Smarter metering for more sustainable energy use

Smart Metering

With the compliments of

Logica Limited Edition

Logica’s E&U Innovation Centre in Lisbon, Portugal, showcases cutting-edge technology for the electricity, water, and gas sectors. The solutions involve competences in smart metering, smart grids, wind farm management, geospatial information systems, asset management, and metering and billing systems.

Our Innovation Centre is one example of Logica’s role as innovation partner, offering solutions that address the whole value chain.

Demos are available on request. For more information on how Logica can help you in the Smart World contact energyandutilities.uk@logica.com or visit www.logica.com/smartmetering.

Energy & Utilities Innovation Centre

A John Wiley and Sons, Ltd, Publication

By Chris Beard, Logica

Smart MeteringFOR

DUMmIES‰

Smart Metering For Dummies®

Published byJohn Wiley & Sons, LtdThe AtriumSouthern GateChichesterWest SussexPO19 8SQEngland

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Introduction

Welcome to Smart Metering For Dummies, yourguide to the exciting new world of smart meter-

ing and the impact that it’s likely to have on the utilitiesmarket and beyond.

About This BookThe words ‘exciting’ and ‘metering’ rarely make it intothe same sentence – but all that’s about to change. Smartmetering is not only set to revolutionise the meteringservices sector, it’s also the catalyst for the singlebiggest wave of change to hit the utilities industrysince the introduction of retail competition. This bookexplains the why, how, and when of smart metering andits effects on customers, suppliers, and distributors.

To keep things simple, we use the term ‘smart’ to referto smart meters and ‘conventional’ to refer to existingmeters.

Foolish AssumptionsIn writing this book, we’ve made some assumptionsabout you. We assume that:

� You work in the utilities sector and understand thebasics of how the electricity and gas markets work.

� You want to know more about smart metering and how it will affect suppliers, distributors, andcustomers.

� You understand some of the utilities and meteringjargon (we include a glossary at the back of thebook, just in case).

How This Book is OrganisedSmart Metering For Dummies is divided into six conciseand informative sections:

� Part I: Get Smart. We discuss the business driv-ers behind the move from conventional to smartmetering and the benefits to be realised by thekey stakeholders.

� Part II: What is a ‘Smart’ Meter? We explain whatmakes a meter smart and how it differs from itsconventional cousin.

� Part III: The Anatomy of an Advanced MeteringInfrastructure. We describe the key componentsof the infrastructure required to support smartmetering and attempt to demystify some of theassociated smart jargon.

� Part IV: Feeling the Impact of Smart Metering. Inthis section we take a look at how the key stake-holders will be affected by the smart revolution.

� Part V: Looking to the Future. Smart meteringwon’t happen overnight. In this part we examinesome of the long-term parallel activities that willinfluence, or be influenced by, a smart meteringrollout.

� Part VI: Top Ten Smart Tips. This nifty part is alist of the essential things to remember aboutsmart metering.

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Icons Used in This BookTo make navigating to particular information eveneasier, these icons highlight key text:

The knotted string highlights important infor-mation to bear in mind.

The Dummies man indicates real-life anec-dotes to illustrate a point.

Where to Go from HereAs with all For Dummies books, you can dip in and outof this book as you like, or read it from cover to cover –it won’t take you long!

Use the headings to guide you to the information youneed. If you require any more information, feel free tocontact us at energyandutilities.uk@logica.com.

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Part I

Get Smart

In This Part� Exploring the move towards smart metering

� Discovering the benefits for the customer, supplierand distributor

Collectively, individuals are responsible for over 40 per cent of the UK’s energy use and carbon

dioxide (CO2) emissions. Back in February 2008, theGovernment estimated that over £900 million waswasted every year by simply leaving domestic appli-ances on standby when not in use! To address this,everyone needs to become more energy savvy. Withsoaring fuel prices and more and more families fallinginto fuel poverty, the motivation for a change in behav-iour is growing. What’s missing is the informationrequired to make smarter decisions.

This part looks at the drivers for introducing smartmetering and examines the benefits for some of the keystakeholders.

Driving towards Smart MeteringSmart metering provides:

� Customers with the information they require tobecome energy savvy and make smarter decisionsabout their energy usage.

� Suppliers with the means to better understandand service their customers.

� Distributors with an effective tool to better moni-tor and manage their networks.

In addition, smart metering enables those cus-tomers who choose to generate their ownelectricity (microgenerators) to be financiallyrewarded for their contribution to the nationalgrid and distributors to better manage thiscontribution.

What’s in it for the customer?Individuals need to understand their energy consump-tion in order to make intelligent decisions about it.Currently, customers are informed of their energy usevia a bill that arrives months after they’ve used the gasor electricity. The bill typically only tells the customerthe cumulative consumption since the last bill and,more often than not, even this is estimated. It isn’t sur-prising that customers don’t feel empowered tomanage their energy use.

But providing individuals with the timely, accurate, anddetailed information they require to take control oftheir energy use is only one of the benefits that smartmetering can bring. Other benefits include:

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� Estimated bills will become a thing of the past.Customers will know what they owe and will beable to budget better.

� New, innovative tariffs will appear, tailored tomeet the needs of specific customers’ lifestyles.

� Customers will get better service such as on-demand readings (for example, on changing sup-plier or moving home).

� Smart meters will measure electricity generatedfrom domestic microgeneration, enabling house-holders to be financially rewarded for their contribution.

