A combination of new demands from regulatory agencies and increasing pressures from market forces is driving the adoption of AMR in Europe. At the same time the mobile industry is discovering the business potential in providing wireless M2M communication services for automated meter reading. In the future mobile operators may offer turnkey meter reading solutions for the utility sector.
Europe is silently gearing up for all-out implementation of AMR in the energy sector. Liberalisation of the electricity markets in all 25 European Union member states should be completed by 2007. However, previous experience in countries such as Sweden, where liberalisation took place in the late 1990s, shows that there are inevitably going to be teething troubles when market forces are unleashed across the European energy sector. Swedish consumer organisations have complained loudly about increasing prices, inaccurate electricity bills and problems with changing electricity suppliers. Consumer confidence in the Swedish energy industry has dropped dramatically over the last few years, according to a major survey published in 2004. A combination of consumer discontent and a political ambition to promote energy conservation resulted in the decision by Swedish authorities to require monthly readings of all electricity meters from 2009.
OTHER COUNTRIES MAY FOLLOW
Developments in Sweden are being closely followed in the neighbouring Scandinavian countries, as well as elsewhere in Europe. The Norwegian parliament has asked the government to launch an investigation into whether Norway should adopt a metering regulation similar to the Swedish model. Large-scale trials of different AMR solutions are being executed by major power utilities in the country, who anticipate new regulations in a few years’ time. Some utilities have even decided to deploy full-scale AMR immediately.
This is already happening in Denmark, where two of the country’s five largest power utilities announced ambitious AMR projects during the first half of 2004. Sydvest Energi awarded a contract for an automated meter reading solution covering all its 156,000 customer sites to the Finnish energy metering solution supplier Enermet. The contract, worth €21 million, should be completed by 2007. Recently NESA, Denmark’s largest power distributor with over 550,000 customers, announced plans to introduce full-scale AMR across its entire distribution area. Installations will begin in 2005 and should be completed before 2010.
Unlike its Scandinavian neighbours, Denmark has not raised the possibility of stricter metering regulations in the future. NESA and Sydvest Energi are both introducing AMR of their own free will, to improve customer service and promote internal efficiency. Increasing competition is expected in the Danish electricity market, as major players such as E.ON, Fortum, Statkraft and Vattenfall consider entering the country, and accurate energy bills could help strengthen customer relations and loyalty in more challenging market conditions. The projects are likely to inspire other Danish power utilities to take similar initiatives. Most of Denmark’s 90-odd power utilities are relatively small and owned by local municipalities.
FIRST LARGE-SCALE MOBILE AMR SOLUTION
Another interesting aspect of the developments in Denmark is NESA’s choice of technical platform for meter data collection. For the first time, a large-scale AMR system connecting hundreds of thousands of meters will rely entirely on mobile communication. GSM is rapidly replacing fixed line telephony as the main communication method for industrial meters collecting hourly values, but costs have so far been too high to be justifiable for residential metering. The customised solution, called NESA Smart Read, has been developed in co-operation with RTX Telecom in Denmark and Uni-Meter in California. Denmark’s number two telecom operator Sonofon will provide data communication services over its mobile GSM/GPRS network.
Data communication services for utility meters are a welcome new business opportunity for the mobile industry. Declining profit margins for traditional voice call and text messaging services put mobile operators under pressure to find new revenue streams for their networks. A slow start for 3G multimedia services among consumers, contrary to expectations during the Internet boom, forced the mobile operators to look for industrial applications for their services.
Machine to machine (M2M) communication has a huge untapped potential and the number of mobile M2M data connections could surpass the number of regular mobile subscriptions in five to ten years. Utility metering and telematics services for commercial vehicles are regarded as the most interesting market segment for wireless M2M communication. Siemens Wireless Modules, the world’s leading supplier of mobile data modules for industrial applications, says AMR is currently the most relevant application for its products.
GROWING MARKET FOR WIRELESS M2M AMR SERVICES
Even though the solution developed by NESA is a new milestone for the involvement of the mobile industry in AMR, existing solutions, such as the one being installed by Enel in Italy, rely to a large extent on mobile networks for communication between data concentrators and the central collection system. The Italian mobile network operator Wind provides between 200,000 and 300,000 GSM data connections for the operation of Enel’s nationwide AMR system.
Wireless Maingate is a mobile communication service provider in Sweden that specialises in M2M communication. The new Swedish metering regulations have resulted in major contracts for them from E.ON and Vattenfall, among others. As a result, AMR is now the most important market segment for the company. Major international mobile operators, such as T-Mobile and Vodafone, provide mobile data connections for tens of thousands of industrial meters across Europe. They appear as natural communication service providers for expansive European energy groups with distribution networks in several countries on the continent.
BILLION EURO OPPORTUNITY
Massive investments are, however, required to modernise the utility meter reading infrastructure in Europe. The total investment cost of introducing monthly meter reading in Sweden could be as high as €1 billion, according to the Swedish Energy Regulatory Agency STEM. And that is for a country with a population of just 9 million!
On the other hand, there is potential for cost savings in the long run. Manual meter readings cost several billion euros per year in the European Union alone. If the mobile industry fully exploits the arising opportunity, it may contribute to financing the technology shift as well. Long-term outsourcing contracts regarding communication services for utility meters and management of meter data would justify subsidies of mobile communication equipment by mobile operators that enter service contracts with power distributors. In the same way as the consumer market for mobile telephony was kick-started by operator subsidies on mobile phones, there could be a similar development in utility metering.
Mobile operators may not, however, rush into the metering business right away. Potential service revenues from meter data collection are still considered relatively low, while Swedish power utilities remain hesitant to adopt mobile communication solutions for AMR exclusively, due to high operational costs. Those differences must be overcome before mobile operators can become successful in the metering business.
Mobile M2M data modules for integration in metering equipment also remain relatively expensive. Unit prices are, however, expected to drop as wireless M2M communication becomes more widespread in other areas such as vehicle telematics solutions and security and surveillance. Considering that there are over 230 million electricity meters in the European Union alone, prices are likely to drop even more once mobile communication becomes a common feature in AMR solutions.