A new white paper by the Institute for Electric Efficiency (IEE) shows that for a wide variety of utilities under a range of realistic assumptions, the customer and utility benefits of investing in digital smart meters, or advanced metering infrastructure (AMI), and associated energy management technologies will outweigh the costs. “Although specific results will vary by utility, our study found that even with conservative assumptions regarding consumer engagement in technology, programs, and rate plans, utilities and their customers can expect positive net benefits from their AMI investment over the next 20 years,” said Lisa Wood, IEE executive director.
The analysis also showed that the strategy with the potential to achieve the greatest consumer-driven benefit is to focus on accelerating electric vehicle (EV) adoption. The benefits of EVs created a disproportionately high share of the overall consumer-driven savings, indicating that even modest increases in EV adoption will have a large impact on benefits.The IEE white paper, "The Costs and Benefits of Smart Meters for Residential Customers," quantifies three categories of benefits from AMI — operational, customer, and societal. In deriving its cost assumptions, IEE relied on AMI business cases and equipment manufacturers’ prices, as well as projections and other sources. IEE then used a framework involving different types of utilities and customers to compare AMI benefits and costs. The framework identified four kinds of utilities defined by real-world factors that influence the overall business case for smart meters, including current generation mix, renewable energy portfolio, regulatory environment, energy prices, and emphasis on efficiency and conservation.
In looking at utility customers, the IEE white paper factored in both how likely they were to be engaged in a utility’s energy programs, and how actively they would manage their energy use. Assuming a service area of one million households, IEE found that the total cost for a utility to invest in AMI and associated home energy management technologies will vary from a low of $198 million to a high of $272 million.
In looking at benefits, the IEE study found that the AMI investment will produce operational savings (resulting from avoided metering costs, automated outage detection, and remote connections) of between $77 million and $208 million, and customer-driven savings (resulting from energy pricing programs, in-home enabling technologies, and energy information) of between $100 million and $150 million. The net benefits from investing in AMI ranged from between $21 million and $64 million for the four types of utilities.
“In estimating the net benefits of smart meters, we took a very conservative approach and assumed fairly low participation rates by customers in different program offerings even after 20 years,” said Wood. “We believe that if customers can choose their preferred rate plans, programs, and enabling technologies, and if significant investment is made in consumer engagement, the benefits to customers, utilities, and society would be even greater.
“Interestingly, our analysis also revealed that the strategy with the potential to return the greatest financial benefit to utilities and customers alike is to focus on accelerating the adoption of EVs. Households that have EVs, which represented only about 1.25% to 1.5% (12,500 to 15,000) of the hypothetical one million customers in a service territory, created a disproportionately high share of the overall consumer-driven savings, indicating that even modest increases in EV adoption will have a large impact on benefits.”