What’s in it for the supplier?For the energy supplier, smart metering will enable thetransformation from an energy supply company to anenergy services company. Smart metering will allow asupplier to get closer to its customers, to better under-stand and service their needs, and, at the same time,allow the supplier to reduce its operating costs:

� The cost to service customers will reduce withincreased customer self-service. Suppliers willhave fewer bill queries, complaints, and site visits.Call centre staff will become more productive.

� Meter reading costs will reduce dramatically asmeters are read remotely.

� Suppliers will be able to differentiate themselvesthrough an extended range of products and serv-ices offered into the home.

� Energy theft will be reduced through smarttamper alarms.

� Improved visibility and control of customers’ con-sumption behaviour will enable suppliers tobetter balance their wholesale positions.

Smart metering also presents a new battleground forretail competition where the customer-savvy and inno-vative supplier will triumph.

What’s in it for the distributor?UK distributors have been just a little bit late to jointhe party when it comes to smart metering comparedto their European colleagues, where the key driver is to enable the smart grid (check out Part VI).

However, here are some of the benefits that smartmetering will bring to distributors:

� Smart metering will provide distributors with theability to more accurately bill suppliers for use ofthe distribution networks in delivering electricityto their customers.

� Functionality within smart meters will enablesystem faults to be notified and located morequickly following power cuts and interruptions.

� Smart metering will give distributors better visibil-ity of their networks, enabling more cost-effectivemaintenance regimes.

� More detailed consumption data will enable dis-tributors to measure, rather than model, networklosses, reducing the need for reconciliations andproviding greater revenue certainty.

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� As with suppliers, distributors will benefit fromreduced theft and fraud through smarter tamperalerts and better monitoring of non-technicallosses.

Who else stands to benefit?Everyone stands to benefit from smart metering:

� The increased use of remotely managed Time ofUse (ToU) and block tariffs (see Part II) will helpspread the UK’s energy consumption more evenlyacross the day, easing the stress on our distribu-tion networks and reducing the need for costlygenerating plant to meet the peak demand.

� An overall reduction in energy consumption insti-gated by an energy-savvy public will reduce theimpending gap between forecast demand and gen-eration and help restore security of supply.

� Less consumption means less CO2 emissions andless climate change.

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Part II

What is a Smart Meter?

In This Part� Discovering what makes a meter smart

� Unearthing the smart impostors

What exactly is a smart meter and why is it clev-erer than the little box currently stuck on the

wall? This part looks at what makes a meter smart andhow it differs from its conventional predecessors.

Smarter than Your Average Meter ...So what makes a meter smart? Traditionally, meters situnder your stairs or in the garage and are only dis-turbed when the meter reader comes to take a reading.Well, at first sight, smart meters don’t look a whole lotdifferent as you can see in Figure 2-1. Like their conven-tional cousins, they still sit in infrequently visited loca-tions, but now they’re not even disturbed by meterreaders.

Figure 2-1: These meters look similar but are a world apart.

Surprisingly, there’s no absolute definition of what asmart meter is and this lack of a standard is one of theobstacles to a wide-scale UK smart metering rollout(which we talk about in Part IV).

However, this section delves into the widely-acceptedcharacteristics of a smart meter.

Two-way communicationIn addition to being remotely read, smart meters canbe remotely instructed and re-configured. Actionswhich, in the case of conventional meters, necessitatelengthy site visits and meter changes, can now be per-formed remotely in near-real time.

Actions that can be remotely performed with a smartmeter include:

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� On-demand meter readings. Reading a meter innear-real time in response to a customer phoningthe call centre, for example.

� Change of tariff. Changing tariff rates and tariffstructures in response to a supplier-instigatedprice change or a customer electing to move to anew, innovative smart tariff, for example.

� Change of payment method. Switching betweencredit and pre-payment modes.

� Change in read frequency. Changing the con-sumption read interval from, say, monthly to daily,or even half-hourly.

� Load limiting/shedding. Remotely controlling anagreed portion of a customer’s consumption inorder to help balance generation and demand or asa means for preventing customers from running upmassive debts while still having access to energy.

� Tamper alerts. Automatically detecting, notifying,and responding to attempts to tamper with themeter.

� Disablement/enablement. Turning supply on andoff in response to, say, a tamper alert.

� Messaging. Communicating directly with the cus-tomer via the smart meter and Home Display Unit(HDU – described in Part III).

� Firmware updates. Remotely updating the soft-ware embedded within the smart meter in orderto fix bugs or add new functionality.

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Detailed consumptionSmart meters are capable of recording consumption in far more detail than their less sophisticated, con-ventional cousins. Meter readers typically visit everyquarter but not always when you’re at home! So thelevel of consumption information available to cus-tomers and suppliers is pitiful. Suppliers have no meansfor encouraging people to change consumption behav-iour and customers have no means of knowing whattheir consumption behaviour is!

Smart meters can record very detailed Time ofUse (ToU) consumption down to half hourly andbeyond. ToU refers to a meter’s ability to recordwhen consumption takes place rather than justhow much is consumed. Customers can see howtheir consumption varies during the day andrespond to new ToU-based lifestyle tariffs thatencourage them to use cheaper energy. Changesin behaviour can have the effect of flatteningconsumption peaks which, in turn, reduce theneed for expensive, carbon-polluting peakingplant and network reinforcement.

Not just electricitySmart meters exist for commodities such as gas andwater as well as electricity. Given that electricity doesn’tmix well with either gas or water, gas and water smartmeters tend to be battery-powered. Battery technologyis constantly improving but, to avoid the costs of sitevisits to replace batteries, these meters tend to spend alot of the time asleep, waking up according to a scheduleto take and transmit readings.

