Smart Meter Makers Act II

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What’s next for Smart Meter Manufacturers?

As the pace of smart meter installation has grown so have the problems facing the companies that make them.  The biggest problem near term has been depending upon utilities to adequately engage customers in the process of smart meter deployment and addressing their concerns including meter accuracy, electromagnetic field issues and data security.

This puts the smart meter makers in that proverbial rock and hard place quandary.  Their product is being blamed for spiking utility bills in Bakersfield, California and elsewhere when the real culprit was a very progressive rate design combined with hot weather.  In Northern California in Marin County the EMF crowd has public officials frothing over radiation issues and the safety of smart meters.  And then there are the data security issues and fears of ‘big brother’ exposing customers privacy as the California Public Utilities Commission implements rules to require utilities to disgorge smart meter data for customers who wish to provide it to third party vendors.

But the existential problem facing smart meter manufacturers is defining their ‘second act’ after they reach the saturation point for this first massive wave of smart meter installation.  After all there will only be one meter per household and the replacement market is going to be much smaller than the deployment market.  Manufacturers of smart meters must find ways to keep their business growing or scale back on their manufacturing capacity that made them successful.

Smart Grid Scalable Growth Phase

The consolidation phase of smart grid is accelerating and every player in the space is scrambling to defend their position and plan for their “Act II” in the smart grid play.  The strategies of players are being revealed but most are keeping option open.  Here are the most common:

  • Go Global. Part of the answer for smart meter manufacturers is to go global and extend the market reach for smart meter deployment to other countries.  This is easier said than done since the North American and European markets are fully developed and target-ready for advanced technology.  China is an obvious growth market but few non-Chinese players expect to win a competition with the master of commoditization.  The risks in going to China are clear to all some volume growth but erosion of intellectual property and speeding up the inevitable competition with China produced smart meters for the long tail market ahead.  But what of emerging markets where the energy infrastructure is less mature?  Ironically, emerging markets may be ripe for development not for large central station-based smart grids but for microgrids that use smart meter and electronics technologies to optimize the performance of these modular building blocks to a scalable smart grid future.  For smart meter makers with more well rounded solutions this may be a target rich opportunity for Act II.
  • Collaborate and Educate.  A second logical choice is to collaborate on standards and industry wide issues — and lobbying to advocate for their shared strategic interests.  In June six leading smart meter producers: Echelon, Elster, GE, Itron, Landis+Gyr and Sensus formed the Smart Meter Manufacturers’ Association of America (SMMAA) to work “fast and focused on smart metering — something we could get to pretty quickly.”  This non-profit trade association will focus on advocacy work and education on smart meter issues including meter accuracy, health and safety, and security.
  • Technology Standards and Interoperability While every smart meter manufacturer would like to have the dominant technology being deployed and reap the benefits from it, the reality is the evolution of smart grid is not going to permit one proprietary technology to dominate unchallenged.  Nor will utilities want to invest billions in equipment that does not work seamlessly with both existing networks and technology and evolving products.  Interoperability is the key to scaling the smart grid and making the products ‘play well together’ is key to the success of every vendor.  These smart meter manufacturers know this and, in fact, are depending upon it since that is the foundation for their second act in developing the applications and services that extend the reach and usefulness of smart meter data to OEM producers, industrial and commercial applications and households.  Here we see progress such as the recent announcement by Itron and Landis+Gyr that they will integrate their technologies offering a more complete solution to customers.
  • Smart Grid M&A Romance As market penetration of smart meters reaches saturation and technology standards and interoperability issues are defined the next challenge for smart meter manufacturers is expanding their presence across the value chain if they want to remain independent.  Those who fall behind or require deep pockets to build next generation technology will likely partner by alliance or be acquired by a larger parent to build and deliver integrated, end-to-end solutions across the smart grid value chain.  Some of the biggest players are busy acquiring good companies and products to round out their solution set and enable scalable growth worldwide. Every player must keep one eye on near term performance while also sizing up attractive dates and marriage prospects that enable it to get the most value out of investment to date and position its products for growth.
  • Smart Grid Research & Development. M&A alone is not sufficient to deliver the smart grid promise to customers.  The industry needs solid research and development efforts all along the value chain from optimizing high voltage transmission performance to reduce line losses, distribution automation to improve performance, reduce outages and enhance security, put the tsunami of smart meter data to use to provide predictive analytics patterns to guide maintenance, reduce congestion, and target investment for the best ROI. Research collaboration with major universities is accelerating this process of transformation including work being done at Carnegie Mellon with help from IBM, the North Carolina State university FREEDM Systems center supported by ABB, Duke and others, and the California Smart Grid Center’s work with Sacramento State University and SMUD.

Living into the promise of smart grid requires the players to continually evolve their business models, strategies, technology standards and marketing to fit a rapidly changing landscape.  While each of the major smart meter manufacturers is focused on growing market share from the initial wave of smart meter deployment, if they want to survive the experience they must also simultaneously re-invent themselves for the next wave of smart grid evolution.

May you live in interesting times has never been more true.