With smart metering on its way, utilities could learn valuable lessons from the telecoms sector, says Software AG’s Jim Shaw
In the last 40 years, measurement and billing requirements for the utilities sector have retained a relative stability. With suppliers billing their consumers every quarter and with meter readings fairly sporadic, utilities have maintained a one-way dialogue with customers.
But the mandate for smart metering, with its environmental, cost and consumer-driven imperatives, is set to shatter this complacency. In effect, the utilities monologue will become a multi-way discourse — or a dialogue with consumers at the very least.
With Barak Obama’s new positioning to tackle climate change and the EU setting ambitious targets to reduce CO2 emissions by 20 per cent by 2020, individual energy use has really come under the spotlight. While plans to implement domestic smart metering – to cut down on energy use and carbon emissions – will vary from country to country, we can expect most developed countries to make steps towards this standard within the next ten years.
Already, the UK Government plans to fit every home with smart meters by the send of 2020. That’s 26 million electricity and 22 million gas meters and a cost of around £7 billion.
As well as working towards environmental targets and cutting costs for the consumer, smart meters will open up a world of choice for utility users. Discussing these possibilities, Gartner’s Nick Jones explains: “At the very least I want real-time monitoring on my mobile to see if I left something switched on by mistake… In a decade my energy consumption data could feed into dozens of social networking systems and new services.” What’s crucial for utility providers, therefore, is to have the necessary infrastructure in place to support all these ongoing changes.
A similar revolution has taken place in the telecoms sector in the last few decades, from static quarterly billing to a constantly increasing maze of customer choice. Today, few people would tolerate a one-size-fits-all tariff from their mobile network provider: they want a varied contract according to their call, text and browser use. Some want pay-as-you-go tariffs while some prefer state-of-the-art handsets, and networks that can’t accommodate them will soon find themselves abandoned in favour of competitors who do.
In the same way, smart metering and legislative changes will force utilities to become more flexible — or simply to get beaten by the competition. Today consumers can get mobile, broadband, and financial services from the supermarket, why wouldn’t they get their energy from there too?
So what does this mean in practical terms? How can utility companies ensure they’re ready to adapt to more flexible consumer relationships? According to the European Smart Metering Industry Group (ESMIG), two of the main criteria for most smart metering plans will be a data transmission infrastructure and an IT environment suited to ensuing data volumes — allowing a 'two-way communication between utility…and the meter'. In this way, utilities will be forced to be flexible to survive.
From challenge to opportunity
Utility companies will have to learn to reconcile all these new technologies with existing ones to adapt to the introduction of smart metering. Because, as well as offering flexibility to their customers, they will also need to navigate the regulatory minefield created by their governments. With household energy use monitored every half hour, in contrast with just four times annually, there will be a number of compliance issues to cope with this unprecedented volume of data.
Having grown up over time, most utilities have disparate and often disjointed back-end IT systems so the challenge of delivering a new smart infrastructure and complying with demanding timescales will be a huge challenge — delivering this change while ensuring the flexibility to innovate and exploit the opportunity it presents will separate the winners from the losers in this new market dynamic.
Telecommunications companies have been delivering on this challenge by using Business Process Management (BPM) solutions. BPM allows existing IT assets and people to participate in new processes to comply with regulation such as Mobile Number Portability and EU regulations on roaming charges. It is also used to more rapidly introduce new products or packages of products to market. Once in operation the real time insight provided has driven significant efficiency and operational improvements.This agility and flexibility delivered has become a strategic foundation for innovation.
The fundamental changes brought about by the advent of smart metering will seem daunting to organisations unwilling to change. However, these changes could actually create important opportunities throughout the utilities sector. With unprecedented data comes unprecedented insight, so for the first time ever, utilities will have the same amount of demographic information as their telecoms counterparts. They will be able to use this to market to different customer groups and introduce bespoke tariffs — improving both retention and attraction, and boosting revenues in the process.
Ultimately, every country will respond to smart metering differently. But whether they are quick or slow to introduce legislative change, utility companies will need to reconcile a huge amount of new systems and channels with a myriad of old and disjointed systems. BPM solutions are one way they can achieve the agility and flexibility they need — not only to allow new processes to run in the first place, but also to make the most of the opportunities they bring and make the best business decisions for the future.