AMI = Smart Meter + Smart Customer + Smart Utility by Chris Trayhorn, Publisher of mThink Blue Book, May 14, 2007 The business world seems to be all about “smart” these days. You have smart cars, smart money, even smart mobs. The utility industry is no laggard in this wave of smartness. “Smart meters” is one of the current buzz phrases that quickly invoke discussions about “smart grids” and eventually “smart customers.” All this is via the smart technology known as advanced metering infrastructure (AMI). But smartness will not come cheap. The investment in AMI is significant; north of $130 per customer at current market costs. The business cases for such projects focus heavily on the meter – what type with what functions; the network required to collect all the data and what systems; new and current ones modified that are required to process the tidal wave of data AMI will generate. The benefits are no more meter readers, far more efficient operations and customers who demand responsive. Today it is estimated that only 10 percent of U.S. customers have some form of automated meter reading device. And although that number will change by a healthy level in the next five to seven years, widespread implementation of AMI is still in the planning and pilot stages at many utilities. This is not out of desire to implement AMI but because the business case does not balance. However, the industry has an opportunity to change the balance of cost-tobenefit in their business cases. By aggressively adopting open standards, the cost of AMI meters can be reduced significantly and the applications that “harden” some of the “softer” benefits in business cases can be effectively developed. The fundamental shift in thinking that is required is the realization that AMI is not a meter system replacement. It is transformational. It is a classical innovators’ dilemma. AMI is a computer and communications system. It is hardware and software. Forget meters. Think computers. Think applications! Let’s first take a look at the key components of AMI – the smart meter, the smart customer and the smart utility – and then consider the challenges this vision presents. Smart Meter AMI starts with a smart meter. The frequent question is, how smart? Is an AMR meter with some application integration in the back end sufficient? AMR automates the collection of meter reads. No more meter readers doing their appointed rounds on a monthly cycle. Instead trucks make the rounds at up to 35 miles per hour and AMR meters transmit their reads. Or a fixed network of varied technologies collect the reads, perhaps more frequently than monthly, but all to the same end – replace people with automated meters. But consider the AMI vision. Your electric meter is really “smart”; it has an embedded computer; it tracks and stores all the vital information about your energy use; and it communicates your usage and other interesting information back to the utility on demand. It will send out a distress call to the utility when the power is out. It can connect to an in-home, IP-based LAN that communicates with all your appliances, monitoring them and, in times of power shortages, can even change the operations of these appliances. AMI requires a meter that is functionrich and able to provide information in near-real time. It needs to be two-way, upgradeable, programmable and extensible. This ups the ante when the decision as to what type of meter and how smart it needs to be is considered. Accordingly, it significantly increases costs. Most business cases treat the AMI meter as 20-year utility property. With over 75 percent of the AMI cost in the meter, its associated network and its installation cost, changing out this infrastructure in a near- or medium-time horizon will be a financial problem to the business case. A five-year horizon like that used for computer equipment would quickly sink most business cases. Nonetheless, conceptualizing the meter as a computer versus a utility meter is the defi ning change in perspective required for achieving AMI benefi ts (see Figure 1). And with this realization enters the opportunity for the fundamental, aforementioned shift. The AMI meter is a computing platform and thus the value comes from the applications it supports – not just the functions it replaces or automates. These are applications that support the smart customer and the smart utility. The Smart Customer For AMI benefi ts to be realized you need a “smart customer.” A smart customer is both informed and empowered in regard to their energy use; informed because they know their energy use and its associated cost over time and how that energy use is derived from all the energy-consuming devices in their premise. Moreover, a smart customer is an empowered customer. It does little good for a customer to receive hourly or even sub-hourly energy and cost information if they have no idea what to do with the information. They need access to a set of easy-to-use applications that allow them to visualize the cost of their energy behaviors and to make informed decisions on how to change those behaviors. These applications need to have the ability to perform what-if analyses to support customers’ energy and cost-effi cient behaviors. And even more ambitiously, the AMI system needs to deliver real-time price signals that alert customers of highcost conditions and that allow utilities to send signals directly via a meter connected to a customer-premise LAN that is able to control customer energy-consuming devices. The Smart Grid Utilities need to be smart for the business vision to work. Utility support for operations in today’s world is basically forensic in nature. Take outage management, for