Saturday, July 14, 2012

Smart Meter Spec. Snafu Seems Resolved -- TEPCO discovers Internet Protocol for Communications

One of the early negative signs about the likelihood of "real" reform of the Japanese electricity supply sector was the mess involving smart meter procurement by TEPCO earlier this year.

TEPCO plans to install 17 million smart meters in its service area in coming years ... and then eventually add an additional 10 million for its entire customer base.  There was a significant brouhaha early in the year when TEPCO seemed ready to go forward with a Smart Meter specification that would likely limit procurement to the usual suspects.  As Diamond, a weekly business magazine, explained it in their April 14 2012 issue, the electric industry "village" was fighting against reform, having lived fat and happy off of TEPCO procurement over many decades in a system whereby they would get [over]paid at every step of the way -- paid for holding inventory, paid for shipping meters around, paid for selling the meters, paid for installation and on and on.  Of course, the system involves cross-shareholdings, sending personnel on secondment from TEPCO to serve as executives at the companies, and various other practices that would block new entrants.

As Diamond continued, the four companies that traditionally supply meters in Japan, Toko-Toshiba (controlled in practice by TEPCO), Osaki Denki Kogyo (with the leading share in Japanese electric meters, cross shareholdings involving each of five utilities, various jointly owned ventures, and a management team that originated at TEPCO), GE-Fuji Electric Meters and Mitsubishi Electric had worked jointly with TEPCO to develop a smart meter specification and collectively controlled relevant intellectual property.

In February, TEPCO rushed out a proposed spec., requested comments and announced a procurement schedule whereby the final spec. would be determined in July, and initial orders for over 3 million meters would be placed in October.

Competitors complained that TEPCO had designed an extremely and needlessly expensive -- and not very good -- product, ignoring international standards and needlessly increasing cost.  And the schedule had been set such that it seemed unlikely any company other than the usual suspects would be able to participate in the initial tenders, at which point the game would be over.  And  once TEPCO rolled out these proprietary meters, it would become more difficult for competitors to take over retail supply.

Other reports indicated that the government's Fukushima compensation fund, the Nuclear Damage Liability Compensation Fund, had interjected itself, and warned TEPCO that if it adopted the original specification, it would get a budget of zero yen for smart meter procurement.  TEPCO soliciated public comments on its specification ... and got an earful.

The final specification was announced on July 12.  Based on the Nikkei's report, the initial proposal was "fundamentally revised", now international standards are being used.  Apparently the communications will be based on something called "Internet Protocol" or "IP".  That sounds ... vaguely familiar.  Yes, they will use IP communications, even though the protocol was not invented at TEPCO or one of its usual contractors.  This will make it much easier for the meters to communicate data not only to TEPCO, but to the consumer and "smart house" equipment.

And the much criticized "bucket relay" system of communication under the TEPCO spec has been revised and made more flexible and robust.  Under the new specification, the initial press reports suggest that international companies that design and manufacture smart meters may find it possible to participate.

Nikkei's main article on July 12 suggests that the implementation cost could be cut in half -- not an insubstantial savings if TEPCO would save up to 10,000 yen on each of 27 million meters (that would be 270 billion yen or about 3.5 billion dollars in savings, over a 10-year period), for a better product.

An English summary explanation of the new specification is available here.  If you take a look, you can see that numerous pages are marked "newly added" or "modified".  Of course, the devil is in the details.  

I take this as a very positive sign -- a sign that electricity reform is an important enough issue for Japan that national interest will take precedence over the usual "village" politics.  Backsliding will not be tolerated.  At least not this month, or next, or maybe for some time thereafter.

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