Regulators open up competition for smart meters
Moves to break energy sectors' cartel in Australia
How will Australia’s smart metering program shape up? Share insights from this report, prepared by BizMonitor for Clarion Events (Singapore), the organiser for Australian Utility Week 2015 expo & conference being held 24-25 November 2015 in Sydney www.australian-utility-week.com.
In a show of support for smart metering technology, the Australian Energy Market Commission (AEMC) earlier issued a new draft ruling opening competition for retailers, distributors, and third parties like banks or other providers of services.
Initiated in March 2015, the commission is canvassing changes to the National Electricity Rules and National Energy Retail Rules. These remove existing networks’ metering monopolies and opens up the market for new suppliers.
The AEMC chairman John Pierce says the proposal enables competitors to offer metering services. This initiative gives people the choice to either keep an existing working meter, or take up new services using the more advanced metering technology.
This ruling is the “missing link between ongoing electricity reforms and consumer choice,” says Pierce. Advances in technology offer better ways to manage electricity and tackle demand and associated costs.
A smart meter is digital and measures the amount of electricity used at any given time. This provides customers with more accurate and up-to-date information, enabling them to manage electricity use, including peak or off-peak.
The AEMC seeks to increase competition between retailers, networks and others offering services using advanced metering, among more integrated platforms.
Changing the rules
In its regulatory role, the AEMC makes electricity rules for the National Electricity Market. This market covers all states and territories, except the Northern Territory and Western Australia.
The commission’s draft ruling, when adopted, reinforces the wider adoption of smart meters. This is underlined by federal and state government moves to improve the performance of the energy sector and improve the rules involving supply and demand.
In all jurisdictions except Victoria, current laws offer limited incentives for networks or retailers to install advanced meters and associated services.
There are no minimum specifications and weak incentives for companies to upgrade meters. There is little clarity involving fees that may apply when a meter is replaced.
New measures increase competition and choice. The focus is on large-scale cost savings across the electricity supply chain.
A national policy framework assesses investments in high-speed, fast-access networks, automated meter readings, improvements to remote connections or disconnections, and a faster response time for outages.
Distribution networks, retailers or third parties are incentivised to develop and offer services built around advanced metering technology.
Innovation is endorsed so the market opens up to new metering and technology options. “Poles and wires” reforms mean that network operators can manage pricing that better reflect the cost of running or upgrading infrastructure.
Curbing electricity prices
Australia’s foray into smart meters, and associated “smarter reforms,” should curb electricity price rises, improve market competition, and leverage technology that accommodates anywhere, anytime access.
This is mirrored by roll-outs in the UK, New Zealand, Italy, Holland, Sweden, Finland, Denmark, France, Ireland and many states in the US.
Tackling the overruns
Victoria was the first state to introduce a mandatory program. This was initiated during 2010-2015. An estimated 2.8 million meters are running across homes and businesses. But this initiative has attracted flak from unions and consumer advocates.
Craig Emery, an energy consumer advocate with the 5,500-member Alternative Technology Association, warns that the Victorian example is marked by costly overruns.
An estimated AU$ 800 million spending program has ballooned to AU$ 2.5 billion, says Emery. “This is many times more expensive than what was previously planned.” This program is costing households another AU$ 150 a year.
The new deal
In contrast to Victoria, the NSW program factors in a market-led model. This was initiated in 2014 and aligns more readily with the AEMC’s national regulatory framework.
The state’s minister for energy and resources, Andrew Roberts, says that suppliers are better able to innovate and offer products at competitive prices. A market-led model ensures competition around metering services. Moreover, a voluntary approach guarantees customer choice.
NSW takes an “equitable approach” to setting metering charges. This policy encourages competition by allowing metering providers, such as electricity retailers or other new entrants, to offer smart meters as part of energy deals.
Better tracking data helps retailers and distributors accurately monitor and manage consumption across the network. This improves demand-side management and reduces having to invest in new or expensive infrastructure.
The NSW example enables metering service providers to offer different meters. These range from basic devices that provide real-time information and better billing options to the more advanced offerings. These enable customers to remotely control their household appliances from mobile devices.
Residential meters are owned and operated by state-owned electricity distribution networks. However, the AEMC ruling targets new players, as with other interested states, once this regime is fully operational.
Unlike Victoria, the NSW administration has consulted widely with stakeholders for more than two years. There are an estimated 30,000 smart meters that were trialled under a high profile Smart Grid, Smart City project.
