Smart meters can be dubbed the original smart grid device. More than a decade after the earliest models of communicating electric meters were deployed, the market for advanced metering infrastructure (AMI, or smart meters) remains strong and growing.
To get a snapshot of where the smart electric meter market stands today and where it is headed in the future, we must gain an understanding of the regional disparity inherent in smart meter pursuits. The degree to which particular countries and regions have adopted smart electric meters are often as different as the cultures within, and thus the technology should be studied within a geographic framework to get a full understanding of the market. The purpose of Navigant Research’s Market Data: Smart Meters report is to further this understanding by way of regional forecasts of total electric meters, smart electric meters, and the underlying communications technologies enabling these smart devices from 2016 to 2025.
We are in the midst of a paradigm shift in the way we generate, transmit, and distribute electricity. Smart meters are a fundamental component of the evolving grid and are creating unprecedented amounts of new data—data that can be used to improve outage response and grid reliability while also educating consumers of their energy use patterns. The smart meter movement has shown no signs of slowing down soon; Navigant is forecasting that global smart electric meter penetration will grow from approximately 30 percent in 2016 to 53 percent in 2025, crossing the 50 percent mark in 2024. Revenue estimates for the report were derived using new and replacement/upgrade smart meter shipment totals alongside a matrix of regional average selling prices. Global smart meter revenue is expected to increase from approximately $8.8 billion in 2016 to over $10.7 billion in 2025.
When looking at the current state of the smart metering landscape, relatively mature markets can be found in North America, Western Europe, and pockets of Asia Pacific. North America is one of the most mature markets, with Canada nearing full penetration and the United States making remarkable strides through the Smart Grid Investment Grant Program. As of year-end E2016, North America is predicted to pass the 50 percent penetration level, with sustained growth from late adopting investor-owned utilities and an expected uptick in public utility deployments.
Western Europe is also no stranger to smart meters, as countries like Italy and Sweden are pioneers of the smart meter revolution. Surrounding countries have followed suit with large-scale rollouts of their own, including Denmark, Finland, France, Greece, Netherlands, Spain, and the United Kingdom, among others. A key smart meter driver in Europe is the European Union’s (EU’s) target of 80 percent penetration by 2020, though the EU is expected to fall short of this goal given various project delays and pushback from certain member states. While Eastern Europe trails its Western counterpart in smart meter activity, current and future projects in Estonia, Poland, Romania, and Russia are expected to lead to penetration gains across the region.
In Asia Pacific, China has separated itself as a regional and global leader in smart meter implementation. As China’s massive smart meter rollout comes to a close in 2017, countries like India, Malaysia, and Taiwan are expected to capture the market for new shipments while China pivots toward replacement and upgrade units. The overall success of the smart meter market within the region rests with the fate of India, given the country’s sheer size and its ambitious smart meter targets moving forward.
While new smart meter deployments will continue throughout the forecast period, notice should be given to the burgeoning replacement and upgrade market. Naturally, as the installed base of smart meters continues to grow, the market for replacement and upgrade units will grow as well. Looking forward, these replacement units will account for an increasingly large share of overall smart meter shipments and associated revenue throughout the forecast period. This market is further sustained by the shorter lifecycles attached to smart meters relative to traditional electromechanical meters. While traditional meters may have lasted for 20-plus years, modern smart meters are typically replaced or upgraded after only 5-10 years. These shorter lifespans are a product of multiple factors, including consumer awareness, technological advancement, and product standards.
Consumers can play a role in smart meter lifecycles through the voicing of safety and privacy concerns, which in turn may sway the utility to upgrade their technologies sooner than anticipated. The rapid pace at which smart meter technology is evolving also creates the potential for shorter replacement rates in the future as new functionalities and applications promote the business case for upgraded smart meter fleets. Another potential market driver includes emerging product standards, which may force utilities to upgrade their smart meters in order to meet the criteria set forth by local governments or independent safety organizations.
When moving to the less developed smart meter markets, there’s still some low-hanging fruit ripe for the picking. Latin America, the Middle East & Africa, and parts of Eastern Europe and Asia Pacific have yet to fully embrace the smart meter revolution, though this is changing as utility and countrywide deployments begin to populate and replace the pilot-scale projects that have traditionally characterized the regions.
Theft and revenue protection, increasing electricity demand and lower operating costs are driving new smart meter deployments in these areas and will hopefully provide positive case studies for surrounding countries that have yet to pull the trigger on smart meter deployments. And while certain areas of these less developed markets are still plagued by issues such as low electrification rates, lack of consumer demand and awareness, lack of regulatory support and/or financial constraints, there is a notable increase in activity that supports a forecast of strong growth in the coming decade.
In Latin America, countries like Brazil and Mexico are expected to go a long way in determining the overall market size of the region given that they account for more than 60 percent of its total electric meters. Mexico has already committed to ambitious smart meter targets through its state-run Comisión Federal de Electricidad (CFE). The future of the Brazilian smart meter market, on the other hand, is somewhat ambiguous given the current political and economic climate of the country, conditions which have delayed project executions.
The Middle East and Africa have also been slow-moving in the deployment of large volumes of smart electric meters. While these regions have primarily experimented with pilot-scale projects up until now, that is expected to change over the forecast period, particularly in the Middle East. In the Middle East, smart meter activity is expected to be supported by countries like Kuwait, Lebanon, Saudi Arabia, and Turkey. In Africa, deployments have predominately been limited to South Africa and Nigeria until now. Looking forward, Egypt is expected to play a critical role in driving smart meter activity, as the country has announced plans to install up to 30 million smart meters over a 10-year period. More detail regarding market drivers/barriers and regional forecasts can be found in Navigant Research’s Market Data: Smart Meters report.
The adoption of smart electric meters by utilities is part of a long-term technology transformation to create a more intelligent grid. The rate of adoption will vary by region, but over time, smart meters will become the norm. For smart meter and infrastructure vendors, the next 10 years represent growth opportunities as more utilities move to smart meters and AMI deployments. They will be challenged by the need to differentiate their products and provide features tailored to a variety of utilities while facing price competition.
About the author: Michael Kelly is a research associate with Navigant Research, contributing to the Utility Transformations program, with experience in renewable energy research and analysis. Prior to joining Navigant Research, Kelly worked as a research analyst at Energy Acuity, where he researched renewable energy projects and transmission planning dockets. Kelly holds an MS in geography and environmental services, with a focus on geospatial analysis, from the University of Colorado Denver, and a BA in environmental studies from the University of Colorado Boulder.
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