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Smart electricity meters, on the other hand, have readyaccess to a power supply and are therefore frequentlyused as the means of communicating data from gas andwater smart meters. The gas and water smart meters‘piggy-back’, by communicating via low-power radio tothe electricity smart meter, which stores and forwardsthe data as additional registers within its own meter.

Export as well as importWhereas conventional domestic meters only recordconsumption, most smart meters are also capable ofrecording electricity generated from domestic micro-generation plants and exported to the distribution grid(solar panels, for example). The ability to measure theoutput from microgeneration means that customerscan be fairly rewarded for their contributions, whichmakes smart meters one of the key enablers for thewidespread adoption of microgeneration.

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Time to find out about Time of Use (ToU)A meter that can record ToU is called a ‘restricted’ meter andrecords consumption by having different registers active atdifferent times. For example, a restricted two-rate meter mayhave one register that records consumption overnight andanother that does so during the day. This enables the supplierto apply different tariff rates that reflect the differential between the wholesale cost of day-time and night-time electricity.

Not quite smart enough ...The following technologies often arise in smart meterconversation but shouldn’t be confused with the realthing.

� Automatic Meter Reading (AMR). An AMR metercan be read remotely but reading the meter is theonly remote function supported. The benefits ofAMR metering are restricted to reducing meterreading costs to the supplier and the ability to billthe customer based on actual meter readings.

� Clip-on electricity monitors. These little devicesare sensors that clip onto the cables feeding con-ventional electricity meters and wirelessly trans-mit near-real time consumption information to aportable display unit located elsewhere in thehouse. The display unit shows how much electric-ity is being consumed and how much CO2 this represents.

However, clip-on electricity monitors have signifi-cant limitations when compared to smart meters.There’s no equivalent clip-on monitor for gas orwater meters, no remote supplier access (so noneof the supplier or distributor benefits of smartmetering can be realised), and no improvement inbilling because the supplier still has to manuallyread the meter.

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Part III

The Anatomy of an AdvancedMetering Infrastructure

In This Part� Thinking about what’s needed to support smart

metering

� Communicating with a smart meter

Smart meters require different bits and pieces tosupport them and this part describes the major

components required.

Introducing the AdvancedMetering InfrastructureMost smart metering solutions will have the same basicstructure as illustrated in Figure 3-1. This structure is generally referred to as the Advanced MeteringInfrastructure (AMI).

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Home Display Units (HDUs)Home Display Units (HDUs; sometimes referred to as In-Home Display Units) are the devices that you put onyour wall or fridge to inform you about your energyconsumption. Communicating wirelessly with thesmart meter (either directly or via the Home AreaNetwork which we explain in the following section), theHDU displays near-real time information on energyusage, cost and greenhouse gas generation for both gasand electricity. A common feature is a coloured lightindicator to tell you when to run around switchingthings off!

It’s fair to say that HDUs have a way to go to becomingthe must-have stylish home accessory but it’s only amatter of time . . .

Home Area Networks (HANs)The Home Area Network enables devices and appli-ances to communicate with each other. The obviousexample is the smart meter and the HDU. However,appliance manufacturers are becoming more and moresavvy to the idea of home networking. The vision of a‘smart home’, in which appliances, lighting, heatingand security are connected and automatically con-trolled to save energy and improve occupant well-being, isn’t far around the corner.

Wide Area Networks (WANs)What makes a meter smart is its ability to hold a two-way conversation with a data communication (or‘head-end’) system. The medium over which this communication occurs is called the Wide Area Network (WAN).

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Although, in principle, smart meters couldhave their own dedicated WAN, a number ofcommunication infrastructures are already inplace that are capable of fulfilling the WANrole. These include the copper and fibre net-works of fixed line telephony providers, thecellular networks of the mobile phone opera-tors, and the power lines of the electricity dis-tribution networks.

Data Communication systemThe data communication, or ‘head-end’, system isresponsible for pulling together data from a large anddisparate set of smart meters. It handles two-way communication, sending service requests to the meterand receiving messages such as scheduled meter read-ings. In order to communicate with a smart meter, a head-end system must ‘speak’ that meter’s protocol.Unfortunately, there’s currently no smart meter equiva-lent of Esperanto, so head-end systems need to be multi-lingual. Alternatively, a smart metering solution can usemultiple head-end systems or stick with one meter man-ufacturer to standardise on a single protocol.

Meter Data Management (MDM) systemsSmart meters can produce a prodigious amount of datacompared to their conventional cousins, which typi-cally only record non-interval data (meaning only when-ever someone manually reads it, usually once everythree months). Smart meters, however, are capable ofrecording interval consumption, meaning that they auto-matically record consumption at a pre-defined interval,

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typically every 30 minutes (in the UK). So a smartmeter can produce over 4,000 times as much data ayear as its conventional counterpart.

An MDM system is a single repository capable of stor-ing the vast quantities of meter readings and other dataassociated with smart meters. It typically gathers datafrom one or more head-end systems.

Data portalGathering vast quantities of metering data is all verywell but has little benefit unless that data can be trans-formed into valuable information and made available tothose who will act on it. A data portal is the means bywhich the data collected in the MDM system is madeavailable to whoever needs it – the customer, supplier,or distributor. Some MDM products also include dataportal functionality.

