Smart meters: Time to make that smart switch


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Smart meters: Time to make that smart switch

By Rahul Prithiani

The current crisis in the power distribution sector offers a great reform opportunity even as it reiterates an urgent need – to switch en masse from traditional to smart meters. Financially stressed power distribution companies (discoms) are staring at rising losses as demand and collections have declined with the Covid-19 lockdowns. CRISIL Research expects power demand to contract 3-5% on-year this fiscal compared with a CAGR of 3.8% between fiscals 2015 and 2020.

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However, discoms could adopt a simple and effective solution to tackle the crisis – by ramping up collection efficiency quickly through large-scale adoption of smart metering solutions. Earlier reform footprints, availability of resources, renewed thrust on ‘aatmanirbhar’ manufacturing, and above all, an urgency to revive ailing discoms make this switch more viable today.

As data from public sector undertaking Energy Efficiency Services Ltd (EESL) shows, utilities with smart metering infrastructure reported 95% billing efficiency in the first quarter of this fiscal, when the lockdown was in force, and generated additional revenue of 15-20% per meter. EESL estimates that this would amount to additional revenue of over Rs 100,000 crore annually from electricity unbilled due to metering, billing and collection (MBC) inefficiencies.

The power sector also faces high aggregate technical and commercial losses with a national average of 18.90% for 26 states (excluding Nagaland, Andaman and Nicobar Islands, and Lakshadeep) as of July 17, 2020. Smart meters can help trim discoms’ commercial losses by changing the MBC process. This would enable better load scheduling based on real-time consumption patterns, lower metering errors, and reduce electricity theft and unbilled consumption.

As of now, India has a smart meter penetration of barely 1% – around 3 million smart meters are operational, compared with ~270 million traditional meters. This is much lower than in mature markets such as the US (65-75%), France (60-70%), and China (40-55%). A major reason ascribed for this is the discoms’ financial distress. As of July 2020, discoms had outstanding dues of Rs 1.28 trn to generation companies.

We estimate that the country would need to invest ~Rs 65,000 crore to transit from traditional to smart meters, assuming a substantial reduction in current meter prices with rising volumes. A locally manufactured smart meter is priced between Rs 6,000 and Rs 7,500 currently. At this price, the cost of replacing all existing traditional meters would be over Rs 180,000 crore. However, the government has initiated steps to check prices and boost domestic manufacturing, in keeping with the thrust on self-reliance and import substitution. So this is an opportune time for Indian smart meter manufacturers to ramp up production. That could lower the effective cost of meters to Rs 2,000-4,000 for bulk procurement – on a par with Chinese imports – bringing down the cost of replacing all traditional meters to ~Rs 65,000 crore.

Phased implementation of smart metering can help reduce the capital outlay further. On the other hand, discoms can reduce their deployment costs by adopting the metering as a service (rental model), which is widely prevalent in mature markets globally.

Undoubtedly, the switch to smart metering will present challenges. Discoms need to upgrade to better meter data management systems and technologies to sort out interoperability issues with legacy MBC systems – something that the end-to-end rental model would cover. Manufacturers too need to ensure compatibility with transmission and metering infrastructure. However, the benefits outweigh the costs. As the pandemic has shown, discoms can no longer afford to postpone the switch to smart meters if they are to charge up for the future.

Source:-financialexpress

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