The concept of prepaid service has long been recognised as a major driver in the explosive growth of mobile communications. With the rising costs of utility services, and the deployment of those services increasing across developing countries, and the availability of smart meters and smart grid infrastructure, Alun Lewis asks how long it will be until pre-paid models start being widely applied in this sector.
The answer for most markets, perhaps surprisingly, is longer than one might think. The world of the utilities is in many ways far more complex than that of telecoms. In the latter sector, global standards and international cooperation have been a fact of life for around a century and a half and, while there are obviously slight variations in the use of technology from country to country, one size does tend to fit all cases.
With the utilities, it’s a much more complex, multi-faceted and messy picture which has huge implications for the use of pre-paid systems. Models of ownership and control of the different elements of the supply chain vary hugely from country to country – as do standards in many supporting areas. On top of this must be added social and political sensitivities that are absent in other industry sectors.
Access to essential utilities can sometimes mean the literal difference between life and death where vulnerable people or extreme weather conditions are concerned. What electric utility company is going to want to be blamed – and their brand and share price affected – when an automated process leads to the disconnection and resulting hypothermic demise of a pensioner?
Leading the way
So far, for a number of historic and political reasons, only two countries – and, rather oddly, one Australian island – are aggressively pursuing pre-payment smart meter-based deployments for energy utilities. The UK and Zimbabwe, with Tasmania bringing up the rear, are leading the field as Rick Hanks, managing director, resources and smart meter lead for EMEA and Latin America at Accenture, explained:
“These countries are the only ones with a history of the comparatively widespread use of prepayment systems, with the UK currently running at around 15%. It’s important here to understand the contexts in which prepayment has usually been applied in the past – and those contexts usually involve pre-payment meters being imposed on consumers as a result of them being perceived to be bad credit risks.
He added: “In the past, installing prepayment meters and providing the infrastructure of payment and retail systems and keys to support them has been an expensive overhead for the utilities. Political, legal and regulatory dimensions too are important here to ensure that vulnerable people aren’t left completely without power and that there’s the possibility to impose a load limiter as against total disconnection.
“That said, once the new generation of smart meters is installed, we see prepayment as creating and supporting new sectors of users – such as students whose accounts could be topped up remotely by their parents or, a few years down the line, those now-retired parents having their accounts topped up by their children, or their power use monitored to ensure they’re still active and well.”
Thick and thin technology options
If that’s the human and social context, what are the technology options for deploying prepay services? Once again, just as in telecoms, there’s a debate between whether you apply intelligence to do things at the centre – or do things at the edge.
In utility speak, this respectively means the difference between ‘thin meters’ essentially acting as a dumb client, and ‘thick meters’ with their own processing capabilities and intelligence – and an implicitly huge difference in the various systems and infrastructure needed at the centre to monitor, manage, provision, bill and pay accounts.
While the EU has ESMIG (European Smart Meter Industry Group) to coordinate activities, the UK’s approach of using thick meters stands out almost uniquely. As Rich Hampshire, principal consultant and smart meter and grid guru at CGI, developers of the ‘Instant Energy’ platform currently used by seven energy suppliers in the UK, observed:
“Lots of European countries are now looking at centralised control using thin meter concepts. The UK has however taken the thick meter route because of how the concept of legal ‘duty of care’ to possibly vulnerable customers by the utilities has evolved in the country. One of the concerns around the thin meter approach is that the utility could erroneously disconnect the customer without any warning and issues like these are likely to be flagged up by consumer groups in other countries as smart grids and thin smart meters are rolled out.”
One of the advantages of moving to a smart meter infrastructure is that, as long as you have the back and front office systems in place, then a much wider range of prepayment options plus additional services become possible. Critical within that framework is having sufficiently secure and robust protocols to handle the transfer of data and command signal. In the UK, this is represented by SMETS – now up to version 2 with longer crypto keys and better integration.
Neill Young, business development and marketing director at international smart grid and metering specialists, Trilliant, offered that: “It’ll be possible for prepay users to top up their central accounts over the internet, through call centres and IVR platforms and be able to check their balance and usage through smartphones as well. Each country, even across Europe, has widely differing sets of responsibilities with some, such as EDF in France, having a complete monopoly. While in the UK, each of the many energy retailers has responsibility for their meters.”
The bigger picture
Irrespective of whatever model is adopted, once the smart grid/smart meter infrastructure is in place, basic prepayment principles can be readily expanded. Oliver Neuberger at Glue Reply, specialists in IT architecture, integration and data solutions, explained: “The homogenisation of household electricity meters offered by smart metering means that all meters will be capable of supporting a prepay arrangement.
“This will allow energy retailers to focus on providing a great user experience, enabling users to pay for their energy in ways that suit them, making intelligent use of online and mobile selfservice tools to allow this to be done at a minimal cost to the retailer, and without the historical costs associated with managing a prepay relationship.
“There are secondary benefits too – through being able to make short term pricing offers, retailers will be better able to influence the demand profile of consumers to reduce the likelihood of an energy crisis when demand significantly outstrips supply.”