Smart Metering – The Rationale

A month has gone by and it seems that I have lost the smart initiative. Wrong my friend! Travel kept me from updating my blog. In the next few posts I would like to present a sneak peek into the smart metering initiative going around. Would like to start with the rationale behind the entire program and try to answer "Why Now?"

Smart metering is the current buzz word in the energy retail industry. Some of the energy markets have already started a transition to the smart world whilst some are gearing up their existing infrastructure to accept the new changes. Before we try to dwell into more details around smart metering let us first try to understand the rationale behind the smart metering program. UK Energy industry de-regulation which happened a decade back changed the customer- utility relationship altogether, empowering customers to select a supplier of their choice. However customers never had the ability to precisely identify their usage patterns and take advantage of a suitable tariff thereby saving energy and money.

From a customer perspective, the only way a utility consumer can know their energy consumption is via a Bill. Energy bills are issued by a utility every month often estimating the usage based on a customer’s energy consumption history. Bills present a cumulative usage value and there is no way a customer can check their usage at real time to budget for it better.

From an energy retail industry perspective, their processes are not subject to frequent changes and remain by and large as they were standardised a few decades back. These processes were designed then, taking into consideration the market structure and the technology maturity in those times. With the business process remaining unchanged, energy suppliers and market participants could not leverage the technology advancements to their advantage to simplify the complicated industry architecture.

So the question is “Why the industry processes were never overhauled if there were known benefits?” The answer is simple, there was a never a comprehensive cost benefit analysis done to implement such a high impact change and the existing model was always scalable enough to accommodate newer market regulations and compliances. The next question then is “Why now if the model is scalable enough?” Well Smart metering is considered as the next generation of the energy industry. Not migrating to smart metering is not an option as newer market functions categorically align to smart meters and implementing them in the existing systems implies significant bolt on to an old set-up. Smart metering allows real time data exchange and processing which quintessentially has been an overnight batch job with data exchange between stakeholders taking months. This inherently implies that the existing underlying business processes in the energy industry can be simplified.

Smart metering program is thus a prospect to fundamentally review the market structure, existing business process and the technology development to create a blueprint for the new age market with an appropriate cost benefit analysis. It is been viewed as a perfect opportunity to rationalise the energy industry by addressing some of the current issues making it easier for customers to do business with their energy supplier in a de-regulated market. The implementation of the smart metering program is also proposed to have provisions for future market changes like smart grids, micro-generation, efficient use of energy program like Renewable Heat Incentive (RHI), Feed in Tariff (FIT) etc.