How Do I Talk to a Smart Meter?When industry types start talking about smart meters,the conversation inevitably turns to communicationtechnologies. So here’s a quick primer so that you canhold your own at the coffee machine.

You can communicate with a smart meter in a number of ways, each with its own advantages and disadvantages:

� Power Line Carrier (PLC): Also known as PowerLine Communication, PLC technology carries dataacross the same power line that’s used to deliverelectricity. Meters talk to a smaller number of con-centrators (communication devices) across the

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power lines. The concentrators then talk to thecentral head-end system via a communicationtechnology such as GPRS (explained in a moment).

The major advantage of PLC is that it’s effectivelyfree. Disadvantages are the need for concentra-tors and the fact that, due to power lines beinginherently noisy environments, communicationsoften need to be repeated, leading to slowerresponse times.

� Broadband over Power Line (BPL): Also knownas Power Line Internet, BPL is the use of PLC tech-nology to provide broadband through ordinarypower lines. Using BPL, a smart meter can enjoy avirtually free, always-on connection to the centralhead-end system. However, as with PLC, BPLrequires concentrators and is subject to line noisewhich often requires a large number of repeatersto boost the signal.

� General Packet Radio Service (GPRS): GPRS is apacket-orientated mobile data service that can beused to provide an always-on wireless connectionbetween a smart meter and a central head-endsystem. GPRS uses a mobile operator’s WAN andrequires the smart meter to be fitted with a pro-prietary SIM card. Unlike BPL, the connection isn’tfree but is typically charged per megabyte of datamoved. However, it can cope with large volumesof data (for example, when updating a smartmeter’s firmware).

� Short Message Service (SMS): Also known as textmessaging, SMS involves sending fixed size textmessages via a mobile operator’s WAN using a SIM card installed within the smart meter. SMS is

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typically cheaper than GPRS and can have abroader coverage. However, SMS is less suited to the transfer of large data volumes.

� Radio: Radio waves can be used to communicatewith smart meters either locally (low power radio)or long range (licensed or private frequency). Bothrequire additional infrastructure (for example, con-centrators and/or dedicated radio masts).

� Wi-Fi: Wi-Fi is the trade name for a popular wire-less technology that enables a device to make awireless connection to the Internet via an accesspoint (or hot spot). The advantage of Wi-Fi is thatit’s relatively cheap to Wi-Fi-enable a smart meter.The disadvantage is the limited coverage of hotspots due to the fairly high power requirements.

� ZigBee: ZigBee is a low-cost, low-power wirelessmesh networking standard. Like Wi-Fi, communica-tion via ZigBee is cheap. However, it’s best suitedfor local coverage such as Home Area Networks(HANs).

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Part IV

Feeling the Impact of Smart Metering

In This Part� Looking at the effect of smart metering on cus-

tomers, suppliers and distributors

� Sharing success stories

Smart metering will have a profound effect on cus-tomers and the utilities that service them. Here,

we consider some of these impacts through referenceto real-life examples.

Impact on CustomersSo, what impact will a smart meter have on your aver-age customer?

Better informedA key objective of smart metering is to make customersmore energy savvy. The timely provision of detailedconsumption information will empower customers tomake smarter choices about how and when they useenergy. Given the continued upward trend in world

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Energy savvy SwedesThe 22,000 inhabitants of Växjö, a city in Sweden, are nowmore energy savvy thanks to an energy-efficient urban devel-opment project sponsored by the European Union (EU).Householders are now able to analyse their energy usage viaa web-based system developed by Logica. The purpose of thesystem is to increase customers’ energy awareness by makinganalysis simple and informative. The system includes a com-petitive element, enabling householders to compare con-sumption with peers and compete for prizes based onreductions in their energy consumption.

Ann-Mari Ståhlberg, President of Växjö Energi AB, said: ‘Withthis solution, we’re able to offer our customers something wealways aim for, namely, the opportunity to influence andincrease the efficiency of electricity consumption.’

energy prices, this empowerment is bound to appeal tocustomers and increase their expectations of the serv-ice they receive from their energy suppliers.

Better billedA welcome customer benefit of smart metering is thedemise of the estimated bill. Infrequent meter readingsand poor access rates mean that many customers arebilled on estimated, rather than actual, consumption.This can result in customers unknowingly running upsignificant debts and exacerbating the problem of fuelpoverty.

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With smart meters, readings are available on-demand.Smart meters are typically read more frequently than acustomer is billed. However, on-demand meter readingscan also be taken in-line with a customer’s billing cycleor a price change to ensure that every bill is based onactual consumption.

With smart meters, the only excuse for billingon estimated consumption is a faulty meter.

Getting the bills rightSwedish legislation demands that by 1 July 2009, all electric-ity meters must be read once every month. Energy companyVattenfall’s solution to this challenge was to deploy smartmeters to its customers and, with Logica as a key partner pro-viding the Advanced Metering Infrastructure, has nowinstalled over 150,000 smart meters.

Hundreds of thousands of meters reporting daily creates veryhigh volumes of data. Despite these volumes, the system hasexceeded its reliability targets, consistently running at levelswell above 99.5 per cent of collected values in a 24-hourperiod. As a result, Vattenfall experiences higher levels of sat-isfaction among its customers and fewer calls querying bills,because the bills are based on up-to-date information.Furthermore, the system provides information about poweroutages and power return for each customer, creating a valu-able quality control resource.

Erik Nordgren, Head of AMR Project Vattenfall EldistributionAN Sweden said: ‘There’s no question that automated meter-ing has helped us deliver better customer service.’

