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Economics or Geography: Which Subject Provides Your AMI Education?By Henry Jones Which of the following T&D infrastructure deployment strategies is seen as a reasonable course of action for an electric utility?
Though similar in concept, the first two would get their proponents laughed out of the room, while the third is a typical plan at North American utilities today. What is the difference? What drives the one-size-fits-all mentality with AMI technology deployments, with decisions based on geography instead of economics? The answer can be found by looking at the nature of many AMI pilot projects. Rather than segmenting customers by need and business case and then deploying appropriate assets to those customers, these pilots pick a geographical region and then deploy to everyone in that area, regardless of whether it makes sense for a particular customer or not. Such an approach implies that the goal of the pilot project is not to test whether AMI works for customers, but to test whether a certain AMI technology will work at all. As an industry, we should be concerned if the latter is indeed still the goal, as at this point we should be well beyond technology proofs of concept and attacking the first goal—to make the customer happy at a good return for stakeholders—as soon as possible. One can see a lot about the purpose of a pilot, and the limitations placed on it by some technologies, by looking at the questions driving pilot design. For example, scoping a hypothetical $10 million pilot constrained by geography would pose these questions:
On the other hand, scoping an economics-based pilot starts with a different question and ends with drastically different results:
The Economics-Based Approach The good news about the economics-based approach is that it addresses head-on a few of the most significant challenges to AMI roll-outs. Cost. By grouping all customers together and then prescribing the same solution for all of them, the utility must embrace the "highest common denominator" and consequently the "highest common expense." The solution is to stop treating the customer base as a single entity; market segmentation is a basic concept that's foolish to ignore for any product introduction. If the customer base is segmented by suitability for AMI, and AMI infrastructure is rolled out to those individual customers who carry a strong business case for AMI, then "highest common denominator" is replaced by "highest possible value." Flexibility. AMI is still the source of some tension inside and around many utilities, as the industry builds the experience and evidence for making this significant investment of human and financial capital. By giving customers and internal stakeholders the ability to choose when and where AMI goes—by allowing voluntary versus mandatory deployment and usage—the overall effort can be more politically manageable, internally and externally. Choice. Consumer advocacy groups have generated considerable backlash against involuntary, or "opt-out," programs and stricter mandatory programs. One of their primary assertions is that the people who need a reduction in their electricity bill the most (e.g. low-income customers) are in many cases the people who are least able to change their consumption patterns (because they typically do not own high-consumption appliances such as central air conditioners, dishwashers and clothes dryers). Therefore, they are the people penalized most by those AMI programs whenever they are required to shoulder the cost of AMI deployments in their area. Pre-pay metering solutions, meanwhile, might make sense for some of these same customers but would be politically difficult to deploy at every low-income home and business. Selectively deployed AMI helps ensure that only those customers who can realize a benefit are asked to support the costs. Regulatory momentum. For the reasons described above, regulators can be hesitant to give the green light to full-scale AMI deployments. Pilot projects based on geography rather than economics can further endanger AMI efforts because regulators are presented with choices that require significant AMI infrastructure to support marginal benefits or unknown benefits in some areas in the act of supporting positive benefits in other areas. By utilizing individual business cases as the determining factor for AMI deployment on a customer-by-customer basis, regulators can feel comfortable with hard numbers produced by targeted pilots, about the expenses for the pilot project, and the nature of the AMI expenses going forward. The technology choices that allow economics, and not geography, to educate your utility have been developed by a range of technology vendors and are deployed throughout the world. There is no reason to be constrained by the location of future AMI network deployments to demonstrate the impact of AMI throughout your utility. Let your business drive your AMI system, not the other way around. Dr. Henry Jones joined SmartSynch in January 2005 to lead the company's product development initiatives. An expert in wireless technologies and process automation, Dr. Jones was director of information services for a robotics firm in Mountain View, Calif. He also founded a successful venture-backed satellite image analysis company and a non-profit technology integrator for humanitarian relief organizations. From Electric Light & Power, July/August 2008.
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