24 Jan 2018 Water and The Internet of Things: 2018
I became interested in water and the Internet of Things (“IoT”) several years ago when I had a below ground water leak at home that resulted in a large water bill. Since I live in the Silicon Valley, California, the high tech capital of the world, I thought there should be a better way to track water usage so problems can be identified and solved sooner. I needed a smart water meter as part of an IoT application that I could access online to monitor water use and provide actionable information so I could conserve water. Motivating water conservation is more effective when you know how much water is used.
I continue to be a good citizen to try to conserve water but smart meters are not yet available for my neighborhood from my water utility, California Water Service (“CWS”). Managing my water consumption is pretty much a guessing game with my traditional water meter as I await my monthly bill detailing usage. The California Public Utilities Commission (“CPUC”) has denied CWS’s requests to add smart meters to the water system in the last two rate cases but approval may be more likely in the next rate case in 2019 because of the success of pilot projects.
The CWS is required to show the CPUC that the benefits of implementing smart meters exceed the costs, particularly the initial capital costs. Traditional water meters require utility workers to manually visit each meter, pry up the concrete, open the meter cover and record usage. Collecting usage information manually is a large operational expense. Smart meters can substantially reduce the operational costs of the manual meter reading process and decrease the carbon footprint resulting from driving tens of thousands of miles per year to read meters. Smart meter systems also enable water utilities to detect leaks more quickly and to monitor usage to aid enforcement efforts. The website for the San Francisco smart water meter program mentioned below also indicates that smart meters measure water consumption at 100 times the precision level of manual readings. While smart meters are more expensive than traditional meters, given the continuing need to conserve water in California, it would seem that the cost benefit analysis should be more favorable toward adoption.
Smart water meters are part of an Advanced Metering Initiative (“AMI”) promoted by the CPUC that also includes smart gas and electric meters. My gas and electric utility, Pacific Gas and Electric (“PG&E”), has installed a smart meter on the side of my house. I can access my account on the PG&E website to view usage information that currently is about three days old.
There continues to be a small but vocal group of opponents of smart meters who believe the wireless emissions from such meters are not healthy and are concerned about consumer privacy and that smart meters could result in higher not lower utility bills. To mitigate such concerns, the website for the San Francisco smart water meter program carefully explains the privacy and security protections in place for customers as well as the testing results of emissions when the smart meter transmits data.
What is the Internet of Things?
Smart water meters are part of an IoT, a network of technologies which can monitor the status of physical objects, capture meaningful data, and communicate that data over a wireless network to a computer in the cloud for software to analyze in real time and help determine action steps. Technologies are capable of monitoring objects such as smart water meters and other electronic devices, organisms or a natural part of the environment such as an area of ground to be measured for moisture or chemical content. A smart device is associated with each object which provides the connectivity and a unique digital identity for identifying, tracking and communicating with the object. A sensor within or attached to the device is connected to the Internet by a local area connection (such as RFID, NFC or BTLE) and can also have wide area connectivity. Typically, each data transmission from a device is small in size but the number of transmissions can be frequent. IoT involves many, many things interacting with each other to produce actionable information.
Each sensor device can monitor a specific condition or set of conditions such as vibration, motion, temperature, pressure or water quality. More IoT applications have become feasible because the cost and size of such devices continues to decrease and their sophistication for measuring conditions keeps increasing. Cisco estimates that 500 billion devices and objects will be connected to the Internet by 2030.
For example, at home I would need a smart water meter (device) that collects usage data which is communicated wirelessly to CWS where software analyzes the data and reports the results on the web site for me to view. In the San Francisco program mentioned below, a customer can view the current data and compare their numbers with past use and city averages. The usage data should eventually alert me to a leak but another device that measures water pressure could detect a leak faster. To find the location for repair, however, I would need to add sensors to measure pressure at various locations in my water system. The sensors would be connected to data analytics software in the cloud that would analyze the data transmitted to identify the location of the leak between two sensing points in my water system. This is a much more complex application than simply tracking water usage and illustrates the importance of the data analytics software needed to make sense of the transmitted data in an IoT application.