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Better servicedSmart metering provides suppliers with the tools nec-essary to better service their customers. With improvedvisibility of a customer’s consumption behaviour, sup-pliers are able to deliver innovative service offerings,tailored to the needs of individual customer types. It’sno longer a case of ‘one size fits all’.

Bringing prepayment metering into the 21st century

Mention ‘prepayment’ to most energy retailers and they gopale. Prepayment meters are typically installed for customerswho’ve had debt problems in the past. Unlike credit meters,prepayment meters require the customer to pay up frontbefore consuming energy and can also be used to recover out-standing debts over a period of time. As such, prepaymentcustomers are often perceived to be high cost, low value, andlabour intensive - why would you want that type of customer?

Instant Energy, an innovative application of mobile technologyto the prepayment market, has transformed prepayment cus-tomers into a profitable and desirable market segment.

Developed by Logica, Instant Energy is designed to replaceexisting prepayment metering technology, leading to reducedcosts in serving prepayment customers, improved customerexperience, and reduced fraud. The solution is an electricityand gas prepayment service based on SMS messaging andthe Pay As You Go (PAYG) concept. The technology enablescustomers to add credit to their prepayment meter without

(continued)

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With smart metering, existing service offerings such ascall handling, are improved. Call centre staff are able tocommunicate with the meter while the customer is on the phone and see the same information that thecustomer sees. This leads to faster calls and a higherproportion of first-time call resolution.

Impact on SuppliersThe impact of smart metering on suppliers will be mas-sive. It will not only change the way suppliers view andengage with their customers, but it will also open a newbattleground for retail competition.

Smarter processesIn 1998, customers could choose who they bought theirenergy from for the first time. While this new-foundfreedom passed many people by, the impact on suppli-ers was profound. Retail competition required a wholenew set of industry processes, data flows, and IT sys-tems. The change to the industry was monumental and,a decade later, many suppliers are still catching theirbreath.

needing smartcards, keys, or tokens - and without necessitat-ing the customer to leave their home.

Instant Energy won the British Computing Society 2005 ITProfessional Award for Social Contribution in recognition ofthe increased flexibility and control it grants customers.

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The advent of smart metering represents the nextmajor disruptive transformation to the retail market.Processes that previously took days or weeks to complete and involved many people from differentorganisations can now happen in near-real time via aself-service customer web portal. The potential forchange is breath-taking and, many would argue, longoverdue.

Smarter competitionSmart metering will create a new battleground for retailcompetition.

A new supplier must be able to service their acquiredcustomer without having to replace the customer’ssmart meter. If not, smart meters will represent aninsurmountable barrier to retail competition. So theneed to preserve retail competition is likely to force theadoption of interoperability standards and provide alevel playing field in which all suppliers have access tothe same basic smart meter functionality.

The vastly increased detail of consumptiondata available from smart metering will enablesuppliers to understand their customers’behaviour far better. They’ll be able to distin-guish the ‘early birds’ from the ‘night hawks’,the students from the OAPs, and the couchpotatoes from the socialites, just from theirenergy use. Having segmented their customerbase as never before, successful suppliers will be those that can rapidly develop newinnovative products tailored to specific typesof customers.

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Innovative product offerings are likely to combine anumber of elements such as:

� ToU tariffs.

� Block tariffs that have varying rates depending onthe level of demand over a defined period.

� Working capital tariffs that have different ratesdepending on the level of credit or debt betweenthe supplier and the customer.

Given that every supplier is likely to haveaccess to the same basic smart metering func-tionality, differentiation will be done in the

A smarter way to change your tariffAs an example of the scale of process transformation likely tocome about through smart metering, consider the humble tariffchange. Today, changing your tariff almost certainly involveschanging your meter. You call your supplier who calls themeter operator to make an appointment for the meter changeand calls you back to confirm the appointment date. Aftergoing round this circle a few times, the meter operator turns upto change the meter and, if you’re lucky enough to be in, youget a shiny new meter. The meter operator then informs every-one and his dog about your new meter and, if the gods aresmiling, you start receiving bills based on your new tariff.

This process takes days, if not weeks, to complete, involves atleast half a dozen parties, dozens of data flows, and is highlyprone to errors. In the new world of smart, you could completethis process yourself, online, in minutes.

back office and will depend on a supplier’sability to assemble modular smart meter andback office functions into a coherent, innova-tive product offering. However, a level playingfield means innovations can be copied so suc-cess will hinge on speed to market.

Coping with the transitionA smart metering rollout won’t happen overnight. Eventhe most optimistic, aggressive rollout models will takea decade or more. During that time, suppliers will befaced with the prospect of supporting two distinct setsof processes – conventional and smart – and the asso-ciated IT that goes with them.

Although the number of smart meters will initially besmall, a complete set of new, smart processes and sup-porting IT will be required from day one to servicethem. In the case of the conventional processes, it maywell be a case of letting them wither on the vine.Alternatively, suppliers may look for ‘sunset’ optionsfrom niche providers willing to take on processing ofconventional customers until such times as theysmarten up.

Impact on DistributorsIn common with suppliers, a significant proportion ofprocesses currently performed by distributors will beimpacted by smart metering.

Smarter processesEarly notification of network faults via ‘last gasp’ smartmetering functionality (that is, the ability of a meter tosend an alert on battery power following a power cut),

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should enable network faults to be located and resolvedmore quickly. However, this functionality may have anadverse effect on a distributor’s Customer Minutes Lost(CML) performance (an industry measure of the scaleof electricity outages) because the clock will start run-ning at the time of the fault rather than the time thatthe fault is first reported by a member of the public.

