In every smart metering business case, that I have seen, the Utility attempts to justify its investment based on reducing costs. The specific areas where a Utility will try to reduce cost will vary. In the early days of smart metering, the focus was on looking at existing processes, and improving them. I have provided some examples of these here.
To this day, improving existing processes is at the heart of every Utilities smart metering business case, only now we are starting to see more advanced services being introduced to reduce costs. One such example is the ability to alter a customer’s energy consumption, even if just for a few hours, through demand response programs. Demand response programs have demonstrated their value in deferring or avoiding capital investments in infrastructure. Demand response is one example; there are others that can help reduce costs to justify this investment.
An area I would err on the side of caution is energy conservation. I am not opposed to energy conversation, quite the opposite, but as I wrote a few weeks ago in a post titled ‘Smart Meters: Are You Telling The Right Story?‘, don’t get confused between business benefits and the stories you need to tell the regulators and the community. In the UK for example, there is a lot of focus on providing customers with more information, so they conserve energy and reduce their bill. Energy conservation is one of, if not the major driving force for the Government justifying the rollout of smart meters, but how does this benefit the Utility?
Conserving energy is a great societal goal, but regarding your business case be careful. Conserving energy to reduce critical peak demand can defer infrastructure investments. Conserving energy to improve the load factor can make the whole system run more efficiently and lessen the cost of operations. But just conserving the overall amount of energy without there being a particular benefit to the Utility is tough to translate into a financial benefit unless the Utility is being mandated to do so, or are being subsidized to do so.
Remember, there is a big difference between the business benefits your shareholders want to see, and the stories your regulators and community want to hear. How are you reducing your costs as a result of investments in smart meters?
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