The Business Case for Advanced Metering Technology

Lynne Kiesling

One day last week, there was a large color IBM ad on the back page of the front section of the Wall Street Journal. This ad talked about the value to homes, businesses, and electricity companies of having plugs that could communicate information back to the electricity companies and network operators. They’ve run it a couple of times, and I am thrilled every time I see it; I dream of a day when each plug will be a smart, interactive node on the network, able to receive a price signal and to be programmed to take an action in response to that price signal (yeah, I know, I need to get out more …). In that world, customers will be empowered and informed, will be able to choose how much price risk to bear and how much to lay off by taking a non-real-time price, and will be able to buy power of differentiated quality at different plugs in their building, and pay different prices for those different qualities.

Unfortunately, IBM does not have the ads up on their website, so I can’t link to it. But I can link to this case study from ASM Brescia, an Italian energy company.

ASM Brescia, an Italian multi-utility provider, streamlined processes and enhanced service offerings with the help of an automated meter management solution built on IBM software implemented by IBM Business Consulting Services.

Business need: ASM Brescia sought to automate its electricity meter and other services (gas main customers, heating, etc.) reading processes.

Solution: IBM will integrate more than 200,000 automated electronic meters in an end-to-end solution that links the meters directly to ASM Brescia’s billing and customer service systems and will replace all of ASM Brescia’s traditional meters by 2006.

Benefits: The AMM solution will provide ASM Brescia with powerful capabilities to develop highly customized, flexible and efficient commercial offerings that will help the company increase its market share while improving service to its existing customers.

If you read through the case study, it’s quite interesting. EU-wide retail competition kicks in next year (2007), and ASM Brescia wanted to do something that would both lower its costs and position it to offer customized and flexible products and services to potential customers, thus positioning it well for retail competition. In other words, they pursued innovation to give them a competitive edge through both cost reduction and product differentiation. The case study emphasizes ASM Brescia’s ability to monitor usage in real time, but they don’t mention that customers should be able to do so as well, and in conjunction with the ability to choose a pricing plan that matches their risk tolerance, the combination of rate plan and enabling technology empowers the customer as well.

Regulation does not produce these kinds of results. Competition does. Regulation cannot match the dynamic innovation incentives of competition.

6 thoughts on “The Business Case for Advanced Metering Technology

  1. I haven’t seen the ad, but it suggests that maybe IBM learned something from their involvement in the New Power Company.

    From CNET:

    America Online, the world’s largest Internet access provider, and computer maker IBM have joined with Enron to form a new power company to deliver gas and electricity to residences and small businesses.

    The New Power Company, which claims an initial investment of more than $120 million, will offer electricity and natural gas in deregulated markets in 24 states. The company will draw from the expertise of Houston-based energy giant Enron.

    … The alliances between Enron, IBM and America Online also provide proof of the Internet’s power as a mass marketing tool. AOL’s rapid ascent as a media powerhouse has made the company an attractive partner for companies trying to reach mainstream Americans.

    … The New Power Company expects to complete construction of its infrastructure by late summer and will launch its lower-cost energy services in Pennsylvania and New Jersey during the second half of 2000.

    As you may have guessed, the story is a few years old. “Media powerhouse AOL”? “Computer maker IBM”? “Houston-based energy giant Enron”?

  2. Lynne as a non-economist I’d like to know what the barriers are to having smart metering in the U.S. Is it the monopoly power of the local electrical provider? The inability of the provider to recapture the costs of installing smart meters? Soviet style regulation of electricity providers?

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