The ongoing coronavirus crisis and the poor financial performance of power distribution companies (DISCOMs) have shown that the power sector needs a serious revamp, and smart meters have to become part of the solution.
There is no better time to implement smart meters than now.
Social distancing regulations and the nationwide lockdown have prohibited DISCOMs from physically collecting electricity bills as conventional metering systems require readings to be checked in person. This, along with its other problems, including aggregate technical and commercial (AT&C) losses, low tariffs, and other internal inefficiencies, has left DISCOMs in a tough spot financially.
Smart meters could be the much-needed solution to most of these problems. They require minimal direct human interaction and have other widespread benefits that will be felt across the entire power value chain.
Why we need them
While the traditional electricity meters measure the power consumption of a home or business, smart meters can record energy usage in 15-minute intervals or at least hourly and transmit data to the utilities constantly. Most importantly, smart meters enable two-way communication with the utility and the home/business.
While traditional meters require meter readings to be inspected physically for power generation, smart meters do not. The readings can be monitored by the consumer and the DISCOM remotely through the internet.
DISCOMs in states without smart meters are now being forced to make consumers send photos of their meter readings, or to bill provisionally based on the previous bills because of social distancing restrictions. Smart meters negate the need to be physically present. At times like these, remote meter reading would also be a huge boon for the sector as a significant chunk of DISCOM revenue is lost due to billing inefficiencies.
A recent report by the Energy Efficiency Services Limited (EESL), the agency responsible for the implementation of smart meters across the country, showed that all states where smart meters were installed had good results with an average increase in billing of nearly 25%. In the New Delhi Municipal Council (NDMC) area of the national capital, with a billing efficiency of over 99%, revenue has gone up by ₹500 (~$7) per month per meter.
Aside from bringing in additional revenue to DISCOMs, smart meters can also help consumers monitor and regulate their consumption so they can save money on power bills. The increase in revenue can help DISCOMs clear their dues to generators on time, as well. Smart meters have far-reaching benefits within the entire power sector.
“There is no solution that has shown as much value to the entire power sector as smart meters. If utilities are to come out of their financial crisis in this country, there is no better option,” said Saurabh Kumar, Managing Director at EESL.
“Last year’s billing efficiency was 83%, meaning 17% was not billed at all. Total power consumption in the country was 1.3 trillion units then, and 17% of that would be about 220 billion units. Multiply that by ₹5 (~$0.07)/kWh, and you arrive at an overall loss of well over ₹1.1 trillion (~$14.7 billion) which is significantly more than the ₹900 billion (~$11.98 billion) package announced by the government,” Kumar explained stressing the need to plug these losses.
Mercom recently reported that the financial stimulus given by the central government to DISCOMs might not solve the sector’s issues. It is only through modern and innovative solutions like smart meters that the power sector can move forward.
Road ahead and the roadblocks
The EESL recently announced that it installed over 1.2 million smart meters in India to date under the Ministry of Power’s (MoP) Smart Meter National Program (SMNP).
While this may seem like a relatively low number, it is no small feat. The EESL has managed to achieve around 8,000-10,000 smart meter installations a day. Their original goal was to install 100,000 a day, but the coronavirus outbreak slowed down work significantly.
However, even these numbers are much higher than what other programs in other countries have been able to achieve, according to Anil Rawal, CEO at IntelliSmart, a joint venture between EESL and the National Investment and Infrastructure Fund (NIIF).
“Smart meters are a win-win solution for the consumer, the distribution company, and the whole power sector at the end of the day,” Rawal said.
He explained that there are still issues to address first, like system adaptability, DISCOM adoption rates, and the overall scale of the whole program.
Conventional meters use an aging infrastructure that is not compatible with smart meters. The entire system needs to be overhauled to support a completely digitized ecosystem that will also take the country into the future in terms of smart-grid feasibility.
