Monetizing

opportunities for
smart meter data

An EXL whitepaper
Written by
Vikas Kumar Praveen Abraham
Assistant Vice President Senior Manager
Decision Analytics Decision Analytics
lookdeeper@exlservice.com

The global utilities
sector is mobilizing to
implement smart meters,
with different countries
at different points in their
implementation. In the
UK, the implementation
of the government’s 2020
plan for completing the
rollout of smart meters
to every household is
well under way and is
gaining momentum.
Smart meters have
started changing
customer expectations
and business models for
utilities.
1 © 2016 ExlService Holdings, Inc.
[ Monetizing opportunities for smart meter data ]
From data scarcity to data profusion, from connected homes, there is a clear win for
the periodic frequency of data collection the customers. According to an estimate1,
to real-time data feeds, from benign connected homes, work, and digital cities
customer engagement with companies will create a $731.79B market opportunity
to active customer interest in their energy for utilities by 2020.
consumption behaviour, many factors are
bringing in a revolution to the industry. Smart meter data can be monetized by
This presents an opportunity for the addressing a few key areas of impact:
utility industry to capitalize on a data- •• Customer experience improvements
rich environment to enhance customer through better customer insights, better
experience, improve their operational cost understanding of consumption behavior
structure and enhance overall industry and reduced billing challenges and by
providing more control to consumers over
performance.
their consumption decisions.
The Big Data challenge in utilities presents
•• Financial performance enhanced by
possibilities to grow the both top line and
growing the topline through tailored
bottom line of energy retailers, along with
propositions, improved revenue
providing additional value to the customers.
Whether it’s accurate billing or advanced
features enabled by smart metering like
1. Frost & Sullivan Report, (2014, April 28) - Connected Living:
http://www.frost.com/sublib/display-report.do?id=M94C-01-00-00-00

assurance, reduced cost of operations
and the innovative use of smart data for
monetization.
•• Enhanced governance mechanisms
that support for integrated grid and
improvement in overall efficiency of the
grid/industry.
Enhance customer experience
Monetization for enhanced
customer experience
Customer outlooks will go through an
evolution because of an increase in
expectation from what smart meters can
deliver. Current expectations of basic
2 © 2016 ExlService Holdings, Inc.
[ Monetizing opportunities for smart meter data ]
service levels like accurate and timely
billing would become hygiene factors.
Advanced propositions, flexible tariff plans,
information and communication to support
informed choices will become important to
deliver higher value and help differentiate
in the market place.
Improved financial performance
Data analytics will be the key to
understanding and meeting customer
expectations through appropriate products
and services. The key to success would
be to provide an actionable, real-time, yet
simplistic view to customers to facilitate
their decisions.
At a broad level, customer experience
related to evolution of smart meters can be
categorized into two parts.
1. There will be a need for a host of
offerings around real-time visualization
and control that help customers
analyze and customize different factors
like tariff plans, consumption behavior,
Overall gains for utility industry
appliance control, dynamic proposition
selection, participation in demand
management and local generation

2. There will be a need for rewards and
loyalty programs that incentivize good
behavior, promote loyalty and provide
an integrated, consistent experience
comparable across other industries
Real-time visualization and control
Smart meters are expected to transform
customer expectations for accessible
real-time appliance level consumption,
customized recommendations, dynamic
pricing, automated breakdown predictions
and corresponding actions and information
about efficient products in order to
reduce their energy bill by controlling and
managing their consumption behavior.
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[ Monetizing opportunities for smart meter data ]
Appliance control and customization
A significant change brought on by smart
meters will be the increased adoption of
home management solutions facilitating
connected homes. Customers will expect
several benefits from these networked
homes:
•• The customers would want to have
the ability to control and customize
power consumption at their homes
remotely using an app installed on their
smartphones. Smart meter data analysis
makes it possible to determine the
resource usage of individual appliances,
lights and HVAC system by analyzing
their data patterns. Alerts or alarms could
be activated on the app if an appliance
is consuming more than average
consumption of similar appliances,
enabling the customer to get the
appliance checked for any malfunctions.
This in turn will help customers to keep
their bills within a desirable limit and save
money through the increased longevity of
their appliances.
Utilities can use this opportunity to
generate new revenue streams by
offering insurance and service products
where appliances are tracked real-time.
Furthermore, sophisticated backend
models like principal component analysis
(PCA) can be deployed to cluster
breakdown types and help engineers
reach the site with the precise equipment
required to fix the issue, resulting in
savings by eliminating the cost of multiple
 [ Monetizing opportunities for smart meter data ]