Smart Water Meters Status
San Francisco has implemented the largest smart water meter program in California. More than 98% of the city’s 178,000 water accounts are monitored by the meters. Water consumption is measured hourly and data is transmitted on a wireless basis to the utility four times a day. Both the utility and customers can track use. Elsewhere in the Bay Area, the East Bay Municipal Water District is also an early adopter. Its program targets mostly single-family homes and provides a daily update of hour-by-hour consumption via a website. Consumers can be alerted, for example, by email or phone call, when water use exceeds a specified limit or when a meter indicates continuous running water for 24 hours. There is also an ongoing pilot of AMI meters by the San Jose Water Company (“SJWC”) in the Willow Glen area of San Jose.
During 2017, adoption of smart water meters was slow in California cities. I estimate that only about 15-20 percent of California water customers have smart water meters. Smart water meter implementation also remains slow elsewhere around the U.S. The water utility industry is fragmented as compared to the energy utility sector. There are more than 50,000 water utilities as compared to about 3,000 energy utilities. Each utility has to make an investment decision on smart utilities which requires regulatory approval by a public utility commission.
Since smart metering for the energy sector is approaching maturity, some analysts believe smart water meters will be the growth driver in the smart meter market. Several research reports published in 2017 were positive about the growth of the smart water meter market. Global Market Insights expects the smart water metering market to be worth $14 billion by 2024, with 290 million new units installed during the forecast period. Transparency Market Research forecasts that the water meter segment will grow from a value of $3.5 billion in 2015 to $5.2 billion by the end of 2024, driven primarily by smart water meters. A Bluefield Research report estimated that water utilities will spend $20 billion on software, data, and analytics solutions over the next decade with more than $15 billion of that on smart meters. The global smart water meter market is projected to grow at a compound annual growth rate of 16.3% between 2017 and 2025 according to a Credence Research report.
Industry accounts for about 20% of water consumption worldwide. Industrial plants are also driving the adoption of smart water meters as part of their strategic goal to reduce water usage and costs. The commercial smart water metering market share is expected to grow by more than 15% by 2024.
Budget restrictions are the largest obstacle to faster adoption of smart water meters for homes. As indicated above, the PUC has denied my utility, CWS, from adding smart meters in the last two rate cases. Smart water meters are more expensive than traditional mechanical meters. Opponents of smart meters also cite consumer health and privacy fears. A smart meter management network can also be expensive and some utilities do not have the IT capability to effectively deploy and manage such technology. Some vendors are offering a managed services business model to utility companies for this purpose.
More smart meter products and systems became available in the market in 2017 but there does not appear to be any dominant market leader. The products vary from the very basic to those that integrate water metering networks with leak detection and usage monitoring applications. The number of global and domestic competitors, coupled with regulatory hurdles, makes fast growth very difficult. The San Francisco program vendor is Aclara Technologies. Some of the other leading U.S. vendors in this sector are Itron Corp. and the Elster Group.
The IoT Can Help Conserve Water in California
The simplest form of smart water meter installed at homes and businesses on a wide spread basis can provide actionable information which can save millions of gallons of water to help continue making water conservation a way of live in California. If the water utilities can provide the smart meter and basic water management platform, private vendors can offer more sophisticated features that are accessible as an app on a mobile phone similar to how AT&T provides the Digital Life home security system. Private vendors are already offering advanced features such as water leak detection.
Agriculture consumes about 40% of the freshwater available in California with a large amount being wasted by leaky irrigation systems, inefficient field application methods and the planting of water intensive crops in the wrong growing location. The IoT has great potential to make water use smarter and reduce waste for the agricultural industry, particularly in irrigation efficiency. Tax incentives (such as accelerated depreciation and investment tax credits) could increase adoption of IoT and other smart water measures by agricultural and other businesses but the federal tax reform act signed into law in late December, 2017 did not contain any such provisions.