example. Generally the utility waits until enough customers call to report an outage to triangulate on the source of the problem and begin restoration operations. In the case of a grid component failure such as a transformer explosion, they wait until the explosion happens, usually unaware of its impending failure. Why? Because they have generally no telemetry installed to give them the required information before the customer calls or the transformer blows. But with AMI meters deployed to all customers, the utility gains the ability to continuously monitor the operational status of the network at the end points. Network component failures are instantaneously observable and can be isolated directly to the limited portion of the grid impacted. During an outage, the utility already knows a customer’s power is out and is able to provide a timely and accurate estimate for the time of restoration when a customer calls. On an ongoing basis, the history of key metrics such as distribution loading – from which key operational metrics of transformer performance can be induced – are collected and analyzed. Predictive maintenance and the replacement and upgrade of network devices are managed more effectively and effi ciently. The distribution grid is managed predictably instead of forensically because the AMI system can operate as a proxy for many of the historical functions of OMS and SCADA. Challenges If this compelling vision of the benefi ts of AMI did not have its challenges, the current less than 10 percent penetration rate of AMI in the U.S. would be much higher. It turns out the challenges are formidable. The first challenge is the cost for the function required. AMI meters are very expensive relative to their predecessor, the electromechanical meter. Clearly, a meter that is much “smarter” and more function- rich than an AMR meter is required to realize the benefi ts of AMI. Such AMI meters exist in the market today and are generally too expensive to be deployed on a large scale to all customers. A signifi – cant element of the cost is in its research and development. As R&D is amortized and manufacturing capabilities grow and mature, one can expect the cost to decline, which has already occurred over the past few years. But for AMI meters to reach the near commodity status of today’s electro mechanical meters, the industry needs take a page out of the computer and telecommunications industries’ playbook. They need to embrace standardization and openness in this technology. AMI is, after all, a computer and communications network, and the recent history in both industries is a dramatic example of what open standardization can do to drive down costs and deepen functionality. The second challenge focuses on the set of applications required to realize both the smart customer and the smart utility. These are customer applications that can provide the information that customers will access to become informed and empowered. These are also utility applications and analytics that support operations, as well as the integration of these applications into the operational processes of the utility. Both sets of applications require a fundamentally different view within the utility in regard to the basic systems and business process supporting customer information and utility operations. Implementing these systems both through new systems and modification and adaptation of current systems is complex. Most business case analysis focuses on the obvious issue of scalability due to the large increase in raw data processed within the utilities systems. But the problem is much more pervasive than data volume. The integration required between batch-orientated billing systems, real-time outage systems and near-real time customer information analytics applications – all utilizing the same data stream from the same AMI system infrastructure – is as complex and sophisticated as any system the industry has yet implemented. The important starting precept is that the AMI system is a complex collection of multiple, interrelated computer and communications systems, not all of which are operating at the same temporal cadence. Effective integration of these systems is the controlling problem impacting successful implementation. The process of planning to add a new meter data management system that connects to the AMI network, and connecting it to the current utility systems through currently employed techniques, will more than likely deliver sub-optimum results. AMI systems cannot be glued together in some gerrymandered architecture. A much more robust, flexible and extensible architecture is required. Again, as with the meter, standardization and openness is an absolute requirement. Building systems around Web services and SOA architectures is already adopted by industries with the same fundamental problem of building similarly complex and extensible systems. Only through such open and standard state-of-the-art architectural approaches will AMI applications be successfully and effectively integrated to perform all the functions required to achieve AMI benefits. Adopting open standards for both the meter and customer and utility application development will drive the cost of AMI implementation down dramatically and increase the realizable benefits to both the customer and the utility. It will also enable the level of application innovation required to deliver the benefits of AMI. AMI champions need to focus on computer systems and applications – and not on the replacement of electrical measuring devices – to be successful. It’s the smart thing to do! Filed under: White Papers Tagged under: Utilities About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.