Purpose

Smart Meters are an important component of five different but related intiatives:

1. Improving the enabling environment for energy efficiency applications
2. Improving controls over power grids to enable stability that would better accommodate non-dispatcable renewable energy technologies
3. Providing improved reliability of services
4. Reduce O&M costs
5. Close the loop on an unfinished design of power system markets  

Benefits

Smart meters have many benefits in improving energy efficiency , incorporating renewable energy to grids, improving reliability and operation of grids, as well as the power system market.

Energy Efficiency Applications: Smart meters are an important energy efficiency improvement instrument. From the demand side, it allows consumers to regulate and steer their consumption to save energy. It also effectively informs utilities about the demand changes to avoid possible disruptions during the peak time and distribute power more efficiently.

Improved Support for Renewable Energy:  Smart meters have the ability to incorporate clean energy to the grid and could deliver power from areas of the country that have an abundance of sun or wind. The smart grid is able to pull energy from distributed renewable energy, like solar panels and small wind turbines, feed it back into the grid and compensate the power generator accordingly. ¹In addition, electric cars can take advantage of "off-peak" hours of low energy demand late at night, when the lights are out and TVs are off, but power plants are still producing, which will also make possible the widespread use of electric vehicles.

Improved Reliability of Supply:Smart metering help utilities pinpoint peak load and thus reduce peak demand. It also allows suppliers proactively manage peak demand and provide a source of reserve to the system operator. 

Reduced O&M Costs: Smart metera provide a source of frequency response for system operation, utility providers can operate grids more efficiently and reduce the operation and maintenance cost.

Power System Market Improvements: Since the inception of electricity markets starting in the late 1980s, governments have been looking for a means to match consumer electricity usage responses to supply prices. The deregulation of elecricity markets that largely took place during the 1990s only focused on the supply-side of the market with the expectation that the demand side would just happen. Unfortunately, many aspects of a demaand response failed, as price signals were ineffective (who knows what the time-of-use really is) and the abaility to respond to price signals is also lacking (do consumers stand by switches waiting to turn off appliances when prices rise?). The next generation of smart meters will facilitate a more effective demand response when they can comminicate bi-directinally and when appliances that can be cycled (heating and cooling systems, for example) can be cycled to flatten system demand.  This can be extended furher to appliances whose time of use in relatively insensitive - dishwashers for example - and could be cycled to off-oeak periods.

Barriers

There are economic, technical and regulatory barriers to the adoption of smart metering technology.
Economic – as smart meter uses advanced technologies, they are more costly than conventional meters. The more sophisticated the model, the higher the price. The adoption of smart metering technology is costly both for consumers as well as suppliers. For consumers, the cost of a smart meter might be three times than a conventional meter. For suppliers, the cost of adopting the technology and replacing the current infrastructure will be very high. ²

Technical – as smart metering is a new technology, there is not standard in the field. The lack of standardization means a large number of smart meters will work, which will result in challenges for energy suppliers.³

Regulatory – With the current regulatory framework, most of the energy meters are owned by the energy suppliers. The electricity network operators are reluctant to risk developing innovative services, especially when it can render their current assets. ⁴
 

Implementation examples

Jo

Italy has the world's largest and arguably "smartest" smart meter deployment - Enel SpA, which has over 27 million customers. Over a 5-year period, beginning in 2000 and ending in 2005,  Enel deployed smart meters to its entire customer base. These meters are fully electronic and truly smart, with integrated bi-directional communications, advanced power measurement and management capabilities, an integrated, software-controllable disconnect switch, and an all solid-state design. They communicate over low voltage power line using standards-based power line technology from Echelon Corporation to Echelon data concentrators at which point they communicate via IP to Enel's enterprise servers.

The system provides a wide range of advanced features, including the ability to remotely turn power on or off to a customer, read usage information from a meter, detect a service outage, detect the unauthorized use of electricity, change the maximum amount of electricity that a customer can demand at any time; and remotely change the meters billing plan from credit to prepay as well as from flat-rate to multi-tariff.

United States

The U.S. is pursuing the same technology.  Smart Grid provisions in H.R. 6 – 2007 Energy Act encourages research, deployment, and deployment of Smart Grid technologies.

California is a forerunner in the country. On July 20, 2006, California's energy regulators approved a program to roll out conventional meters retrofit with communications co-processor electronics to 9 million gas and electric household customers in the Northern California territory of PG&E. These meters report electricity consumption on an hourly basis. This enables PG&E to set pricing that varies by season and time of the day, rewarding customers who shift energy use to off-peak periods. The peak pricing program will start out on a voluntary basis, and the full rollout is expected to take five years. ⁵

The smart grid also allows PG&E to give customers timing and pricing options for upload to the grid.The largest municipal utility in the U.S., the Los Angeles Department of Water and Power (LADWP), has chosen to expand its advanced metering infrastructure (AMI) serving its commercial and industrial (C&I) customers.The utilities’ commercial and industrial customers may tailor their daily energy consumption around the data provided by the smart meters, thus creating potential for reducing their monthly electricity bill and, at a broader level, contributing to global energy conservation.

Australia

In 2004, the Essential Service Commission of Victoria, Australia (ESC) released its changes to the Electricity Customer Metering Code and the Victorian Electricity Supply Industry Metrology Procedure to implement its decision to mandate interval meters for Victorian electricity customers.

The ESC's Final Paper entitled "Mandatory Rollout of Interval Meters for Electricity Customers" foreshadowed the changes to be implemented and contained the rollout timetable requiring interval meters to be installed by 2013 for all small businesses and residences with new and replacement installation commencing in 2006. The ESC forecasts that within 7 years of the start of the rollout, up to 1 million large customers and other customers will have existing meters upgraded to interval meters.

The Victorian government is not alone with other state governments and the Commonwealth issuing a Joint Communiqué at the Council of Australian Governments meeting in Canberra on 17 February 2006 committing all governments to the progressive rollout of smart metering technology from 2007. ⁶