This smart grid project complements energy modernisation that has attracted AU$ 100 million in federal funds and AU$ 390 million in kind from contributors. These contributors include Ausgrid, Energy Australia, IBM Australia, CSIRO and several local councils.
Smart meters replace traditional meters that cost time and money to run. These do not offer at-home or remote monitoring capabilities.
Without this insight, consumers face problems with managing budgets. There are disputes involving a lack of clarity around usage. Insights are needed around using appliances inside peak or off-peak times.
The broader debate is influenced by mandatory vs flexible choices, more privatisation of the energy sector, marketplace competition, clarity around cost-share for infrastructure upgrades, and consensus across the political divide.
How the fine print stacks up
In a politically sensitive environment, most states are exploring the adoption of smart meters on a voluntary basis. However, the goal is to prepare for a smart-ready energy system that steps up to demand as this unfolds.
Governments’ support for smart meters underlines a strategy that seeks to improve supply and demand arrangements, and inject more competition into an industry that is traditionally run by monopolies.
Among the initiatives, the federal spending package factors in nearly AU$ 200 billion to modernise the energy infrastructure.
Building in the smarts (IoT)
The investment in smart energy is in lockstep with real-time communications, and increasingly connected to the internet. This leverages alliances involving energy companies, third party suppliers, and the information, communications and technology (ICT) sectors.
The ICT landscape is marked by spending on platforms with “built-in smarts.” These incorporate smart meters, smart grids, machine-to-machine technology, the internet of things (IoT), sensors, and intelligent networks.
The goal is to create a system that is better integrated, scalable and leverages technology with a 21st century fit.
Architects endorse infrastructure that runs seamlessly from businesses and homes and back to the sources of energy. These offer a clearer picture around the volatilities of supply and demand.
Networks with added grunt come equipped with sensors and controls that are embedded into the fabric. Interconnections offer two-way information flow and the ability to track consumption. This includes real-time data on pricing.
In this connected terrain, end-users are the “masters of their destiny.” They leverage digital meters, sensors, machine-to-machine communication or the internet of things (IoT).
The promise of the IoT lies in connecting people, devices and “things” across a pervasive network. The IoT takes connectivity to another level and is attractive for the energy sector.
Apart from pricing considerations, consumer choices or connectivity, the focus is to reduce Australia’s runaway CO2 footprint.
The AEMC initiative consolidates the uptake of smart meters, among other technologies-of-choice. The goal is to develop nationally-consistent and cohesive strategies, factoring in tech-savvy consumer needs. These re-energise a sector that remains heavily regulated, fragmented and in need of incentives to level the playing field.
Opportunities for metering coordinators
Andrew Dillion, corporate affairs manager, for the peak Energy Supply Association of Australia, says the AMEC draft ruling is a “long time coming.”
Broadly, residential meters are owned by distribution companies. The aim is to open up competition to “metering coordinators.” These include retailers, distributors, or third parties and new players like banks or other financial institutions.
“We can’t afford to run 21st century infrastructure on a 19th century platform,” Dillion says. “The benefits are in real-time data use – to be charged in line with costs imposed on the system. This is around peak or off-peak usage and supports a reflective pricing structure.”
Traditional “dumb meters,” as opposed to their smarter counterparts, do not respond to energy use. Better tracking mechanisms offer clarity around use and balance consumption during peak of off-peak loads. The challenge, however, is around the cost and who pays for infrastructure upgrades.
While Victoria has seen costly overruns, the industry anticipates these will come down progressively, once the upgrades are bedded down and consumers more settled into the fold.
No mortgage on the future
“No-one has a mortgage on the right answer for the future,” notes Dillion. “It’s about how and when you use the energy. The incentive is to use energy, allowing for peak load times. This reduces pressures on the distribution network.”
Dillion foreshadows changes involving distribution pricing arrangements. “There’s also better network control with the built-in smarts.”
In terms of market competition, the energy sector will see more players in this space, perhaps emerging from unexpected sources or left field.
“The profits are led by the broader investments in 21st century technology and not just smart meters. These incorporate smart grids, modernised networks and better tracking technology,” adds Dillion.
*This Metering Report was developed for the Australian Utility Week 2015 expo and conference taking place on 24-25 November in Sydney – www.australian-utility-week.com
This is the region’s largest dedicated AMI and Smart Grid event designed for Australian and New Zealand utilities – electricity, water and gas. Australian Utility Week provides a roadmap on how to develop an ICT infrastructure and analytics program for improved asset management, customer service and operational benefits.
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