trips. Also, renewal prices can be refined 1. Identifying consumption histogram, While the first three algorithms analyze

significantly by looking at previous electricity consumption of each household

2. A three-line algorithm for
performance data of appliances and in terms of its distribution, temperature
understanding the effect of external
sensitivity and daily patterns; the fourth
charging a premium for cases where temperature on consumption
algorithm finds similarities among
multiple breakdowns are forecasted.
3. A periodic auto-regression (PAR)
different consumers for adjustments
algorithm to extract typical daily
•• Machine learning can be applied to and recommendations. This tracking and
profiles
improve energy efficiency, reliability and model can be extremely useful for utilities

comfort by monitoring operations and 4. Time series similarity search to find by helping them to accurately forecast
similar consumers customer consumption.
using algorithms to adjust it for external

weather while avoiding any manual Clusters of activity Corresponding cooling and
profiles heating gradients
interventions. Configuring smart meters to

the real-time GPS location of a customer

can help activate devices depending on Temperature time

series
the estimated arrival time after taking

traffic condition into account. This would

Activity load +
help provide a seamless, cost-effective temperature
dependent load +
white noise
experience for customers. A four step Select a cluster Select cooling and
heating gradients
approach for implementing algorithms

can be adopted to reach this goal:

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 [ Monetizing opportunities for smart meter data ]

Dynamic pricing to adjust their loads, either manually to proactively reach out to the customers

The price consumers pay do not reflect or through home energy management would help save utilities on inbound call

true cost of production, and also do not systems. volume, customers would also be able to

incentivize customers to shed during peak save on costs through early intervention

loads. The ability to “shave” peak demand Singapore employed a dynamic pricing before the damage reaches an irreparable

could allow a utility to reduce built capacity pilot on its expanding smart grid in 2012, level.

and save on the cost of generation. Utilities with dynamic pricing on 30 minute

can pass some of these savings to the intervals. The pilot reduced peak Smart meters also present an opportunity

customer through dynamic pricing. Smart residential loads by 3.9% and total energy for data breaches. The risk of hackers

metering promises several avenues for consumption by 2.4%. infiltrating systems can be mitigated

realistic pricing which can drive beneficial through systematic configurations. Utilities

results. can effectively detect and eliminate the

Breakdown prediction and security risk of tampering through advanced

Time of usage (ToU) pricing institutes a By capturing real-time consumption data, metering infrastructure. Utilities can

price schedule for electricity usage, under utilities can identify breakdowns at an early consider providing several enhanced

which electricity is least expensive when stage. This can be achieved by looking at add-on features along with basic gas and

loads are low and most expensive during the consumption pattern of an appliance, electricity connections, and open doors for

peak hours. ToU is based on the fact that as well as overall household usage levels

by altering rates at different times of the to identify significant changes in trends

day, providers can incentivize customers from an expected value. While being able

5 © 2016 ExlService Holdings, Inc.

 [ Monetizing opportunities for smart meter data ]

new revenue sources similar to telecom

Puerto Rico started the smart meter
and digital service providers. For example,
roll-out along with installation of a 1GW
smart meters can be made to work in
renewable energy with an aim to reduce
two separate modes: ‘home’ and ‘away’
its dependency on expensive oil-fired grid.
mode. When a customer is not at home
The smart meter pilot, in conjunction with
for a long time, he or she can choose a
other measures, has already saved USD
few appliances that should continue to run
17 million per year in reduced electricity
and key in a password that will make the
theft within the first three years. This figure
meter work in ‘away’ mode. When there is
is expected to rise to USD 50 million when
an unexpected usage or a wrong password
the rollout is expanded.
keyed to activate an appliance, the smart

meter can send a text message to the

consumer.

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 [ Monetizing opportunities for smart meter data ]

Rewards and loyalty Incentive roll-out to promote loyalty household consumption levels during peak
and ideal behavior hours can serve as a useful tool to enhance
With real-time data feeds from smart
By integrating behavioural economics, retention by keeping customers engaged
meters, utilities can roll out several reward
gamification and loyalty programs, utilities while curtailing peak loads.
and loyalty programs similar to that offered
can rollout multiple loyalty programs and
by retail chains and airlines. Reward
incentive schemes to keep customers A pilot program initiated by National Grid
allocation done in real-time provides an
engaged and alter their consumption in New York and Rhode Island offers
opportunity to make these programs
patterns. Advanced marketing mix models loyalty points to customers based on the
extremely engaging and generate a higher
(MMM) can be deployed to estimate and amount of energy saved. Rewards can
level of participation. These programs can
track the impact of various rollouts and be redeemed at Home Depot, Amazon.
be broadly classified into two sets. While
optimize promotional tactics with respect com etc. or donated to charities. Since the
first set of offers would correspond to
to profit. Since these programs will involve launch of the pilot in 2009, National Grid
incentives rolled-out to promote loyalty
investments from utilities, a test-and- customers in those states have saved
while driving an appropriate behavior, the
learn process, where RoI is evaluated for - $73.7M and 800M kilowatt-hours of
second set corresponds to collaborative
multiple variants of programs rolled out in electricity.
partnership with other industries to capture
small batches is recommended to decide
cross-sell opportunities.
on the optimal scheme for a large scale

