Utilities should sell network to claw back high smart meter costs

MELBOURNE, AUSTRALIA: Utilities should look for ways to generate additional revenues from smart meters in a bid to reduce the impact of the enormous costs associated with them, according to Ovum.

In a new report* the independent technology analyst claims that the business case for rolling out expensive smart meter networks is often thin, so utilities need to find ways to manage costs to retain financial stability.

To do this, the report advises utilities to upsell the communications network of smart meters to other industries, and claw back some of the high capital expenditure needed to deploy them.

Stuart Ravens, report co-author and Ovum principal analyst, said: “For some utilities, the business case for rolling out smart meters can be thin, with high capital costs and questionable revenues as a result. Utilities need to think outside the box in order to investigate potential revenues from non-traditional business models.

“By selling network capacity on to enterprises in other industries, utilities could potentially offset the considerable impact of costs associated with smart meters.

“This approach does not come without its challenges. It is questionable whether utilities are up to the task of running alternative revenue business models. However, we believe utilities need to investigate them regardless. “

According to Datamonitor, the global smart metering market for residential customers will reach $5.7 billion by 2015; a 350 per cent increase from 2009, demonstrating the huge investments being made.

Selling network capacity, for example to telehealth providers or transportation management enterprises, could help utilities recoup some of the huge outlays they are making. However, according to Ovum’s report, a major ‘road block’ to this would be regulators, who would need to be consulted about any plans to generate additional revenues.

Ravens said: “Utilities wishing to investigate alternative revenue generation opportunities from their smart meter infrastructure will need to engage early with regulators. However, we believe the necessary involvement of regulators is a significant risk for utilities considering such approaches.”

According to Ravens, utilities should start to view their network as a potential revenue-generating asset now, despite having a relatively stagnant business model. He added: “The implementation of smart meters provides the opportunity for utilities to ‘break out’ of that mold. They should consider alternative opportunities when planning rollouts, working with regulators and testing technology.”