“Smart metering is more about being digitally strong than just installing smart metering systems, which is just one small step. Having a smart meter is about having a dynamic piece of equipment in the houses of people communicating with the digital backend round-the-clock,” Rawal stated, adding that “the backend should be very strong at doing everything that used to be done physically, digitally.”
There is also the problem of state-level implementation. While the central government has certainly made its intention clear, it is ultimately the decision of state governments to take the implementation of smart meters forward based on the financial performance of the power distribution sector.
EESL’s Kumar explained that Uttar Pradesh, Haryana, and Delhi had the best responses so far.
NDMC was the first municipal council in India to implement a 100% smart meter solution in its area. Notably, Uttar Pradesh still grapples with the reduced collection of power dues even after the installation of nearly a million smart meters. The state has a target of installing four million smart meters across five DISCOMs.
EESL and DISCOMs in Bihar have entered into a memorandum of understanding to deploy smart meters in 130 towns and adjacent rural areas covering approximately 1.8 million customers in the state. In another state, the MoU with the DISCOMs in Haryana and EESL was to initially install one million smart meters across the state and later expand the project to cover more towns.
Back in 2018, EESL issued a tender for the procurement of five million smart meters to be installed across India. There are also challenges surrounding the scale of the whole operation. A program this large is unprecedented across the world. The Government of India’s target is about 250 million smart meters over the next few years.
“However, I think it is feasible. The manufacturing capacity in the country is about 80-100 million electronic meters per year. The supply of meters is not an issue, and they are all manufactured in India,” said Kumar.
“The industry, along with the Ministry of Power, have assured us that they can convert their lines to support smart metering in about 5-6 months. If the states and all the related sectors work closely together, this target will certainly be achievable,” he added.
Prepaid Smart Meters:
Prepaid smart meters are also a solution to DISCOMs and consumers. With prepaid smart meters, consumers top up their meters up-front, failing which their power will be cut. Thanks to this, DISCOMs will have the ability to receive payments immediately.
When bills are delayed, DISCOMs are denied the working capital for that particular period. However, prepaid smart meters invalidates this problem. Consumers can also benefit from being able to track their consumption and expenditure in real-time and can potentially lower both.
“Prepaid smart meters are a way to give guaranteed income to DISCOMs and savings for customers. There is no better system than this, currently,” said EESL’s Kumar.
Rawal and Kumar, both spoke of the success of the EESL’s trials with prepaid smart meter systems in Bihar, the first state in the country to have installed over 25,000 smart prepaid meters.
During the lockdown, DISCOMs in the state generated daily revenue of ₹500,000 (~$6,659) from prepaid smart meters. Consumers, on average, are recharging their prepaid smart meters with a credit balance of ₹20 (~$0.266) daily.
According to EESL, this has resulted in significant revenue to the state DISCOMs, while other DISCOMs with conventional meters have not fared as well.
“The government is largely aligned to prepaid meters, but we are fine with both. We have a system that can operate both kinds of smart metering in any state. It’s ultimately the state’s choice,” said Rawal talking about whether prepaid smart meters will eventually replace its post-paid alternative.
Smart meters have been around for a long time around the world. However, India is behind. They would solve many of the power sector’s problems and help DISCOMs get back on their feet.
“We are working to provide state of the art and top-notch facilities to the consumers and DISCOMs to be ready for the future of the smart grid. The smart grid is all about demand-side management and the responsiveness of the grid to the concurrent demand situation under every setting. The grid needs to respond on its own to the actual demand, and that can only happen with a strong digital backend,” said Rawal.
Smart meters are truly a modern solution to the power sector’s many aging ailments and can play a pivotal role in improving the financial health of DISCOMs.
“Smart meters can unlock a slew of capabilities that the utilities in India badly need – increase billing efficiency, remote billing, automatic outage reporting, flexibility with time-of-use tariffs, and add new revenue streams. The coronavirus pandemic has clearly shown that the legacy systems in the country are obsolete and need an overhaul. The change to smart meters needs to happen now,” said Raj Prabhu, CEO of Mercom Capital Group.
Nithin is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai.