Public Power - November/December 2007 - (Page 26)

AMR or AMI? in its decisions surrounding advanced metering. Strategy also dictates the focus a utility places on its infrastructure projects. Public power utilities meeting electricity needs in rapidly growing communities have a number of competing interests, such as simply keeping up with infrastructure expansion. This can be reflected in their appears to be playing a significant role. Demand-response from time-differentiated rates can lower system peak demand and reduce the need for T&D investment. 4. Technology/philosophy—As with any technology, utilities have varied adoption cycles, appetites for technology risk and differences in long-term visions. Utility The current continued expansion of mobile, one-way AMR (a relatively old solution) shows the industry’s general lack of technology risk acceptance as well as a tie to existing business models. approach to technology implementations. Less obvious, but nonetheless important, is that a utility’s strategy is closely tied to its technology philosophy. The willingness to make an investment in technology at the risk of rising costs to customers links to management’s belief in the value of those investments. 3. Financial considerations—After years of under-investment in much of the transmission and distribution system in electricity and marginal investments in gas distribution, utilities are faced with an increased demand for capital at the same time significant investments are required in AMR/AMI. The situation in some areas is exacerbated by upward rate pressure due to the price of natural gas, increased operating costs and assets that have been almost fully depreciated. There has been an up-tick in planned T&D investments, which will potentially increase the asset base for a number of utilities. The potential for AMR/AMI investments to add to this measure continues to be attractive from a financial perspective. The world market for automation and related integration projects in 2006 and 2007 will be $550 million to $600 million, with a total market size of $40 billion, according to a Newton-Evans study. In addition, there is a 10 to 15 percent increase in T&D construction spending due specifically to performancebased ratemaking—and AMR/AMI 26 NOVEMBER-DECEMBER 2007 philosophies surrounding all investments vary widely. The move to AMR/AMI has more farreaching implications than a decision to replace a series of transformers or capacitor banks. In some cases, the implications of significant change and the cultural transformation required push utilities to a simpler and less sophisticated metering solution. In others, AMI becomes the centerpiece for a broad and deep technology evolution and new business model. New installations are also split in terms of technology decisions between utilities seeking safe, proven solutions versus those willing to take a risk and push into new areas. The current continued expansion of mobile, one-way AMR (a relatively old solution) shows the industry’s general lack of technology risk acceptance as well as a tie to existing business models. The market share for mobile radio frequency (RF) climbed from 45 percent in 2001 to 67 percent in 2005, while annual unit shipments have grown from 4.9 to 10 million, according to a Utilipoint-Howard ScottItron study. There is clearly a significant trend toward new technologies with the utilities themselves providing much of the impetus for manufacturers to advance their own systems. Utility adoption of advanced metering is increasing for a number of reasons. Technology is enabling cost-effective, ro- bust solutions that provide more benefits than remote meter reading. There is growing interest in using advanced metering for demand-response, grid automation applications and other customer benefits. Price points for all AMR/AMI systems are declining, making the range of solutions more attractive than in the past. Utilities are still deploying AMR systems, but the number of them pursuing business cases and deployments for advanced AMI to broadband AMI systems is increasing. Four factors are at the core of the decision process. These factors continue to change and evolve as utilities, regulators and the financial communities alter their positions, but remain of central importance. The factors have both internal and external influences. Management of expectations. AMI feels like the “trend du jour” when it really builds on 20 years of experience. Success requires the development of proper expectations (anchored in a sound business case). Clarity of strategy. Conflicts can arise when utility strategy is not sufficiently robust or broadly supported. AMI touches all parts of a utility—from customer to generator. Financial considerations. Numerous business cases have been built on the simpler aspects of AMR/AMI deployment, which may not speak to the broader benefits that may accrue to the utility. Technology philosophy. Utilities with a shared and planned vision of technology, a willingness to adopt technology and to take some risk have a higher chance of successful system deployments. Regardless of the path chosen from simple drive-by AMR to broadband AMI, there are lessons learned by successful programs—there is no right or wrong technology choice. The four drivers significantly impact the decision to move ahead with an AMR/AMI program, allow for its successful implementation and provide a basis for utilities to move forward into the future. ❚ Mark Gabriel is an executive consultant with R. W. Beck, Inc. PUBLIC POWER

Table of Contents Feed for the Digital Edition of Public Power - November/December 2007

Public Power - November/December 2007 Contents Washington Focus 10 Questions Connecting with the Customer Through Automation AMR or AMI? The High Court’s Antitrust Thunderbolts California’s Push for Demand-Response Plug-In Partners Get Plugged In Wiring Up for Double-Digit Growth For Engineers Safety Community Broadband For Governing Boards DEED Customer Service Hometown Connections Index to Advertisers Parting shot

Public Power - November/December 2007

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