Advanced Metering Infrastructure (AMI)

AMI and Business Process Expert

  If you’re a business process expert in the utilities industry, no doubt you’re thinking hard about the  looming impact of AMI (Advanced Metering Infrastructure). And you’re right to be concerned. By enabling real time two-way communication between customers and utilities, AMI – in conjunction with smart meters – is transforming the industry.   The change may be coming faster than many of us anticipate, too. My feeling is that the issues around AMI have moved well beyond whether or not the utility industry should adopt it. Think of AMI as an answer to a question – and when companies find answers, it’s difficult to prevent them from taking action.   In the broadest of strokes, the questions AMI answers are twofold. First, how do utility companies serve their customers better in energy markets that are becoming increasingly consumer-driven — whether those markets are liberalized or still regulated? Second, how do energy providers smoothen out demand peaks at a time of constrained generation capacity and reduce the loads required to serve the customer base?   Europe tends to focus on the first question. There, markets are either already deregulated or  heading that way fast. Operating in a liberalized market economy, utilities must compete for customers. With the benefit of real-time communication and data collection, energy providers can better understand the needs of their customer base and offer more competitive products.   North America tends to focus on the second question. There, utilities face the challenge of increasing demand coupled with an overtaxed grid that’s clearly showing its age. Utilities need to mitigate the generation capacity issues that have led states such as California to employ rolling blackouts in order to prevent long term outages. One of the strategies for executing on this objective is to convince customers to consume more of their energy during off-peak hours. This requires a thorough analysis of when demand spikes occur, a way to set pricing as an incentive for off-peak usage, and the means to communicate this information to consumers – all of which is possible with AMI and smart meters.  

How Much Data?

Whatever the incentive for AMI adoption, its rise will lead to a precipitous increase in the sheer volume of data utilities must manage. There’s something of a debate, however, over how much data is needed to realize the full benefit of AMI. Should meter reads be taken as little as once a month or as often as every 15 minutes? At the moment, Europe and North America are staking out different positions. This is due to the nature of the markets in which they operate.   Deregulation in Europe has resulted in a break up of the traditionally vertically integrated utility group. This makes for a wider range of market participants, including retail, distribution, generation, and meter reading companies. While retailers might favor more frequent meter reads, distributors show some reluctance to invest in the technologies required to manage the increase in data volume. Time will tell where the European market will settle. For the time being, countries such as Sweden – where AMI projects are now underway — are comfortable with monthly reads. This is adequate enough to increase customer satisfaction and drive down costs – two significant requirements in a liberalized market. AMI will also make it exceptionally easy for Europeans to disconnect customers as non-payment issues arise and reconnect them again once payment is settled.   North American utilities – still vertically integrated – are leaning toward more frequent meter reads. While customer satisfaction and cost reduction are important, the immediate concern is managing generation capacity. More frequent reads give utilities the granularity of data they need to more accurately understand usage patterns. With this information, utilities can then develop individualized products designed to promote the kind of off-peak usage that will smoothen out demand and take pressure off the grid. 

The Importance of Service Orientation

  In either case, the data management requirements of AMI will have significant implications on the way utilities do business – and this is no small concern for business process experts who play a critical role in helping their organizations manage this transformation. Integration is perhaps the chief concern. Without the ability of internal business systems to receive incoming consumption and/or meter reading data and make sense of it, AMI is useless to energy providers.   SAP understands this requirement. This is part of the reason why we’ve made the transition to enterprise service oriented architecture (enterprise SOA). Enterprise SOA makes it far easier to communicate with any AMI system and pass data between the customer’s smart meter and the utility. It also makes it easier for utilities to process that data internally for analysis and forecasting purposes using third party tools on the back end. In Q3, in fact, SAP will deliver the first pre-integrated services for SAP for Utilities applications that will maximize the value of partner solutions and increase the ability of utilities to execute on their AMI initiatives.  There’s much more to discuss when it comes to the IT and business process implication of AMI – and I’ll cover some of these issues in future installments. But for now, the message is simple: if you want to benefit from AMI, an open, flexible IT infrastructure is critical. Enterprise SOA gives you that openness and flexibility – and that’s a solid starting point for AMI success.
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