Sunday, November 7, 2010

Post # 47 - Smart Grids and Meters May Not Accomplish All that Utility Companies Expect

I have previously blogged about studies indicating that the consumer benefits of smart grid and smart meters may be oversold (for example, Post Nos. 27, 40, 41, and 46). Now, a new study from the British-based technology analyst Ovum casts doubt on the ability of smart grid and smart meters to fully live up to their potential from an industry perspective. While Ovum acknowledges that smart meter and smart grid investments are able to address many issues facing utilities companies, smart meters could increase costs. Ovum also found more investment in newer technologies is needed.

According to Ovum's report on its study, the utility industry faces major -- and possibly conflicting -- challenges. For example, utilities must respond to public concern over CO2 emissions. The cost of needed infrastructure investment is high, while rising fuel costs create pressure to reduce costs. At the same time, many utilities are experiencing an increase in payment defaults due to the economic downturn. Further, the workforce at many utilities is aging rapidly.

Ovum concludes that smart grid and meter investments will be very helpful in dealing with these problems. However, to fulfill the full promise of smart energy, utilities will require further new technologies such as analytics, billing and customer relationship management (CRM) systems. Further, customers may struggle to understand the benefit from smart meters and may be confused by the additional complexity smart meters bring. Ovum also finds that there is a very strong risk that this increase in complexity will cause an increase in customer service costs.

The study highlights two major and related smart grid goals: reducing the environmental impact of existing forms of electricity generation by supporting renewable energy and energy storage; and employing smart meters to influence customer behavior through demand-response programs. But the study cautions that these benefits, while significant, should not be overestimated. While they could make an impact, Ovum concludes that there is a possibility they will not deliver what utilities are expecting.

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