rollout. The deployment of region based

gamification based on rewarding efficient

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Collaborative partnership
In order to fully leverage the advantages
of smart meters, utilities should explore
partnerships with other industries. While a
partnership with a telecom company can
be extremely useful to set up the process
and get devices connected to smart meter,
partnership with other industry players can
help rollout advanced gamification along
with loyalty programs.
Utilities usage data at appliance level is
a useful asset that can provide insights
for customer segmentation and optimal
marketing channel. Hence, it should be
utilized as a potential revenue source
while working with other industries. As
an example discounted IoT (Internet of
Things) connections and no network
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[ Monetizing opportunities for smart meter data ]
charges for accessing smart consumption
on smartphone apps, in lieu of customer
segmentation insights can be considered
as potential collaboration terms with a
telecom player.
Monetization of increased
efficiency gains
Providers should aim to make the best
use of the AMI (Advanced Metering
Infrastructure) data to increase efficiencies
at all levels of services and offerings to the
customer. A close examination of different
operational elements in the smart grid will
open avenues for growth in top line and
bottom line for utilities.
Customer segmentation
based propositions
While the AMI data opens up many
possibilities, a key area where utilities
need to work is improving customer
segmentation based on actual
consumption data from smart meters. With
the roll-out of smart meters, the use of data
mining to generate customer segments
to increase marketing effectiveness
and boost potential RoI can be refined
significantly. Segments generated through
predictive analytics programs can be used
to generate target messages with high
precision.
 [ Monetizing opportunities for smart meter data ]

Further, a traditional customer’s lifetime to experience a breakdown is based the •• The capability to process data at
value can be fine-tuned to look into discretion of call center agents. This can extremely high velocities in order to

cost to serve and revenue at a far more be replaced with an auto alert system for quickly respond to pricing signals and

granular level (e.g. peak vs. off peak, specific device failures in a household identify the set of customers who can be

hourly, daily etc.) as compared to the that trigger home emergencies. In order targeted for energy efficiency programs

current monthly level approach which to realize these benefits, utilities should

can lead to inaccurate classification be prepared to leverage analytics by

and segmentations. Accurate definition developing:

of customer’s lifetime values can help •• Accurate load curves for every customer,
prioritize, target and acquire the most thus segmenting them based on:

valuable customers first while deprioritizing ++Customer attributes

the ones who might have a low or negative ++Energy consumption pattern
lifetime value.
++Areas triggering peak load at grid level

++Areas of energy efficiency

With more accurate segments, several

manual activities can be automated to ++Renewable energy usage

improve cost efficiency, performance

levels and accuracy. For example, the

current process to identify customers likely

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Demand response
management
When a production facility is not used,
it represents less efficient use of capital.
However, utilities need to plan their
capacity to be able to meet the peak
demand with a sufficient buffer to deal
with unanticipated events. Hence, any
opportunity to shed peak demand can
help release significant capital for utilities.
It is estimated that a 5% lowering of peak
electricity demand would result in a 50%
price reduction to the end consumers.
2
The dynamic Time of usage (ToU) pricing,
rewards and incentive mechanisms
covered in earlier sections are some of
the methods which can be deployed for
demand response. Further, several new
10 © 2016 ExlService Holdings, Inc.
[ Monetizing opportunities for smart meter data ]
technologies are available to automate
The Fayetteville Public Works Commission,
the process of demand response. Such
the largest municipal electric provider
technologies forecast the need for load
in the state of North Carolina, has rolled
shedding, communicate the demand
out demand response/home energy
to participating users, automate load
management service commercially. The
shedding, and verify compliance with
demand response service has installed
demand-response programs. Utilities
smart meters with an integrated gateway
can automate appliances connected to
module and a programmable networked
its users that can reduce consumption at
thermostat in homes and small business
times of peak demand by delaying draw
premises. Initial results show that
marginally, such as turning up refrigeration
consumers have saved as much as 15-20%
and lowering the temperature of hot
of their overall electricity usage compared
water during peak hours. Such programs
to previous years.
have a considerable scope to reduce
peak demands. Utilities can substantially A similar advantage for large scale
cut costs through these schemes, and customers with smart meters and
then pass on some of these benefits to generation capacity could be the ability to
participating customer based on megawatt
power.
2. The Power to Choose - Enhancing Demand Response in Liberalised
Electricity Markets Findings of IEA Demand Response Project,
Presentation 2003
 [ Monetizing opportunities for smart meter data ]

