Why I want to be paid to have an IHD. (A commentary)
- Jun 5, 2015 2:51 pm GMT
Competitive Electricity retailers better start taking a leaf from the mobile service provider's book on churn management.
Customers living in a world where they can get a free handset and $50 cash back for signing up a new mobile service provider are not going to look at Electricity and In Home Displays (IHD) too differently.
The convergence of energy, communications and electronic devices in Smart Metering is plain to see, and does not come as a surprise to anyone.
There has been a nagging cold war between lobbyists to gain control over this convergence. Distribution companies, retailers, telecommunications companies and even smart metering manufactures have been trying to convince regulators, standards bodies and environmentalists that they are the right group to rollout and control the Advanced Metering Infrastructure (AMI, or Smart Metering).
With different groups registering wins in different parts of the world, one is bound to question the regulator's effectiveness in keeping this fair and competitive, and ensuring the reliability and security both physically and economically of this 'essential service'. So, do regulators care to prevent a monopoly and ensure the best interests of everyone? In fact they do. All lobbyists are promising the bare minimum of Smart Metering features that will deliver the goods that have been promised by the researchers and demanded by the regulators. Regulators have done their bit, working out the benefits and costs of a Smart Meter rollout and have approved cost recovery models for their preferred lobbyist. So the Smart Meter benefits are for everyone to enjoy. Then why lobby?
That brings us to the large unregulated prospects of Smart Metering. A significant prospect being: `owning the link to the customer'. That's where the money is, and that's not included on the majority of cost benefit analyses by regulators. So the winner, who rolls out and owns the Smart Metering network, has their investment paid back by a regulated cost recovery mechanism, and then has first access to all the unregulated freebies. Did the regulators overlook this? No they did not. Firstly, because the unregulated Smart Metering business does not exist today and who knows what it will look like tomorrow. They just could not nail down the effect it would have. Entrepreneurs have generally been happy to innovate within regulated ecosystems. Secondly some regulators have taken measures to ensure that such an advantage is not monopolised. (The UK is a good example of the latter)
So just who can get entrepreneurial? Just about everyone you can think of.
The distribution company (in parts of the world where the regulation permits it)
With their own communication network, they will be to offer non regulated messaging to other utility and non-utility players for a price. They will also be the custodians of all meter data, which can mean customer usage patterns, equipment signatures, appliance health, residential status, geographical location and frequency of switching. This information is invaluable for market research, and if presented as statistical results in a non-identifying way, will meet privacy laws of most parts of the world.
The telecommunication company
They already have a communications network, and all they want is for everyone in the territory to be their customer, if not directly then through the Smart Metering network. They will be able to provide an AMI backhaul network for use by other players. They will also be in a position to offer a central meter data repository. They're already great service provider, with a little more hardware and software they can even foray into the energy retail business (especially in deregulated markets). With 3G coming up, energy data and energy management services can be sold to mobile phone customers who can chose to tag their meter number with their phone numbers. In several markets multi-utility conglomerates have thrived in the past, and continue to do so. Almost every `telco' worth its salt has an M2M strategy with specific offerings for the Energy industry, and Smart Metering in particular.
Data Centres and Computing providers
Remember the old ECG machine that you were hooked up to once every year for your annual physical, that spewed out a yard long strip of paper with squiggly lines on it. Well imagine the same machine hooked up 24/7 to everyone around you. That's right not everyone on the AMI bandwagon is keen to spend millions on computing and storage, when the price such things halves and capacity doubles every year. Consolidation to mitigate these economic risks have paid back for storage and computing service providers. In the AMI world, they can offer to consolidate and crunch data that includes meter data and other interesting stuff and offer the mix those who are willing to pay for it. They just need to make sure the contract states who owns the data and its usage (regulated by privacy laws in most parts of the world). Last I heard someone was ready to host the data for free as long as they were allowed to sell statistical reports on it.
Consumer device manufacturers
The touchy feely part of AMI - The device could be anything, a phone, personal entertainment, digital TV box, laptop computer, refrigerator, washing machine...All these need is to be able to connect to the AMI to get price signals and meter data. After that it's how creative you can get with the device. Can the oven turn itself on when the cost of electricity is low? Can the fridge do the defrost cycle when it's hottest and electricity is at a premium? There's a bunch of stuff out there that's already being sold on the market. There are also the manufacturers of enabling devices, things like zigbee dongles that you can plug into your laptop. Smart relays that can be inserted between sockets and appliances, for data sharing and command response. We're already seen mobile apps picking up this theme. Regulators are already homing in on the messaging and security protocols that allow for interoperability among `HAN participant' hardware.
Are there more?
The virtual world, with its ability to instantly connect everything, opens up the door for new web businesses around AMI. These could be services or products, like checking your appliance status online for better proactive maintenance service and lower maintenance costs. There are other players who will find new ways to build business around AMI, such as electricity charging stations, combined electricity-gas-water solutions etc.
Almost everyone will be a winner, and there is already news about one or more of these players partnering to create a stronger value proposition.
In fact my retailer can install an IHD with nice energy management features, a colourful screen and a little section for local advertisements. They can charge those Pizza guys 50cents for flashing a coupon number every hour, and since I like Pizza, I will use the 10% off coupon to buy pizza occasionally, and everyone is happy. And that's why I won't pay for an IHD, but would rather be paid to have one installed.
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