Itron CEO Talks Smart Grids and Cities, Big Data, China, and Water

2/19/13Follow @bromano

Based outside of Spokane, WA, but with a business presence in 120 countries, Itron is the quiet, global giant in the state’s cleantech sector—and a key part of the Pacific Northwest’s cluster of smart grid businesses.

Philip Mezey took the helm of Itron at the start of the year, guiding a company in an enormous marketplace of 2.6 billion electric, gas, and water meters worldwide. “Fewer than 10 percent of them have been automated in any way,” he says, alluding to the massive opportunity in an interview with Xconomy.

“There are really good reasons that we would want to connect our electric, gas, and water meters—to have the utility and the customer understand how and when we’re going to use energy and water, because there are significant inefficiencies built into the market of not knowing.”

Itron just posted 2012 revenue of $2.2 billion, down about 10 percent from 2011, but swung to a $108.3 million profit, from a half-billion dollar loss the year earlier.

As a top supplier of utility meters, communications technology embedded in them, and complex smart grid systems, Itron (NASDAQ: ITRI) has a unique vantage point on a future of connected cities, which Mezey discusses—along with the smart grid “hype cycle,” China, big data, water, and more—in this condensed, edited interview.

The pace of smart grid deployments in North America, and why we’ve seen relatively few very large projects:

“California, Texas, and Ontario, [Canada] mandated electric smart metering and essentially triggered a series of very large projects which are just now completing…. I think what led to a hype cycle in the industry was an expectation that after California, Texas, and Ontario, that all the other states were going to follow at this level of complete commitment, total rollout, and that is not what happened….

“It’s a conservative industry, and there are a lot of utilities that want to wait and see the economics of how these large projects in California and Texas pan out. They want to see results before they make the plunge and commit.

“There are places, large places in parts of the country where the average electric bill is $70 a month and the incremental savings out of having control over how and when you use your electricity is possibly not justified for the level of expense. … And then because of the recession and increasing rates in a number of regions, regulators have been very careful about increasing the burden on the residential consumer to make the investment in smart grid.”

Smart grid pilot projects then and now:

Mezey

“[Utilities] were proving to themselves, ‘Does it really work?’ I think at this point, we have 5 million meters up and running in Los Angeles, 2 million in San Diego, and another 2 million in Houston. I mean, the stuff works, demonstrably. [Today], they’re business-case pilots, in which they’re studying consumer behavior, and looking at different rate structures, and all kinds of projects to find the best economic model for deploying the technology more widely….

“Innovation tends to focus too much on technology. People think it’s about hardware, and it turns out there is a lot of innovation in business process, and delivery, and channel development.”

A policy change to open the Washington smart grid market:

“Time-varying rates. There is no incentive for people to pay attention to … Next Page »

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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  • Jerry Jeff

    Cool article. Nice overview of the company and the challenges of the field.