Smart Metering: strict conditions make projects profitable

All Smart Grids (and Smart Cities!) initiatives seem to lead to Smart Metering. The object of this article is not to discuss the legitimacy of this assertion. But we notice easily that the deployment of smart meters represents a very important cost for the utilities (distribution network operators) and for the community.

Is this cost justifiable? Are these investments profitable?

We notice that this question is often avoided

– Many projects of smart meters start from a political will, translated or not through the regulation, based on the belief that these meters will directly allow to reduce the electric consumption. Disappointing belief because the way is long between the knowledge of the consumptions and their reduction.

– The political decision-makers, convinced of the legitimacy of their choice, cannot help but present the project under the most favourable angle to make it acceptable or desirable: a kind of lie of omission, conscious or not, which can quickly act as a boomerang.

– These very expensive projects represent such opportunities for the various potential actors (meters manufacturers, integrators) that these actors deliver, in a very careful way, messages on a possible lack of profitability. No way to hinder the quick start of these projects.

Can the profitability of these projects be threatened?

– Certain conditions are favourable to the achievement of a good level of profitability: among them, the detection and the reduction of the thefts of electricity. A proportion of stolen energy superior to 10 %, favours largely the justification of the smart meters (which allow to verify permanently the gap between transported energy and charged energy). In certain countries, the inferred operational savings can also be sufficient.

– Except such conditions, more rarely gathered in the western-European countries, the cost benefit analysis of the smart meters has to cover all the generated savings: inferred savings, operational productivity of the utility, savings coming from a better global efficiency of the energy system, the energy savings, the reduction of CO2 emissions.

– The adjustment variable that makes a project more attractive is, most of the time, the energy savings. The potential of energy savings is then often a declared intention, that needs to be proven, aiming at reaching a level of acceptable profitability in the eyes of the sponsor of the project.

How to avoid being disappointed by the consequences of a fanciful assessment of the potential energy savings?

– The smart meters provide an information necessary for energy savings but, watch out, they are not the only solution available on the market.

– The actually achieved savings will depend on the available reservoir of savings and on the effective capacity that we shall have to exploit this reservoir.

– The reservoir of savings depends, on one hand, on the state of the local systems (for example, for lighting, a strong penetration rate of LED bulbs will reduce the potential of savings), on the other hand, of the more or less energy-consuming character of the habits of life. It is relevant to estimate it and to plan its evolution over time.

– The capacity to exploit this reservoir depends on the knowledge of the local service providers (utilities, associations, private providers) to accompany the consumers in their savings. Of course, this capacity has to be proven and measured. In most of the cases, this knowledge is very low today, especially for residential customers, and does not allow taking into consideration the energy savings in a business plan of smart meters.

– It will be important, for a trustable evaluation of the financial relevance of the project, to integrate the entire costs to be committed to obtain these energy savings, not only the cost of meters.

So, relying on energy savings to make profitable a deployment of smart meters, puts an important pressure on the development of our effective capacity to transform a raw information about the consumptions into long-lasting result. In the absence of this capacity, the chances are high that the envisaged investment is neither profitable nor really useful.

It will be time, once the guaranteed global profitability, to think about the financing of the project: but it will then be easier to adjust the contribution of each, to the profits that it will generate from these future meters.

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