NEW YORK, May 23, 2011 /PRNewswire/ -- Reportlinker.com announces that a new market research report is available in its catalogue:
"By 2020 there will be 1.5 billion M2M connections in the utilities business, the vast majority being smart meters. However, such stellar growth belies a risky market. There is so little traffic generated by smart meters that MNOs cannot rely on carrying traffic to make money. They need to be heavily involved in service provisioning and management if they're going to convert the massive growth in connections into any meaningful revenue".
Matt Hatton, Director
1. Executive Summary
The market for M2M in the utilities sector will see spectacular growth in terms of numbers of connections, from 100 million in 2010 to 1.5 billion in 2020. This opportunity is dominated by one application: smart metering. As illustrated in Figure 2-1, it represents 97% of connections in 2010, rising to 99% by 2020. It also accounts for more than 95% of revenue throughout the forecast period. It is slower to dominate traffic, taking three-quarters of all traffic in 2010 but growing to almost 96% over the forecast period. The other two applications examined in this report – transport & distribution management (T&DM) and electric vehicle (EV) charging – are modest opportunities in comparison to smart metering, although on a per unit basis they generate more traffic and more revenue. Any discussion of the opportunities in the utilities sector naturally focuses predominantly on smart metering.
Figure 0 1: M2M connections in the utilities segment and smart meter share of connections and revenue 2010-2020 [Source: Machina Research, 2011] (omitted)
There are some very substantial drivers for adoption of M2M connectivity and in particular smart metering. Utilities are keen to develop new value added services and add some service differentiation elements. They're also looking to use smart grids to reduce network losses and increase network efficiency. Furthermore there is a growing public appetite for energy savings, particularly in the light of recent fuel price rises. Most important, however, is the government impetus. Left to their own devices utilities would gradually adopt smart metering. However governments are setting very aggressive targets, most prominently the EU requirement that 80% of electricity meters are upgraded to smart meters by 2020. In the US, China and further afield governments are setting targets, investing funds and implementing roll-out obligations for smart metering and smart grid. This, more than anything else, is going to ensure the rapid adoption of M2M in the utilities industry.
There are one or two barriers that might cause problems, predominantly associated with future-proofing of smart meters. If smart meters are due to be installed for at least 10 years the utilities want to ensure that they're getting it right. They don't want to install meters that don't have the functionality that they'll later want to use. Similarly they don't want to invest in any wide area networking technology which may be switched off during the anticipated lifetime of the meter. Machina Research does not expect these barriers to be insurmountable and they represent mere blips in the inexorable rise of smart meters.
In terms of technology, cellular connections will eventually account for majority of M2M connections in the utilities industry, growing from 38% to 57% of installed base by 2020. MAN, including powerline communications (PLC) and community WiFi connections, will also be significant, accounting for 28% of connections in 2020, albeit down from 53% in 2010. Of the wireless wide area connections, 3G is expected to dominate due to anticipated plans for 2G switch-off.
Figure 0 2: M2M connections in the utilities sector by technology 2010-20 [Source: Machina Research, 2011] (omitted)
The total market for M2M in the utilities segment will be worth EUR24 billion in 2020, up from EUR4 billion in 2010 and having peaked at EUR28 billion in 2017. From 2017 onwards the number of new additions starts to decline, resulting in a reduction in device, installation and provisioning revenue. The largest region in revenue terms is Emerging Asia-Pacific, courtesy of China's significant investments in utilities upgrades. By 2020 China will account for 40% of global M2M utilities connections and 31% of revenue.