Smart meters may also improve the resolution of inter-ruptions by providing the ability to communicate withindividual meters to determine their state. Similarly,the ability to read meters on-demand will help toresolve erroneous customer calls (where a house fusehas blown, for example).

A distributor’s role in identifying and stopping energytheft is likely to be significantly improved through thereceipt of unsolicited tamper alerts from smart meters.

Similarly, more detailed consumption data will ulti-mately enable distributors to measure energy lostduring distribution rather than estimating losses usingcomplex models. A more accurate understanding oflosses will lead to more accurate bills, reduced recon-ciliation wash-ups, and greater revenue certainty.

Smarter billingAs with suppliers, distributors will have the ability tooffer more innovative Distribution Use of System(DUoS) tariffs based on the greater detail of consump-tion data available from a smart meter. An increase indistributed energy may force a major re-think of theway in which distributors charge suppliers for use oftheir networks. DUoS tariffs are typically related to theamount of energy consumed by customers. However,an increase in microgeneration and heat technologiesmeans customers will import less energy, resulting in

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lower revenues for the distributors. However, invest-ment in new systems to control the two-way flow ofenergy is likely to increase the cost of maintaining a dis-tribution network. So distributors’ current cost recov-ery mechanisms are likely to require a major rethink.

The smart gridA smart grid is a transformed electricity transmissionand distribution network that uses robust two-way com-munications, advanced sensors, and distributed com-puters to improve the efficiency, reliability, and safety ofpower delivery and use. A UK smart grid is probablyfurther off the radar than in most other European coun-tries, but the drivers for a smart grid (such as the likelyincrease in microgeneration, the need to manage activenetworks, and so on) are the same.

Energy networks need to become intelligent.Additional remote monitoring across the net-work will be required to feed data into predic-tive modelling that will enable distributors toactively manage two-way electricity flows(that is, electricity flowing both to and from ahousehold) across the network. Two-wayenergy flows mean that isolating parts of thenetwork for maintenance will become morecomplicated. New safety procedures will berequired to ensure that field staff are pro-tected from electrocution.

Smart metering will be an essential component of thesmart grid, delivering the detailed load and flow infor-mation required to enable distributors to manage thenetwork effectively and support investment decisions.How quickly this becomes a reality in the UK is anothermatter . . .

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Impact on OthersThe impact of smart metering will extend beyond cus-tomers, suppliers, and distributors. Here are a fewother parties who are likely to feel the effects of thetransformation:

� Meter manufacturers will need to produce thetens of millions of meters required to smarten upthe conventional metering infrastructure.However, suppliers will need to agree on a mini-mal level of smart meter functionality before theproduction lines can begin in earnest.

� Meter operator numbers will double or treble to achieve a ten-year UK smart metering rollout.

Smart EuropeansIn 2005, the SmartGrids European Technology Platform forElectricity Networks of the Future was formed. SmartGrids (asit’s known to its friends) aims to provide a shared vision for aEuropean electricity network for 2020 and beyond. TheSmartGrid must be flexible, accessible, reliable, and sustain-able while remaining responsive to the rapidly evolving needsof its customers. SmartGrid’s goal is to change the mindset ofthe industry into adopting new technologies, addressing realconcerns over security and reliability and embracing theSmartGrid vision.

SmartGrids is backed by the work of IRED (Integration ofRenewable Energies and Distributed Generation), a cluster ofEuropean projects with €35 million of EU funding and over 100stakeholders from research, industry, and the utilities sector.

Dual-fuel sites will require either a new breed ofmulti-skilled meter operator or close co-operationbetween existing gas and electricity meter operators.

� Data collection will become a virtual activity asincreasing numbers of smart meters are readremotely.

� Data processors will need to respond to the chal-lenge of smart meters and the associated increasein data volumes.

� Water utilities with a 100 per cent metering policy(either due to water scarcity, leakage, or both)have the opportunity of piggy-backing on a gas/electricity smart meter rollout to accelerate theirmetering programmes and/or deliver them atreduced cost.

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Part V

Looking to the Future

In This Part� Delving deeper into microgeneration

� Living in a smart home

Smart meters aren’t going to magically appearovernight. Even the most aggressive rollouts will

take years, if not decades, and the world at the end of asmart metering rollout will be very different from thatat its start. In this part, we look at some of the parallelactivities that will influence, or be influenced by, awidespread rollout of smart metering.

Creating a Buzz in Your OwnBackyard: MicrogenerationThe introduction of microgeneration (households pro-ducing electricity from, for example, solar panels) willfundamentally change the relationship between cus-tomer and supplier. No longer a one-way transaction ofthe customer paying the supplier for delivered energy;the customer will also sell to the supplier and take onthe role of a trading partner.

Microgeneration has a huge potential to minimise trans-mission and distribution losses and offset some of theimpending energy gap threatened by the plannedretirement of 50 per cent of the UK’s current generationcapacity by 2020.

For microgeneration to flourish, it needs improvementsin technology, a system of financial reward, and, notleast, a means of measuring the power generated.

Significant growth in microgeneration willpresent challenges to distribution networkoperators who will now need to manage activenetworks (those in which electricity can flowto and from a customer).

Distributed generation will meet demandlocally but less predictably, increasing thechallenge of scheduling the central generationplant effectively by the system operator.Demand is likely to become more volatile,increasing the challenge faced by suppliersand traders in forecasting wholesale demand.