Another focus for IoT to help save water is landscape irrigation in parks, medians and elsewhere. This is a major use of water in cities. Nationwide, it is estimated to be nearly one-third of all residential water use and as much as half of this water is wasted due to runoff, evaporation or wind. Landscape irrigation systems, which apply sophisticated data analytics to a wide variety of objects, are available in the market. Current weather data is combined with sensors for moisture, heat and other data such as the slope of the land, type of soil and the relative exposure to sunshine at a particular time.
In the water infrastructure, a utility can use an IoT network for predictive information to remotely determine the status and working condition of equipment (open or closed, on or off, full or empty, etc.). The information can be actionable, for example; a water gate can be opened or closed or a pump turned on or off remotely to adjust the flow of water through a water supply system. Pumps, gates and other equipment with moving parts in the water infrastructure can be monitored for predictive maintenance alerts based on vibration and other indications of failure to prevent equipment malfunctions. If a water pump is about to fail, the utility can be prompted to repair or replace it. An IoT-enabled water treatment plant can report if its filters are clean and functioning properly. The IoT can measure water pressure in pipes to find leaks faster in the water transportation system or the presence of certain chemicals in the water supply.
Privacy and Security: IoT networks need to be designed and implemented with adequate security and privacy protection. A network failure or hacker attack could have serious consequences, particularly in the water infrastructure. There is at least one reported incident of hackers changing chemical settings in a water treatment plant. Sensors and other entry points for an IoT network have such small software footprints that implementing security is difficult at such entry points without architectural changes which would impact the economics of the network
Most water infrastructure IoT networks will have only security concerns but there will also be privacy issues in consumer IoT networks. Hacking into a smart water meter, for example, could reveal whether or not a family is at home. Better security will mitigate privacy concerns. While most attention has been on security threats to personal information, there also are security issues for non-personal information.
Data Ownership Rights: Ownership rights to data used in an IoT network can provide a competitive advantage, particularly in agriculture IoT applications. While some data may be from the public domain or licensed from third parties, a business should try to own as much data as possible. Such data can be a valuable asset and important consideration in a liquidity event.
Intellectual Property Protection: The advances in sensing technology, the way that IoT physical components are combined into a network and the related data analytics software can have significant business value. Analytics is the process of collecting, organizing and analyzing large amounts of data to discover patterns and other useful information. Businesses need to think both offensively and defensively in creating an IP strategy so they have the freedom to operate without a license from a third party and also provide a barrier to entry by a competitor. There are already thousands of patents issued relating to IoT.
Some data analytics software appears to remain patentable after the Alice court decision but patent holders and applicants will face challenges if they rely on computer execution of nothing more than routine algorithms. Inventive steps will be needed to make IoT data analytics software patentable. Such a patent may lose its value over time since the algorithm may improve over the one described in the patent and additional patent applications may be needed.
Limiting Liability: There may be liability issues if an IoT device fails or the data analytics software provides erroneous information. Limiting liability by contract with a utility, state or local government or business may be feasible in the same way as for other equipment and software but click wrap agreements may not be possible for many consumer applications. Insurance will be needed as a safety net to mitigate the risk.
The IoT can be used to determine when, where and how much water is needed in residential use and in landscape and agricultural irrigation. Smart water meters are a simple and effective beginning point for smart water systems. The widespread implementation of smart water meters for residential customers could help save millions of gallons of water in California and elsewhere. Smart meters have many benefits for customers and water utilities. They help customers make informed conservation decisions so usage is more efficient and less wasteful. The meters enable utilities to reduce labor costs, improve enforcement efforts and speed up leak detection. While smart water meters are more expensive than traditional meters, given the continuing need to conserve water in California and the potential operational cost reductions, the CPUC cost benefit analysis should be more favorable toward adoption of smart water meters. It is unlikely that any federal tax incentives will become available to drive IoT adoption since the recent tax reform law, with the most major changes in more than three decades, did not include any such provisions.