Deus ex machina?

Marcus Torchia tells Power & Energy about the growing prevalence of the M2M market.

The M2M industry in North America is expected to represent a $180 billion business by the end of 2008. This significant growth potential is being helped by the utilities industry improving the delivery and management of energy through communications enabled metering equipment. By having improved access to information at the point of demand, utilities can manage the costs of energy with greater accuracy and, ultimately, tighter cost control. With the right business model, utilities expect to reap significant short- and long-term savings. The most prevalent business case for the utilities is reducing peak load demand.

Until now, much of the utilities industry focus has been on industrial and commercial demand response solutions. These business customers see a direct benefit and can more easily justify the investment as cost reductions flow to the bottom line. With residential customers, the value proposition is not as strong and we’ve seen a slow pace of adoption for innovative M2M solutions. Certainly, residential customers are motivated to reduce costs, but the lack of adoption has been a supply side shortcoming, most directly related to the lack of available, affordable solutions. With falling communications component and service costs, M2M communications is a viable approach to tie together tens of millions of end points on the grid.

For example, Oncor Electric Delivery Co recently announced its plan to deploy 3 million smart meters to Dallas customers. The Dallas utility expects to pass on the cost to the customers through a reasonable surcharge, expected to fall under $3 a month. In theory, Oncor should be able to pass on the savings to the customer by limiting opex and capex typically spent on additional capacity and transmission costs: Oncor joins a cacophony of utilities to bring better management to energy consumption. In other states, Californian utilities are winding proposals through the state’s regulatory agency, California Energy Commission. The proposals are aggressive, trying to mandate that utilities have access and control of new residential homes’ thermostats. With M2M connected thermostats, the utility can turn back or completely shut off a building’s energy draw in emergency peak usage circumstances. The new proposals are attempting to circumvent an individual’s decision to participate and forcibly assert control over a private home’s internal environment. While it is being met with resistance in some quarters, it is expected to pass within a stringent set of conditions.

Times are changing
Historically, the M2M industry has been quite bullish about the utilities industry’s potential to be a blockbuster market segment. It does, after all, hold the promise of tens of millions of connections. However, the North American demand drivers were slow to materialize over the past decade and subsequently market growth lingered when compared to European markets. The major difference has been Europe’s steadfast commitment to global carbon emissions reductions and subsequent political successes in backing national programs to reflect environmental priorities. In the US market, there has been a lack of political mandate by the current administration, indicative of a larger debasing of responsibility of environmental stewardship by the US. Instead, the market’s current appetite for AMI is driven by energy cost control, rather than carbon emissions reduction, coupled with the farcical excuse to reduce foreign energy dependence for national security reasons. Now, AMI is high on the radar with surging fossil fuel prices showing few signs of easing.

An AMI/AMR solution, while focused on energy demand, consumption and management issues, in fact touches a number of assets in the business and the home that become part of a larger ecosystem of M2M devices and services. Utilities, meter manufacturers and software vendors serving the utilities market will find opportunity to create additional value by bridging the need for communications with other market activities. Anything that creates a load becomes an integration point, such as a dishwasher, or light fixtures; at the same time, in adjacent markets such as home healthcare, entertainment, and building infrastructure, vendors and service providers will struggle to tackle the same issues around device management, security, communications networks. It behooves utility focused companies to become familiar with other innovation areas and establish a dialog among leading vendors. A tangible output would be a shared vision for infrastructure and system functionality that shifts buildings, and their power drawing assets, from passive and inefficient, to predictive and optimized. All of this would need to take place in a larger conversation around M2M interoperability across multiple industrial or vertical segments.

AMI/AMR is evolving from improving simple meter reading processes to providing a service wrapper around energy usage; for example, meter reading has moved from fully manual, to semi-automated reading over the course of the last 10 or so years. Today, thought-leading utilities are certain that quickly moving to automated meter reading will provide new benefits and opportunities through real-time data access.

With this kind of access and control of energy information, a utility can increase cash flow through faster billing cycles, improve customer satisfaction and loyalty through incentives and self-adminstration as well as decrease opex with the reduction of payroll expenses and more accurate energy purchases.

A smart connection
The biggest challenge in integrating meter equipment with communications is becoming expert with the unique nature of wireless and deciding among the myriad choices to network a device. In a vacuum, ample opportunity exists to make poor technical choices; the choices cover a range of areas that include wireless bearer, communication hardware, development environment, application architecture, device management, security, provisioning and more. A company like Itron, for example, is a market leading utility meter manufacturer: Itron is not a device networking company by business, but had to get smart in order to build their solutions. As the M2M market continues to mature, robust tools and products are more readily available for developers to create a well-designed product or service.

While some wireless technologies are better suited for meter reading, which can change depending on a myriad of factors including existing infrastructure, appetite for risk, density of reads or meter life cycle, wireless connectivity comes in various forms that include licensed and unlicensed solutions, with differences in range, capacity, speed, architecture, standards, TCO and initial price. Subsequently, the technical challenges should be considered along side those of the business. This in itself can present a new set of unique issues.

However, a significant promise of M2M is its capacity to create service wrappers around core processes. Like many early market solutions, M2M service innovations involve cost reduction and quality improvement programs; cost structures and services levels are widely benchmarked in a company and creating business cases is far less risky than embarking on revenue generating programs. As the technology and the means to innovate improves, the initial infrastructure investment can be leveraged for new innovative uses that include revenue generating opportunities. Utilities will deploy AMR to reduce truck rolls and increase customer service quality levels. Utilities can then use the same investment to extend new services into the business or the home for new revenue streams.