Italy's Smart Meter Revolution: Showing The World How It's Done

After an aggressive campaign of fitting roughly 85% of Italy's homes with innovative smart meters, the country's main utility, Enel (BIT:ENEL), is saving up to $750 million per year and cutting consumer costs dramatically.

A Brief History and How Smart Meters Work:

Back in 2001, Enel started a five-year program to install smart meters across its customer base of 40 million homes and businesses.

"We wanted to improve efficiency, create higher margins, and help customers reduce their energy bills," says Livio Gallo, Enel's director of infrastructure and networks. But another motivation, according to outside experts, was to throttle rampant power theft and other forms of fraud.

Regardless, by 2006 Enel had invested $3 billion in the initiative, which included meters of its own design, based on technology from California-based Echelon, that send usage readings automatically to the central office and display time-of-day pricing to customers.

The Italian utility can now collect customer data and manage its energy network remotely, instead of sending out costly technicians. And improved data on consumers' electricity habits permit Enel to run its power plants more efficiently.

All told, the utility says it is reaping annual cost savings of $750 million from the new technology—allowing it to recoup the infrastructure investment in just four years.

What it Means for Italian Consumers:

Smart meters give customers greater control over their energy bills. Typically, the meter is installed in a convenient place in the home—say, in a kitchen cupboard or the laundry room.

When electricity prices are high, for instance during the peak evening period or on cold winter nights, the smart meter informs household members of higher rates, allowing them to alter their habits (such as postponing a load of laundry until the next morning) to avoid big charges.

Analysts figure that attentive Enel customers have been able to cut their bills by as much as one-half by keeping close tabs on energy prices and usage.

The World is Watching:

The U.S. government has earmarked $4.5 billion from the stimulus package to subsidize the roll-out of smart meters nationwide. European Union politicians are pushing hard to connect 80% of the region's homes and businesses to smart meters by 2020.

Even emerging geopolitical giants like India and China aim to install the technology in new buildings.

With so many smart meters to be installed in the near future, Enel's Gallo figures other utilities can learn a lot from the Italian experiment. First of all, he recommends that companies roll out the technology as quickly as possible. Instead of gradual installation, a whirlwind program, often in just three or four years, helps achieve a fast return on investment.

That may involve higher up-front costs, but it gives utilities quick access to consumer data and greater control over their energy network, which can lead to ancillary cost savings. "In the long run, it's more efficient than installing smart meters over a decade," says Gallo.

Enel also advises that companies make sure that consumers understand what they’re getting into by holding public forums like town meetings so the utility’s customers have a chance to ask questions.

This also gives utility companies a chance to show their customers that they will actually save money using this technology, making it more likely that consumers will not only accept the changes, but embrace them wholeheartedly.

Sources:

Business Week's Online Article

Mother Nature Network