Power Theft Spurs Demand for Smart Meters at Brazilian Utilities

Reading electricity meters isn’t typically a dangerous profession -- unless you happen to be employed by AES Eletropaulo.

Robson Dourado said residents of Sao Paulo’s Morro do Indio slum watch him warily as he makes his rounds, worried he’ll detect rogue wires siphoning away power illegally. Some co-workers have lost teeth in encounters with angry customers.

To avoid confrontations with the street toughs who walk around with guns tucked into their trousers, Dourado, 28, practices a studied indifference, Bloomberg Businessweek reports in its March 12 issue. "I just keep on doing what I’m doing until they come speak to me," he said. "If there’s trouble, I leave."

Electricity theft is rampant across much of Latin America, so much so that statisticians have devised a formula that uses the purloined wattage to measure the size of a country’s informal economy. In some parts of Brazil, power losses reach as high as 20 percent.

To combat the problem and avoid violent encounters, utilities are turning to smart meters. The devices, which cost about $150 to $400 each, including hardware, communications software and installation, let power companies monitor customers’ usage remotely and in real time.

The meters can detect unusually heavy demand, which may signal an illegal hookup. They can also be used to shut off service to households and businesses that don’t pay their bills. The devices remove the human factor from the equation, so customers can no longer collude with dishonest meter readers to cheat the power company.

‘Perfect Solution’

Smart meters "are the perfect solution," said Fabio de Oliveira Toledo, chief technology officer for the distribution unit of Light SA, a Rio de Janeiro-based utility that has installed more than 150,000 of them. "They save you money, they’re easy to install, and they require little maintenance."

Andre Pepitone da Nobrega, director of the national electricity regulator, Agencia Nacional de Energia Eletrica , said the meters may save utilities as much as 8 billion reais ($4.5 billion) a year.

Makers of the wireless gadgets, including Toshiba Corp.’s Landis + Gyr AG, Echelon Corp. and Elster Group SE, are increasingly counting on developing markets to offset shrinking revenue in the U.S., where government funding to support smart meter deployment has dried up.

Sales of smart meters in Latin America are expected to generate $24 billion in revenue through 2020, two-thirds of it in Brazil, according to Northeast Group LLC, a Washington-based research company.

"Lots of U.S. companies are excited about Latin America and Brazil," said Jeff Lund, vice president of business development at San Jose, California-based Echelon.

Latin American Demand

Brazilian utilities may install as many as 63.5 million smart meters by the end of the decade, at a cost of approximately $15.2 billion, according to Northeast Group. The company estimates that Mexico will deploy 22.4 million, Argentina 4.9 million and Chile 3.2 million over the same period.

"Brazil is a clear regional leader," in smart grid development, said Ben Gardner, president of Northeast Group. "Mexico is next in line."

Elster, based in Essen, Germany, has retooled its factory in southern Brazil to produce smart meters as well as the regular variety. Hong Kong-based ATC International Group is considering teaming up with a local partner to open a facility in the country by 2013.

"Brazil will become one of the world’s top five markets," for smart meters, predicts ATC’s chief executive officer, David Liang.

Making Preparations

In Rio de Janeiro, utilities are taking advantage of preparations for the 2014 World Cup soccer championship and 2016 Olympic Games to deploy the meters.

Before August about 80 percent of electricity in Tabajara and Morro dos Cabritos, two of the city’s more violent slums, was stolen through illegal connections, said Geraldo Guimaraes, vice president for Latin America at Elster’s Integrated Solutions division.

After police established a constant presence in the favelas last year, Light began installing 50,000 of Elster’s meters. Theft has dropped to zero since, Guimaraes said. "Now everyone receives invoices, and if they don’t pay them, they’re disconnected."

Companies like Elster are anticipating a substantial payday. Brazil may require utilities to replace all of the country’s 67 million existing power meters with smart devices under a program expected to be introduced by year-end, said Brazil’s electricity regulator.

If that happens, Landis + Gyr will be ready. The company has added three salespeople in Brazil over the past year, said Eduardo Casagrande, South America sales director. "I have no doubt the market will explode," he said. "The only question is when."

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