Smart Grid billing outlook

Innovation Observatory

By Danny Dicks
March 2012

(Below is the executive summary from this analyst report from Innovation Observatory. LogNet Systems and our MaxBill solution are highlighted in this analyst for our focus on smart grid billing. To download this analyst report, please click here.)

The Smart Grid will require change to billing IT infrastructure to enable utilities and other energy providers to deal with specific challenges. Some of the change is absolutely necessary (for instance, ensuring that billing systems can scale to new volumes of data and more frequent meter reading, and deal with management and rating of new mandatory tariffs) and some of it is discretionary (support for new services that utilities and other electricity retailers may choose to offer – such as electric vehicle roaming).

The smart grid billing challenges can be addressed in different ways, and each company will choose to do things differently. Decisions on billing system change – for instance, whether to go for a “big bang” or an “adjunct system” approach, will be taken in the light of the company’s competitive market position, and its existing IT infrastructure.

In the last couple of years, much smart grid investment has been meters, and much billing-related investment has been in data-collection and management (Meter Data Management, MDM) rather than in the charging, billing and customer care. MDMS companies like eMeter have achieved success by offering systems that utilities understand and which are closely tied to the big capex item – the smart meter rollout. Contracts for sophisticated billing systems able to support innovative smart-grid-enabled new services have been relatively thin on the ground – at least with established utilities that are undertaking the biggest and most far-reaching smart grid investments.

Nonetheless, contracts for highly capable billing systems are starting to point the way towards increased opportunities for billing system vendors. For instance, LogNet Systems’ contract with First Utility suggests that new entrants into the electricity retail market, unencumbered by legacy IT infrastructure, can make billing system decisions based on choosing the best system for the new requirements of electricity supply retailing in the smart grid era. Convergys’s February 2012 framework deal with E.ON IT suggests increasing acceptance by large utilities that there is a place for new providers with capable systems.

Four types of supplier are competing for the smart grid billing system market: established enterprise IT system vendors with a very large footprint in the utility space; MDMS vendors whose systems can offer rating and charging; billing system vendors with a telecoms background; and new entrant vendors that have built billing system for smart grids from the ground up.

We estimate that there is a market for smart grid billing systems worth USD440 million in capex in 2012, rising to USD1200 million in 2016. Of this, we estimate that some 15% of it is available to new providers of billing systems, rather than existing utility market suppliers. Maintenance and upgrade revenues increase the size of the potential market.

Utilities should install systems that will enable them not only to cope with the immediate challenges of rating and charging based on smart meter data and introducing simple time-of-use (TOU) tariffs, but will also provide them with a long-term strategic tool to realise operational efficiencies, create innovative services, and improve customer care. Utilities should invest in systems that have sufficient flexibility to cater for their uncertain or unknown future needs, and can be adapted to new challenges without expensive customisation. They should consider such investments strategically, taking into account not just the short-term requirements to meet regulators’ requirements relating to smart meter deployment and tariff evolution, but also the medium- and longer-term revenue and customer service opportunities that such billing systems can support.

To download this analyst report, please click here.