Background and Challenge

The smart grid technology is integral to promoting energy efficiency, and will enable consumers to reduce and optimize their consumption based on greater insight into their usage and the potential application of demand-response tariffs. However, the investments required to support these capabilities are estimated to reach several trillion dollars, with significant funds needed for maintenance, upgrades and replacement of the existing transmission and distribution infrastructure. Metering hardware in homes and businesses also needs to be replaced or upgraded to realize smart grid benefits.

To better understand smart grid opportunities globally, a provider of smart grid solutions commissioned L.E.K. Consulting to prepare a comprehensive smart metering study covering 19 countries to address key questions on likely volume and value demand during a 10-year forecast period, such as:

  • What is fundamentally driving (or constraining) smart meter adoption by country, by utility (electricity, gas and water) and segment (residential, commercial and industrial)?
  • How “smart” will the meters really be and what functionalities will likely be included?
  • Who are the main players in the global smart metering market and what are their relative shares?
  • During the next 10 years how is market volume and value likely to evolve by country, utility and segment?

Approach and Recommendations

OUr study results are based on a combination of primary and secondary research – including more than 500 interviews with utilities, meter suppliers, regulators and other industry experts. Research was conducted between April-June 2009 and an update of the NAFTA region (Canada, Mexico and the U.S.) was prepared in January-February 2010 to address the fast-changing market environment in this region.

Results

We determined that the smart metering market is driven by a number of favorable underlying market trends (such as increasing utility connection rates and rising metering penetration rates) as well as specific advantages associated with smart metering such as consumer benefits (higher transparency and control of consumption), reduced energy costs, and improved energy efficiency and supply.

Key findings include:

  • Regulation: Regulation and political interest are among the most important drivers in smart metering, which has accelerated smart meter industry development in many parts of the world. Regulators develop the framework, and in many countries, drive the decision-making process on smart meter definition and adoption. Based on the respective frameworks, utilities have to develop appropriate solutions:
    • In Canada and the U.S., large-scale deployment of smart meters is encouraged by regulation and supported by governmental funding
    • Largely driven by regulation, most Western European countries are planning to start large-scale smart meter roll-outs for electricity and gas
  • Vendor Analysis: The study also examined the smart metering vendor landscape, including:
    • The three largest global meter players in terms of value are Itron, Elster and Landis+Gyr (2008 data)
    • The electricity segment is fairly fragmented and the top-three players have a combined market share of 57% in value terms (2008 data)
    • In gas, Elster is the global market leader with Itron and Landis+Gyr being the market follower (2008 data)
    • In the water segment, there are several strong suppliers, as the three key players held a combined market share of 48% in terms of value (2008 data)

Our client is using this information to shape its global strategies and prioritize sales initiatives. The company is also using report findings to calibrate its go-to-market strategies in specific markets.