Figure 0 3: M2M revenue in the utilities segment by region 2010-2020 [Source: Machina Research, 2011] (omitted)
A total of 1.4 billion new smart meters will be required between 2011 and 2020 meaning that meter manufacturers such as Landis & Gyr and Itron have a rapidly growing revenue opportunity. Companies that manufacture the telecommunications modules such as Sierra Wireless, Telit and Ericsson – as well as those that benefit indirectly such as Qualcomm – also stand to prosper. However, operators, and mobile network operators in particular, will find it challenging to generate substantial revenue from this sector because the amount of traffic transmitted is so small. It amounts to just a few hundred KB per smart meter per year for instance. As a result pure traffic revenue, that is the revenue associated with carrying bits, is tiny. Excluding device, installation, provisioning and other associated services, mobile traffic revenue will amount to only EUR50 million worldwide in 2010, growing to EUR1.2 billion by 2020. Proportionately that is 1% of total revenue growing to 5%.
The biggest conclusion to draw from the forecast numbers is that the revenue opportunity for M2M in the utilities sector does not lie in carrying traffic. MNOs must get involved in device and service management if they are to secure a significant portion of the EUR190 billion that will be generated between 2011 and 2020 in the sector. If the MNO's role is relegated to that of bit pipe, the revenue opportunity is modest in the extreme.
About the report
Machine-to-machine (M2M) Communication in the Utilities Sector 2010-20 provides invaluable qualitative and quantitative analysis of the emerging opportunity for machine-to-machine communications in the healthcare sector.
The forecast excel data sheet includes very granular 10 year market forecasts for 54 countries and 6 regions. The forecast covers numbers of connections, traffic and revenue for each of the three applications (electric vehicle charging, smart metering and transport & distribution management) with splits by technology (2G, 3G, 4G, short range, MAN, fixed WAN and satellite) and a break-out of mobile traffic revenue.
The report reviews the major drivers and barriers for growth of M2M in the utilities sector and analyses the key market dynamics, including how MNOs, fixed operators, service providers and vendors might go about identifying and realising addressable opportunities. Each application is examined individually with case studies and forecast analysis.
1 Executive Summary 2
2 Contents 5
3 Scope 7
4 Drivers and Barriers 9
4.1 Drivers 9
4.1.1 Government regulation and funding of smart grids 9
4.1.2 Public demand 11
4.1.3 Utilities gearing up for a competitive environment 12
4.1.4 Reduced energy theft and improved fraud detection. 13
4.1.5 Service differentiation for utilities 13
4.1.6 Government push for electric vehicle adoption 13
4.1.7 Business topography 14
4.1.8 Network technology developments 14
4.1.9 Mobile Network Operator (MNO) revenue stagnation 15
4.2 Barriers 15
4.2.1 Lack of infrastructure and availability of utilities 15
4.2.2 Lack of incentive to deploy smart metering for gas and water 16
4.2.3 End-user opposition to smart metering 16
4.2.4 Security 16
4.2.5 Opposition (albeit subtle) from the power industry 17
4.2.6 Meter manufacturing and installation capacity 17
4.2.7 Technology uncertainty 18
5 Utilities Market Analysis and Forecast 20
5.1 Key market developments 20
5.1.1 Increasing penetration of basic utilities. 20
5.1.2 Rising costs of fuel (and increasingly water). 20
5.1.3 The green agenda 20
5.1.4 Competition in the utilities market 21
5.2 Market dynamics 21
5.3 Market forecast 30
6 Application Analysis and Forecast 33
6.1 Smart metering 33
6.1.1 Definition 33
6.1.2 Application Market Analysis 34
6.1.3 Forecast 36
6.2 Transport & Distribution Management (T&DM) 39
6.2.1 Definition 39
6.2.2 Application Market Analysis 40
6.2.3 Forecast 40
6.3 Electric Vehicle (EV) Charging 42
6.3.1 Definition 42
6.3.2 Application Market Analysis 43
6.3.3 Forecasts 43
6.4 Home Energy Management (HEM) 46
6.4.1 Definition 46
6.4.2 Application Market Analysis 46
6.4.3 Forecasts 46
7 Recommendations 47
7.1 Vendors 47
7.2 Mobile network operators and service providers 47
7.3 Utilities 48
8 About Machina Research 49
8.1 Our approach 50
8.2 Connected Intelligence reports 51
8.3 Our people 52
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