closely monitor, shift, and balance load in
a way that allows them to trade what they
have saved in an energy market. This will
involve sophisticated energy management
systems, incentives, and a viable trading
market.
Managing demand with
analytics
Smart propositions will facilitate a higher
adoption of distributed energy systems
enabling consumers to generate on-premise
energy that can be fed back into the distri-
bution grid. Distributed energy resources
often use renewable energy (RE) sources,
including biomass, biogas, solar power, wind
power and geothermal power, enabling ac-
cess to cleaner energy on the grid.

Additional opportunities
across the utilities sector
Regulatory bodies across countries want

to know how investments in smart meters

are helping improve operational efficiencies

and deliver enhanced levels of customer

service. AMI data and the overall adoption

of smart propositions are expected to drive

the benefits at a sector level by closing

gaps between regulatory bodies and

customers, along with incentivising the use

of alternate energy.

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Smart meters can provide near-instant
data on supply and demand levels. By
combining this information with real-time
markets, an analytics engine can make the
grid intelligent enough to manage loads
and provide convenient reconciliation of
anything that is produced and consumed
anywhere.
This will enable the distributed energy to
be precisely billed, benefiting customers
for every unit of energy produced in their
premises. Utilities can better manage
peak loads by having access to multiple
energy sources with reduced carbon foot
print for the grid. However, due to a higher
variability in generation versus demand,
dynamic price negotiations within the grid
would be required, necessitating demand
response capabilities. Energy storage will
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[ Monetizing opportunities for smart meter data ]
become quite critical due to the variability
of renewable sources.
Predictive analytics can be applied to the
problem of energy storage to forecast
demand spikes and optimize energy
storage and distribution systems for
renewable sources. Combined resources
can then be used for managing demand
response or determining how surplus
energy can be traded in a broader
electricity market. Analytics can also
forecast how energy storage systems are
used on a daily basis so the systems can
be properly sized for a building’s energy
demand, thus avoiding any underutilized
storage capacity.
Analytics will act as an enabler for better
response mechanisms through integrating
and reconciliation of various data sources:
•• Accurate forecasting: Widespread
instrumentation and advanced computer
models allow system operators to better
predict and manage renewable energy
variability and uncertainty.
•• Smart inverters with auto-switch:
Inverters and other power electronics can
provide control to system operators to
automatically provide some level of grid
support. Auto-switching between sources
can be modelled on historic consumption
trends and weather forecast, such as
switching to solar on sunny days or wind
turbines on windy days to help meet the
peak demand from alternate sources.

•• Integrated storage: Smart storage can
help reduce short-term variations in
renewable output, and also manage
mismatches in supply and demand.
•• Real-time system management:
Instrumentation and control equipment
•• Differential pricing basis generation mode:
across the transmission and distributions
networks will allow system operators
to have real-time awareness of system
conditions. This will also enable the ability
to actively manage grid behaviour, as well
as identify and resolve losses and theft.
•• Distribution network planning: Combining
data from grid meters, smart meters and
inline sensors along with geographical
data can provide a real-time network plot
illustrating key line parameters including
voltage, real and reactive power,
percentage loading and other variables.
This enables better monitoring, reliable
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system operation and better customer Gapa Island in South Korea is an example
service in the form of faster outage
of self-sufficient renewable energy
restoration and automated alerts. This
deployment in smart grid. The island, with
will eventually lead to fewer customer
a size of 8.5km² and a resident population
contacts and complaints.
of 281 in 2012, had wind and solar
generation systems of 500 kW and 111 kW,
It is imperative that renewable energy
respectively, complimented by a 1-MW
sources have different pricing per unit.
lithium-ion battery. This in turn replaced a
This depends on the number of sources
450-KW diesel generator. This combination
and their mode of operation, which
has made Gapa a carbon-free electricity
is why it is critical to have differential
system. The project benefits are estimated
pricing. Analytical systems will enable
establishing a weight-based model at $415,000 avoided fuel costs and an
for this differential pricing after due annual reduction of more than 750 tons of
consideration of all factors. Such pricing CO2 emissions.
models will incentivize more consumers
to actively participate in distributed
generation, and eventually make it easier
for utilities to reduce dependency on
traditional sources

