The adoption of smart meters in the power distribution segment has been one of the key focus areas of power utilities and policymakers in the past couple of years. Smart metering holds the potential to significantly improve the financial and operational performance of power utilities in the country. It improves the billing and collection efficiency, reduces aggregate technical and commercial losses, and enhances consumer experience. In light of the recent Covid-19 pandemic, revamping the metering infrastructure has become even more important. Smart meters, offering remote monitoring and reading facilities, have provided a major relief to discoms during the lockdown following the pandemic.
Smart meter benefits and industry experience
One of the key benefits of smart meters is the improvement in billing and collection efficiency. Currently, the discoms are incurring huge revenue losses due to inefficient billing. As per the latest Power Finance Corporation report on the financial health of utilities, the billing efficiency in the country is at 83 per cent. This implies that 17 per cent of energy is not billed, constituting around 200 BUs of electricity. At an average rate of Rs 5 per unit, this translates into a revenue loss of about Rs 1,000 billion. The use of smart meters ensures accurate, reliable and efficient billing of electricity consumption, and subsequently also improves the collection efficiency. A case in point is the NDMC utility, which supplies electricity to about 55,000 consumers in central Delhi and is running 100 per cent on smart meters. It has witnessed an average 20 per cent increase in billing per consumer per month with the deployment of smart meters. In another example, the Kanpur Electricity Supply Company witnessed an 11 per cent increase in its average revenue per unit with smart meter deployment during the period January-April 2019 over the 2018 revenues. Similarly, PaschimanchalVidyutVitran Nigam Limited, a discom in Meerut, has witnessed a 21 per cent increase in its average monthly revenue.
One of the biggest smart metering projects in terms of number of installations has been implemented by Madhya Pradesh PaschimKshetraVidyutVitaran Company Limited in Indore Smart City, entailing the installation of 140,000 smart meters. The smart metering project has given the network self-healing capabilities and better reliability, thus helping achieve 100 per cent readability. The utility has derived a number of other benefits from the smart metering project, including lower losses in high-loss feeders. These losses have come down from 34 per cent to 19 per cent. Besides, the utility has been able to recover the amount spent on the smart metering project within one year.
Since the outbreak of the Covid-19 pandemic and the subsequent lockdown, utilities have not been able to physically collect electricity bills from consumers, leading to a dip in the cash flow. In this scenario, smart meters enabling remote meter readings have come as a major relief for discoms. The discoms with smart meters have been able to generate around 95 per cent billing efficiency and have reported a 15-20 per cent average increase in monthly revenue per consumer. Smart prepaid meters have offered significant benefits to utilities during the lockdown. Bihar is the first state in the country to install 25,000 smart prepaid meters. During the lockdown, consumers are recharging their prepaid smart meters for an average of Rs 20 daily, translating into daily recharge revenue of Rs 500,000.
Some other benefits of smart meters for utilities are their ability to remotely connect/disconnect consumers, reduce operations and maintenance cost, and improve the quality of service by providing consumers with demand-side management options. They also allow electricity consumers to track their electricity usage on a real-time basis and pay their bills easily through mobile phones. Smart meters enhance consumer satisfaction through efficient complaint management, system stability, reliability and transparency. This gives consumers better access to information and allows them to make more informed decisions on the use of electricity in their homes, leading to reduced power wastage, and long-term carbon and financial savings.
Government schemes have been the key drivers of smart meter deployment. Under the Smart Meter National Programme (SMNP) being implemented by Energy Efficiency Services Limited (EESL), 1.2 million smart meters have been installed so far across Uttar Pradesh, Haryana, NDMC, Bihar, Rajasthan, Arunachal Pradesh, the Andaman & Nicobar Islands and Andhra Pradesh. EESL is implementing its proven model of bulk procurement, demand aggregation and monetisation of savings. Overall, the SMNP envisages replacing 250 million smart meters across the country. This is expected to significantly improve the billing and collection efficiency of discoms and increase their revenues by about Rs 600 billion.
UDAY also aims to install smart meters for all consumers with a monthly electricity consumption of over 200 units. It has achieved 6 per cent of the target so far. As of June 2020, 1.73 million smart meters have been installed under the scheme. Smart meters have also been installed under the Integrated Power Development Scheme (131,946) and the Ministry of Power’s smart grid pilot projects (156,349). The central government has also announced in the 2020-21 budget its plan to replace all conventional electricity meters with smart prepaid meters in the next three years.
In another development, in order to support the government’s smart meter deployment drive, EESL and the National Investment and Infrastructure Fund have formed a joint venture, IntelliSmart Infrastructure Private Limited, to finance and implement smart metering solutions in distribution companies. With a focus on expediting the deployment of smart meters across the country, IntelliSmart plans to operate on a large scale by leveraging the expertise and capital of both the shareholders.
Issues and challenges
One of the key challenges in the implementation of smart metering infrastructure has been the integration of data that comes from smart meters with the head-end system (hardware and software that receives the stream of meter data), the meter data management system and then the legacy billing and collection software. The entire process has to be automated, right from meter reading to the connection with billing software. Since most platforms in utilities are based on different software, getting them all on to a standard platform is a challenge.
Another challenge facing utilities in the adoption of advanced metering infrastructure pertains to the mismatch between the life cycle of smart meters (10 to 15 years) and that of communication technology, which tends to be a lot shorter. To address this, it is necessary for utilities to adopt a communication system that can be remotely and securely updated. Apart from this, ensuring cybersecurity, which is an integral component of the smart metering architecture, is a challenge. For the successful operation of smart metering projects, there is also a need for capacity building. Raising awareness regarding the benefits of smart meters is also essential. Another concern area has been the supply of smart meters in such huge numbers. That said, the supply has now improved considerably. At present, there are six to seven meter manufacturers that have received certification from the Bureau of Indian Standards. The recent countrywide lockdown due to Covid-19 has also brought on a major challenge, which is likely to seriously impact the timeline for smart meter installation. However, it is expected that once the situation returns to normal, smart meter deployment would take place at a faster pace.
Net, net, the large-scale implementation of smart meters has the potential to improve the operational and financial performance of the power distribution segment. The improvement in billing and collection efficiency, reduced operational expenditure, fewer complaints from customers, better user experience and effective outage management are some of the expected short-term gains of smart meter deployment. Besides this, it will have a positive impact across the power value chain in terms of financial health. Smart meters are the foundation of the smart grid programme and will be crucial to address the challenges of the evolving energy mix and achieve the target of providing 24×7 quality and reliable power supply.