consulting

Matt Chwalowski, Ph.D., is an energy and utilities expert with 20 years of combined management consulting in the energy and IT areas. He is with the Energy Business Transformation Practice at PA...

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  • May 5, 2004
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Automated Meter Reading (AMR) continues to grow at a steady pace as more utilities begin to realize that its value extends beyond the simple monthly revenue read. While historically gas utilities have had more total AMR installations as a percentage of meters installed, the trend clearly indicates a pronounced growth in the electric utility sector, which is outpacing both gas and water. The AMR market is characterized by a variety of different technologies and communication media, leaving utilities with a number of possible deployment choices. Adding to this is a growing richness of data communication capabilities and channels that have the potential to further increase the AMR attractiveness to utilities. Utilities have a luxury of choices in this evolving environment where vendors go to great lengths to gain utility business and satisfy their needs. Since AMR represents a substantial investment for a utility, and there are bewildering choices in the market, it is both prudent and worthwhile to consider the current status of the AMR landscape. Demographics. According to industry statistics, roughly 80% of worldwide deployments in AMR have occurred in North America, with about 12% in Europe and 5% in Asia. Many factors drive the North American leadership in this area, including requirements for monthly reads, rising meter reading labor costs, increasingly dual income households, unoccupied residences and the continuing pressure from regulators to reduce estimated readings. Mobile radio frequency (RF) has dominated this market, with a typical annual shipment share of about 50% to 60%. Other technologies, including power line communications (PLC) and fixed RF are gaining foothold with deployment shares of 15% to 20% each, with the remainder divided among broadband, telephone and cellular. The current installed AMR population represents about 25% of the estimated potential U.S. market. Market share. For a variety of reasons, metering solutions found in other countries, such as pre-paid meters, or annual meter readings, have not found wide-scale adoption in the U.S. AMR seems to be the only acceptable alternative to manual meter reading. Increasing number of utilities rely on remote access to consumption data as a part of requirement for end-to-end connectivity underlying their business processes. Further, the strategic value of remote consumption monitoring to the utility is growing. In particular, this value can be enhanced if the data is captured more frequently than the billing cycle requires. Additionally, industry deregulation offers a powerful motive to the continued development of new offerings that AMR can provide. System integration. AMR involves personnel from all aspects of the utility business including: metering, IT, data communication, marketing, energy management, customer information service, and customer care. AMR is only achievable when all its components are properly matched and integrated. Matching of the meter to the communication unit is normally done as a contained package, however the network communication services over which the information is locally captured may require third party involvement. Very few meter suppliers are also experts in communications networks and are therefore dependent on others for embedding communications or developing interface relationships. In addition to the data concentration services, aggregation node connectivity, the integration of the network interconnection to the back office servers and the setting up of rules for the firewalls will require that same third party involvement. Deployment criteria. Utilities often face a choice regarding whether to deploy AMR only in those areas that can be easily justified (difficult to read locations, high churn areas, large customers) or across the board. While the parsing of residential customers from the rest of the service population decision is straightforward, the more difficult challenge is to determine the net benefits when only a subset of the population gets AMR implementation. For instance, if only a portion of meters in a given route meets the financial criteria for AMR, the business case must reflect automatic and manual meter reads. Further, if the meter route is not adjusted to compensate for increased inefficiencies of more dispersed meters that require manual reads, the average cost of the unadjusted manual reading process will actually increase. Decisions about partial deployments need to take macro issues into account in order to achieve overall business objectives. Communications technology. In the late 1990’s a number of utilities made significant investments in various communications technologies, including fiber optic networks, network services and joint efforts with cable operators, telephone companies and even AMR equipment firms. Few of these investments ultimately became commercially successful, and as a result they have been sold off, shut down or placed in a state of suspension. Lately, there appears to be a resurgence of interest in broadband power line communications (BPLC) systems by a number of electric utilities. Fueled by the growing demand for high-speed Internet access, this future network represents a potential lever for a growing electric utility interest in AMR and other related utility services as the prevailing anchor-tenant for these service infrastructures. Own versus outsource. Aside from all the technological and business issues noted above, there is interest in outsourced AMR services. In the past, some utilities created separate business units to run these services for their parent organizations and endeavored to do it for others as well. However, the concerns raised about privacy and access to critical competitive information stalled many of these early ventures. In some cases the remaining elements of these units have been reduced to installation and service bureaus rather than full outsourced metering entities. With increasing specialization of AMR systems, it is likely that a new breed of service providers will emerge, with roots that are not linked to competitive entities. This may be especially true as electric utilities in the same service territory look for partners among water and gas utilities to reduce deployment costs. It is projected that AMR share of meters in North America will continue to increase. Choices are neither simple nor inexpensive, and they require insight, experience and judgment – in short, a metering strategy. After all, the system will serve a utility for at least a decade and sometimes it will take a few years to recover the investment. A variety of offerings, technological improvements and regulatory requirements create new operating environments that must be carefully evaluated by a utility to achieve operationally and financially desirable results.
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Thank Matt for the Post!
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