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14 | 24TH - 30TH OcTOber 2014 | UTILITY WeeK Beyond smart metering The smart meter alone will not deliver the complete business model transformation. This will require better connectivity between the regulated smart meter system and the wider world of connected technology (see figure 1, p12) and achieving this connectivity will require the understanding and co-oper- ation of consumers. However, the exploded visibility that the national smart meter roll- out will bring, over a few short years, is undoubtedly an important stepping stone towards a redefinition of energy suppliers. That said, it will take more than simply the installation of millions of smart meters to enable the business models described to emerge – or even for less exotic service ele- ments to appear such as the ability to make comparisons between the energy consump- tion of one home with a similar home in the same area. The challenge of engaging consumers with the potential benefits of smart meter- ing and gaining their trust to the extent that they give permission for their data to be used for energy management schemes should not be underestimated. Furthermore, assuming engagement and trust can be gained, utilities face further challenges in constructing new service architectures and business processes in a highly regulated landscape. Then, there is the relentless march of competition and technology to contend with, both of which could sideline the smart meter as the primary tool for energy management in the home, according to experts. Neil Pennington, director of smart inno- vation at RWE Npower, says: "Energy has a lot of incumbent issues to deal with before it can really take advantage of a lot of these trends and ideas. Look at the reports on customer trust that put utilities at the bot- tom of the league table – then look at rising paranoia about privacy and think about the challenge of getting people to opt-in to half- hourly smart meter readings." If utilities work hard to rebuild trust and partner strategically with firms in other sec- tors whom customers are already more open with, then this problem can be overcome, says Pennington, and he is excited about the prospect of customer-centric "ecosystem" realignment across sectors. But then there's regulation to contend with. "There are a lot of barriers in regu- lation and market structure, which work against traditional business models being able to exploit all that modern technology has to offer," confirms Pennington. It is not much consolation, but Penning- ton observes that this is not only a problem in the UK. He recently took part in a three- day thinktank for the US renewables supply chain, which concluded that their regulators were also "not responding fast enough to changes in consumer demand". That said, Pennington believes change is both inevitable and imminent. "Innova- tors will not wait to see the system centrally Beyond Smart metering THE Topic Who else is getting smart? Ahead of the game Electralink is track- ing the installation of smart meters across the UK. However, its records do not indicate whether the smart meters being installed today are compliant with the SMET 2 technical specifications set out for the government- led smart meter rollout programme. smart meters in the uK designed," he says. "They will do things – I don't know what – to accelerate change because they will be able to demonstrate the benefit to the consumer." Both Siemens' Henry and Npower's Pen- nington expect new names to arrive in the energy landscape over the next few years – perhaps initially in the US, but then closer to home. It is a development that could pose a threat or an opportunity, depending on how nimble and clever utilities can be at posi- tioning themselves with relevance to the customer. Henry sees potential for brands with data aggregation and analysis capabilities (and customer trust) to be able to muscle in on the energy management value proposition. These players would be able to sell them- selves as a providing a substitute service alongside their core product, and essentially bypassing the role of the smart meter in delivering value-add energy services. "[Smart meters] will only transform the service element of the energy market if the regulator rules that the only way to manage domestic energy is via the smart meter," he says. This prospect means that collaborative partnerships must be sought out and struck soon. "Everybody's trying to find the angle," says Pennington. "It's not just about having a customer relationship, but about how that customer views you and whether they will give you permission to bring them a new business model." Partners from other sectors might be ideally placed to help utilities get that permission. China: Smart grid investments will reach $96M by 2020. According to Bloomberg New Energy Finance, China now has more than 250 million smart meters installed US: $45 billion has been allocated to grid updates including $435m for smart grid demonstrations. Over 38,500,000 residential smart meters have been installed in the US according to the US Energy Information Administration. South Korea: A $65m government investment has enabled a demonstration smart grid on Jeju Island which supports 6,000 households. A nationwide roll-out is planned by 2030. Japan: Similarly to the UK, Japan aims to have a smart meter in every home by 2020. The Japanese Federa- tion of Electric Power Companies is also establishing a smart grid with US$100m of government support. Source: Litmus report Energy 3.0: An Industry in Transformation. Full report at: http://bit.ly/Energy3Litmus Cumulative smart meter installs, Jan 2012 - Sep 2014 119,679 61,369 29,097 50,904 67,127 Source: ElectraLink 95,357 75,795 118,869 78,621 139,448 107,994 64,231 45,599 15,317