How smart meters are helping Australia embrace a new energy future
Australia’s rollout of smart metering solutions is a template for upgrades to energy networks in Asia Pacific
Upgrading old, analogue electricity meters to modern digital equipment is a key part of managing demand and supply in a renewable energy driven energy system.
The benefits for electricity suppliers are significant: the Australian Energy Market Commission has put forward a recommendation for 100 per cent uptake of smart meters by 2030, which would deliver net benefits of A$507 million across New South Wales, Australia Capital Territory, Queensland and South Australia.1 Yet the rollout of smart meters in a country the size of Australia is an expensive and complex operation.
A smart approach to financing is part of the solution. As infrastructure equity investors and debt financiers warm to smart meters as an asset class, Australia and New Zealand are demonstrating how other markets across Asia Pacific can mobilise the resources needed to upgrade essential infrastructure and accelerate the energy transition.
Smart meters, which measure the amount of electricity or gas that a household or business is using and deliver that information to consumers and energy suppliers in real time, are an essential part of energy systems.
Consumers can use the data on their secure in-home display to monitor their energy consumption and keep track of costs. As flexible pricing options are introduced, customers can also benefit from lower tariffs, for example by charging their electric vehicle during daylight hours when the cost of generation is lower.
On the supply side, energy network operators benefit from lower operational costs since they do not need to dispatch engineers to read analogue meters or identify faults in the network.
This data will also facilitate further improvements in the electricity grid, by allowing energy suppliers to match demand to generation and take full advantage of the intermittent nature of renewable energy. As more wind and solar generation is integrated in the national grid, energy suppliers will be able to adjust pricing to incentivise usage at times of excess generation.
These benefits make smart meters an attractive asset class with long-term and stable cashflows from provision of essential metering services to households and businesses over the asset’s useful life. This makes them attractive to long-term institutional investors such as pension funds and sovereign wealth funds, in much the same way as major infrastructure assets such as a solar or wind power installation.
Combined with an innovative approach to traditional project financing, this allows specialist metering companies to access the additional resources they need to roll out millions of new smart meters across nationwide energy networks.
Instead of considering each meter as a single piece of equipment, a portfolio approach allows major investors to finance multiple assets in a single, scalable transaction. As global experience has shown, this is an efficient way of mobilising funding at scale.
The clear environmental benefits of a more efficient energy system also allow sponsors to access green financing.
Societe Generale has helped develop this model in Australia, leveraging our experience in the UK and Europe. For instance, we supported Arcus Infrastructure Partners (Arcus) on its acquisition of Horizon Energy Infrastructure in 2019 and refinanced the debt facilities with a green loan in May 2022. Arcus also teamed up with infrastructure fund GLIL to acquire Smart Meter Assets in 2021.
In Australia, IntelliHUB and Vector Metering have each attracted investment from financial sponsors. To cite some examples, Pacific Equity Partners (PEP) invested in IntelliHUB in 2018, with Brookfield taking a 50% stake in 2021. Alongside the Brookfield investment, we helped IntelliHUB to put in place a A$1.45 billion green loan to fund the rapid rollout of smart meters across Australia and New Zealand in 2021, the first of such financing to be certified by the Climate Bonds Initiative.2
More recently, we also supported Vector Metering raise NZ$1.833 billion (€1.035 billion) of green financing for its portfolio of 2.3 million smart meters across Australia and New Zealand, the second green loan for a smart metering transaction in Australasia. QIC, the Queensland government-owned investor with A$102.2bn in assets under management, has taken a 50% stake in the platform alongside New Zealand-based energy distributor Vector, combining industry expertise with the capital support of a major financial sponsor.3
Developing new markets
Partnerships like these show how bespoke financial solutions can have a positive impact on the energy transition.
We see an opportunity to extend a similar approach to developing markets such as India, which is aiming to install 250 million smart meters by 2025 at a total cost of US$30 billion where we see global financial sponsors collaborating with local and strategic players to position for a significant pipeline4, and across Asia as these markets also transition their electricity networks.
Smart meters will play a crucial role in the digitalisation and decarbonisation of energy networks and are a vital part of the energy transition. With a global track record in this emerging asset class, Societe Generale looks forward to helping financial sponsors and energy companies access the funds they need to bring forward the benefits of smart energy infrastructure to consumers and energy suppliers across Asia Pacific.