Smart meters, with the capability of measuring exportin addition to consumption, form the key enabler ofthis microgeneration revolution.

Home, Smart HomeImagine arriving home from work. As soon as your digi-tal key unlocks the door, your house adjusts the light-ing, heat, and window blinds to your liking and puts onyour favourite music in the kitchen. In your absence,the house has fed the cat, ordered more milk, turnedoff the TV that your kids left on in the morning, andkept electronic vigil over your property.

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And that’s not all. In response to an updated half-hourlytariff from your energy services company, your househas turned off your freezer and fired up your fuel cellmicrogeneration unit to sell power to the grid.

A bit far-fetched? Just think of how homes havechanged in the last five years.

For this scenario to become a reality, technology needsto elevate the customer from operator to strategist.The customer takes the strategic decision to adopt asmart tariff and technology takes responsibility fordelivery. In this type of set-up, where you no longerneed to think about when to run the washing machineor dishwasher, half-hourly tariffs become feasible withprofound implications for both wholesale and retailenergy markets. Yet this vision is only conceivable in aworld with smart metering.

Smarter SettlementThe energy consumed by a supplier’s retail customersmust be purchased on the wholesale market. Theprocess by which suppliers settle for their wholesalepurchases is likely to experience a transformation trig-gered by smart metering.

In the UK, wholesale purchases are settled forevery half hour. Half-hourly customers are thosethat are sufficiently large to warrant their consumption being metered on a half-hourlybasis. Non half-hourly customers are those withsmaller consumptions that don’t warrant theexpense of a half-hourly meter. For these cus-tomers (the majority of people), a system of

profiling is used to turn infrequent meter read-ings into estimates of half-hourly consumptionso that it can be settled on the wholesalemarket. This process is called settlement.

As suppliers learn more about their customers throughthe increased detail of consumption data provided bysmart meters, their product offerings will expand asthey identify and target specific types of customer.Some of these products will be designed to encouragebehavioural change through innovative lifestyle tariffs.However, for suppliers to realise the benefits of thechanges in customer behaviour that they’ve broughtabout, these changes need to be recognised in thewholesale settlement.

The system of profiling used for non half-hourly settle-ment uses a relatively small set of profiles, changes towhich are lengthy and difficult. This isn’t conducive toa fleet-of-foot supplier looking to differentiate them-selves by rapid deployment of new products.

The alternative is for the supplier to move their cus-tomers into the half-hourly settlement process wherethey’ll settle for their customers’ consumption on ahalf-hourly basis. Barriers currently prevent this fromhappening but none are insurmountable.

A mass migration of domestic customers to the half-hourly settlement process will see an explosion in datavolumes because annual half-hourly settlement of anunrestricted customer requires over 4,000 times asmuch consumption data as is now the case. While thecentral settlement systems will be insulated from thesevolumes by data aggregation, the settlement agents willbe faced with a profound challenge.

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Smarter BalancingKeeping the lights on is the job of the system operatorwho must ensure that exactly enough electricity is gen-erated to meet demand on a minute-by-minute basis. Inthe event of unexpected demand or unplanned outagesof generation plant, the system operator invariablyturns to the generators to provide the flexibilityrequired to restore the balance between demand andgeneration. Market mechanisms do exist to allow sup-pliers to contribute to the balancing process but thesehave rarely been used.

With the better visibility and control overtheir customers’ consumption provided bysmart metering, suppliers will, for the firsttime, have the tools necessary to actively par-ticipate in the balancing process and realisethe financial benefits this offers. This won’thappen overnight. Nor will it apply to a sup-plier’s entire customer base, but there are customers out there with predictable, inter-ruptible loads who could be helping thesystem operator to keep the lights on.

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Part VI

Top Ten Smart Tips

This part is small but packs a punch! Here are ourtop tips for surviving and thriving in the smart

world.

Firstly, some general pearls of wisdom:

� Think of smart metering as an opportunity, not a threat. Smart metering is coming and the suc-cessful companies will be those that embrace thetechnology.

� Think about the process, not the meter. To date,a lot of attention has been focused on the box onthe wall but it’s time to start thinking about howto transform your business to exploit the opportu-nities that smart metering will enable.

� Remember that rollout must be watertight. Therollout of smart metering offers a unique opportu-nity to address long-standing, acknowledged dataquality issues in the energy sector – but only if weget the rollout right!

� Smart won’t happen overnight, so be preparedfor the long haul. Even the most aggressive roll-out models are likely to take a decade or more –be prepared to continue to support your conven-tional processes alongside your smart processesor, alternatively, look for sunset options.

� Learn from others. Look to countries that are further down the smart road, like Italy, the US, and the Nordic countries, and learn from theirexperiences.

Here are our tips for the energy suppliers:

� Use smart meters to get closer to your customers.Smart metering offers a unique opportunity to better understand your customers’ energyneeds – so use it!

� Be prepared to be different. The successfulsmart supplier will be the one that can rapidlytranslate customer insight into innovative productofferings. Make sure your IT systems are ready forthe challenge!

� Differentiate in the back office, not the meter.Innovations within the meter belong to everyonebecause everyone is likely to have access to the same basic smart metering functionality.Innovations within your back office are yoursalone.

� Get ready for data – and lots of it. Better cus-tomer insight comes from more detailed consump-tion data. Ensure you have the systems to handlevastly more data than you do today.

