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It is Saturday. Down the street is yet another yard sale where people are trying to get rid of a 30-year collection of vinyl records.
Every time a technology wave washes over our shores, it leaves a lot of flotsam on the beach. As consumers, we have learned to cope with this flotsam, life’s outdated technologies. We nurse along our cassette player until the dog decides it is better than a Frisbee. Our third-grader makes a collage from our Apple III’s innards.
Technology change in the utility workplace, however, may have far more serious consequences.
Metering is today’s clearest case in point. Market gurus have relegated the electro-mechanical meter to the Smithsonian. But, many remain. ABS Energy Research reports that in 2007, 79 percent of all utility meters globally were electromechanical, and these meters remain a substantial portion of the 122 million meters annually installed.
Reasons vary for the continuing popularity of electromechanical meters. Of course, utilities expanding existing systems or replacing defective meters have little choice but to go electromechanical. Additionally, as ABS points out: Many utilities use 20- or 30-year meter amortization. It may be years before they can clear the books or face write-offs of the unused portion of the meter asset.
Some countries, like Germany and Japan, appear to be reluctant to alter a proven technology.
Utilities in less affluent countries find “the price is right” for electromechanical meters recycled from meter change-out projects elsewhere.
But, what about utilities now considering projects to replace all their electro-mechanical meters? Should they choose automated meter reading (AMR)? Or should they bypass AMR and move immediately to the more sophisticated interval meters with two-way communications that characterize advanced metering infrastructure (AMI)?
AMR technology—meters that broadcast consumption totals to a pole-mounted, drive-by or similar receiving device—languished on the utility market for decades before taking off in the late 1990s.
The reason for the delay was money. Initial high AMR costs meant that many utilities found it less expensive to keep human meter readers in place.
In more recent years, AMR costs have fallen while wages advanced and insurance costs skyrocketed. Benefits outweighed costs, leading public utility commissions, city councils and cooperative members to approve AMR projects. By 2005, according to industry guru Howard Scott, AMR meters comprised about a quarter of the North American market.
But, just as the regulators were voting ‘aye’ to approve AMR projects, environmental concerns began to undermine the assumptions on which those votes were based.
One of those assumptions is that keeping cost-of-service low is a primary utility goal—perhaps the primary utility goal. Given that assumption, AMR is an outstanding technology—a proven product with a clear payback period.
But what happens when cost is not the primary consideration?
Today’s public is increasingly focused on the environmental consequences of energy use. Lowering energy emissions is front and center. Public officials and private organizations are actively seeking utility help in evaluating and implementing programs to alter historic consumption patterns.
Any behavioral change requires an initial catalyst, a plan of action, and continued positive reinforcement. Without all three, efforts to change will almost always fail.
The first has already emerged. News media are full of warnings about climate change and shortages. Few consumers, however, grasp the correlation between reducing consumption and preserving the environment. (See Figure 1)
Yesterday’s utility education programs are clearly not enough. In electricity, experts foresee unrelenting consumption increases. Almost as bad from a regulatory point of view is that even those programs that may have succeeded can rarely document their results.
Many in the utility industry see demand response programs as the best way to address environmental goals. At its most basic, demand response asks electricity users to reduce use in response to price signals or other incentives.
Price-related demand response programs may use one of two approaches. They may peg prices to costs during a specific period, or they may peg prices to the negative environmental consequences of the electricity generated during a specific period. Most users experience these programs as “time of use” pricing; prices are higher during the workday and lower at night. Large commercial and industrial customers in most jurisdictions have long been under such programs, often with interval meters.
Can AMR accommodate an expansion of demand response to residential and small business customers? If a utility envisions demand response as a time-of-use program with rates that vary only monthly, then AMR with meters that record and report consumption in time of use “buckets” will suffice. If a utility envisions demand response as involving frequent rate changes that respond to varying grid or weather conditions and/or market prices, then AMR looks less helpful. Will the current design accommodate a weekly or daily drive-by rather than monthly trip? What would be the consequences in terms of wage, fuel and vehicular costs?
Utilities that envision demand response with surcharges or incentives must ask more questions before making the choice between AMR and AMI. AMR is compatible, for instance, with load reduction programs that involve radio signals from a utility to a device on an air conditioner—but only because the two are completely separate. Similarly, a utility might style a commercial opt-in interruptible load reduction program around a series of personal phone calls and rely on “gentlemen’s agreements” for compliance. The more programs and options utilities want to offer customers, however, the more it makes sense to go immediately to an AMI that can simultaneously initiate and verify multiple programs and variations.
The heavy emphasis on demand response at utility conferences and in trade publications has led many in the industry to fail to look beyond demand response when evaluating whether or not to continue with AMR deployments or halt them and switch to AMI with its interval meters and two-way communications. If a utility can get most of the demand response benefits with time-of-use meters, it would appear to make sense simply to continue with the original plan.
The case for continuation is even stronger when utilities consider the after-market meter add-ons that enable two-way communications and downloadable programming for AMR meters. These add-ons mean that utilities can achieve many of the advantages generally ascribed to AMI, such as the ability to: - Alter the time periods to which various prices apply. AMI does this through centralized changes to interval analysis, but AMR, in some cases, can reach the same end through remote reprogramming of time-of-use meters.
- Remotely connect and disconnect meters.
- Obtain a final meter reading—though an AMR system is likely to have great difficulty in accomplishing this as rapidly as can AMI.
Once installed, an unamortized AMR system represents a stranded cost to a utility that wants to replace it with AMI. And the cost can be heavy—generally several hundred U.S. dollars per meter.
Thus, utilities choosing AMR today need to make sure that they will not need AMI until full amortization concludes. And making sure involves a careful evaluation of the benefits AMI brings that are unavailable via AMR. It means that utilities must quantify the value of: - More rapid identification of precise outage location and of nested outages.
- Increases in overall throughput that can occur when network engineers can more precisely identify and resolve bottlenecks and other inefficiencies—without running the risk of blackouts or voltage fluctuations.
- Expense reductions for vegetation management inherent in the ability to pinpoint blink-out location.
- The ability to analyze and predict inflows from small, distributed generators operating under “net metering” programs. This ability can become significant as net metering grows in popularity.
- Implementing prepayment programs without special prepayment meters.
- Fine-tuning supply portfolios to shave unnecessary procurement costs.
- Detection and reporting of voltage fluctuations.
The choice of AMR or AMI can be very difficult for the utility already partly down the road to AMR. Contracts signed and meters partially deployed are already stranded costs that must be weighed against the additional benefits of AMI. Analyses will vary, and factions may develop, with one seeing an AMR continuation as “pouring good money after bad” while the other sees it as “making the most of current investment.”
The choice is less difficult for utilities without stranded costs. Still, those with cost-conscious regulators and other stakeholders will need to size the benefits carefully and structure careful arguments for the added flexibility and much wider breadth of programs that interval metering can bring to a future in which not all community environmental needs are as yet clearly defined.
Keeping a clear eye on the role your utility envisions for itself in a future can help ease this choice. Does the community anticipate supply constraints? Are environmental concerns rising? Will the community increasingly look to utility leadership to address these problems?
Five years from now, will you look back and know that you made the right choice?
Guerry Waters is vice president of industry strategy for Oracle Utilities.
Utility Automation & Engineering T&D September, 2008
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