Information flow across the
industry value chain
Smart metering and connected homes will
empower customers, but only if they are
kept engaged. Also, regulatory pressure
is mounting for utilities to enhance
customer experiences by keeping things
simple without compromising on adopting
technology. High levels of stakeholder
engagements will require delivering
seamless experiences across utility
channels by providing choice, consistency,
context and continuity for everyone.
Analytics can enhance transparency,
communication and accessibility among
various stakeholders in the utility chain:
•• Faster communication of breakdown
and restoration: Utilities can determine
the location of breakdowns using GPS
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[ Monetizing opportunities for smart meter data ]
coordinates, along with which crew
and equipment is well-suited for the
necessary repairs. This information could
be shared with its service team. This type
of information and analysis enables utility
to accurately provide an estimated time
of restoration to the customers impacted,
often even before they realize there is a
problem.
•• Complaints/query turnaround time:
Customers can receive auto alerts of
a breakdown to update them of the
expected resolution time, effort and
grievance compensation for similar
breakdowns.
•• Tariffs propositions transparency: Details
corresponding to cost for customers of
competitors with similar consumption
levels will be available and accessible
across the board for tariff quotes.
•• Improved safety: Real-time analysis of
customer usage enables detection on
unusual spikes that indicate safety risk,
thus allowing quick identification and
action. Effective monitoring and proactive
maintenance of utilities assets is made
possible with predictive analytics models
incorporating the make, maintenance
schedules and energy usage of assets in
the grid.
•• Vulnerable customers: Superior customer
segmentation can be facilitated by smart
data to enable accurate identification of
vulnerable customers and proactively
address their concerns, suggesting
suitable devices for their individual

needs. This would also help providers in
proactively addressing the targets set by
regulators regarding social obligations.
•• Governance reports: Smart metering
data enables the automated preparation
of detailed governance reports. By
employing suitable data architecture for
the smart meter data, aggregate figures
can be pulled automatically, eliminating
manual effort for creating such detailed
reports.
•• Fines and penalty reduction: Timely and
proactively addressing issues, enabled
by data-driven insights from smart meter,
will bring down the number of escalated
issues and regulatory interventions. This
reduces the cost of fines and penalties.
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[ Monetizing opportunities for smart meter data ]
Conclusion The potential benefits for successfully
To conclude, the advent of smart meters implementing smart meter programs
provides significant opportunities for significantly outweigh these challenges. Be
utilities stakeholders and other industries it enhanced customer experience, superior
through effective, collaborative partnership. financial performance or better industry
However, in order to realize these benefits, governance, assessing the scale of these
there are a few challenges which utilities opportunities helps utilize smart meters
players need to successfully address. more effectively.
Technological Government Customer Data privacy &
challenge regulations receptiveness security risks
Including wifi connectivity is Better consumer protection Addressing key customer While greater control is
becoming imperative for all
homes. Better data
and eco-friendly
regulations must be
concerns on the
interoperability of smart
given to consumers
through smart metering
management techniques established to harness the meters across providers, and advanced features
are required to store and full potential of smart data usage and other provided by AMI, the
manage a high volume of metering. Authorities and concerns would help in associated security risks
data and to manage the regulators must draft increasing the level of must be addressed. Aside
different flows. policies that foster openness among from data protection, there
long-term development, consumers towards smart is also a broader security
aim to remove barriers for metering. concern of hackers
renewables and ensure infiltrating the networks of
controls on access and use connected homes.
of smart meter data.
 EXL (NASDAQ: EXLS) is a leading operations management and analytics company that helps
businesses enhance growth and profitability in the face of relentless competition and continuous
disruption. Using our proprietary, award-winning Business EXLerator Framework®, which
integrates analytics, automation, benchmarking, BPO, consulting, industry best practices and
technology platforms, we look deeper to help companies improve global operations, enhance
data-driven insights, increase customer satisfaction, and manage risk and compliance. EXL
serves the insurance, healthcare, banking and financial services, utilities, travel, transportation
and logistics industries. Headquartered in New York, EXL has more than 25,000 professionals in
locations throughout the United States, Europe, Asia, Latin America, Australia and South Africa.

© 2016 ExlService Holdings, Inc. All Rights Reserved.

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