� Remember that customers are people too! Thetransition from conventional to smart meters willbe exciting and disruptive, not least for the cus-tomer. Make sure you have adequate informationand support in place to help them through thetransition.

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Glossary• AMI: Advanced Metering Infrastructure.

The hardware, software, and communica-tions infrastructure required to supportsmart metering.

• AMR. Automated Meter Reading. The ability to remotely read a meter.

• BPL. Broadband over Power Line. The useof Power Line Carrier (PLC) technology to provide broadband through ordinarypower lines.

• CHP. Combined Heat and Power. The useof a heat engine or power station to simul-taneously generate both electricity anduseful heat.

• Clip-on meter. A low-cost sensor thatattaches to the existing conventional elec-tricity meter and sends consumption datato a wireless monitor elsewhere in thehouse, showing customers how muchelectricity they’re using in near-real time.

• CML. Customer Minutes Lost. An industrymeasure of electricity outages experi-enced by customers.

• Concentrator. A device required to sup-port Power Line Carrier (PLC) communi-cation between the head-end system andPLC-enabled smart meters.

• DUoS. Distribution Use of System. Thecharges levied by the distributor on the supplier for use of the distributor’snetwork in supplying the supplier’s customers.

• ERA. Energy Retail Association. An organi-sation representing the major electricityand gas suppliers in the domestic marketin Great Britain.

• Firmware. A computer programmeembedded in a hardware device.

• GPRS. General Packet Radio Service. Apacket-orientated mobile data service thatcan be used to provide an ‘always on’wireless connection to a smart meter.

• HAN. Home Area Network. A networkwithin the home that enables devices andappliances to communicate with eachother.

• HDU. Home Display Unit. Also known asIn-Home Display Units (IHDs), thesedevices communicate with smart meters,either directly or over the Home AreaNetwork (HAN), to display energy-relatedinformation to the customer.

• Head-end system. The central componentof an Advanced Metering Infrastructure(AMI) that communicates with smartmeters in the field.

• IHD. In-Home Display unit. Another termfor Home Display Unit (HDU).

• MDM. Meter Data Management. A singlerepository of meter-related data (billing,settlement, demand forecasting, and soon) that can gather data from multiplehead-end systems and make this availableto multiple applications.

• Microgeneration. The production of heatand/or electricity on a small-scale from alow carbon source.

• PLC. Power Line Carrier. Also known asPower Line Communication, this is a tech-nology used to carry data across the samepower line that’s used to deliver electricity.

• SIM. Subscriber Identity Module. A smartcard that stores data for GSM cellular tele-phone subscribers.

• SMS. Short Message Service: a low cost,message-based alternative to voice callsthat can also be used by a head-endsystem to communicate with SMS-enabledsmart meters.

• Smart Grid. A transformed electricitytransmission and distribution networkthat uses robust two-way communications,advanced sensors, and distributed com-puters to improve the efficiency, reliability,and safety of power delivery and use.

• Smart Home. A home in which systems(appliances, lighting, heating, air-conditioning, and so on) are connectedand remotely controlled over a Home Area Network (HAN) to save energy andimprove comfort, safety, and conveniencefor the occupants.

• SOA. Service Orientated Architecture. Asoftware architecture where functionalityis grouped around business processes andpackaged as interoperable services.

• ToU. Time of Use. The ability to recordwhen a customer uses energy in additionto how much they use.

• WAN. Wide Area Network. In the contextof smart metering, the WAN refers to thecommunication infrastructure used tocommunicate between the smart meterand the central data comms (‘head-end’)system.

• Wi-Fi. The trade name for a popular wire-less technology that’s increasinglycommon in home networks, mobilephones, and video games.

• ZigBee. A low-cost, low-power wirelessmesh networking standard that’s becom-ing an emerging benchmark for HomeArea Networks.

A Reference for the Rest of Us!TM

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BUSINESS

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The Challenge The town of Växjö, in Sweden, was chosen as one of three sites for an EU-funded trial of smart metering and reporting technology.

Swedish energy company, Växjö Energi AB (VEAB), worked with Logica to develop and implement the trial, equipping 20,000 households within the town with a smart meter and develop-ing an innovative reporting system, EnergiKollen.

The SolutionEnergiKollen is a web-based solution with easy-to-follow graphics outlining changes in energy consumption. Custom-ers of VEAB can log on to the service over the Internet free of charge in order to analyse their usage of electricity, water, and heating. By enabling the comparison of energy consumption (for example, energy use between similar sized apartments), customers are motivated to lower their usage, thus actively contributing to a reduction in the country’s carbon footprint.

The BenefitAnn-Mari Ståhlberg, Chief Executive Officer of VEAB said: ‘VEAB is part of many initiatives contributing to a better environ-ment and we are in the forefront when it comes to sustainable energy development. We have succeeded in reducing carbon dioxide emissions from fossil fuels by 86 per cent since 1993, while reducing the total amount of emissions by 30 per cent per capita in the town of Växjö. With EnergiKollen we can build on our achievements and offer our customers what we always strive for – namely the opportunity to impact and reduce energy consumption.’

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Discover the impact and future benefits

of the smart revolutionRegulation to tackle climate change is forcing utilities like yours to reduce energy consump-tion and carbon emissions. Smart metering is a key enabler to achieving this. Lower con-sumption means lower revenues but smart offers the possibilities of new innovative services. It is also the foundation of the ‘Smart Grid’ and a means for managing the impend-ing growth in microgeneration.

This guide will help you understand and realise the full value of being smart!