China-India Military Standoff Generates Smart Metering Opportunities

In May 2020, Chinese and Indian troops initiated a military standoff along the heavily contested borders of Ladakh, India, and Aksai Chin, China in the Himalayas. Long-standing tensions culminated in a deadly clash on June 16, 2020, resulting in the death of at least 20 Indian soldiers. While both nations have shown interest in de-escalating the crisis, these latest developments mark a new low in bilateral ties.

India Snubs Chinese Products

There is a growing cry across India to boycott Chinese goods and services following the border clashes. This particularly affects India’s electricity sector. Part of its larger energy transformation goals include the aim of installing 250 million smart meters by 2022. Chinese equipment manufacturers have traditionally held strong market shares across India and were expected to contribute significantly to these mega-deployments; however, this is now uncertain.

Already, there are examples of supply chain disruptions playing out. On June 23, 2020, the Uttar Pradesh Power Corporation Limited (UPPCL) decided to scrap its consignment of Chinese smart meters in response to the growing calls for boycott. This procurement is part of the larger 250 million smart meter initiative led by Indian state-run Energy Efficiency Services Limited (EESL). The decision by UPPCL follows reports of concern within the Ministry of Power (MoP) around potential malware within Chinese smart meters.

This presents a remarkable opportunity for advanced metering infrastructure (AMI) system providers across the value chain. Domestic Indian suppliers are likely to focus on hardware manufacturing rather than creating IT solutions. Foreign software providers that engineer mobile device management, headend systems, and theft analytics platforms will hold a competitive advantage over hardware providers that supply meters, network interface controller cards, and concentrators.

Cost and Cultural Barriers Restrict Vendor Entry

How can vendors differentiate themselves to capitalize on these opportunities? Emerging markets are traditionally tough nuts to crack. There are often economic, political, and sometimes cultural barriers to entry that can constrain vendors’ potential. Cost-competitiveness will be the primary determining factor when it comes to India’s procurement practices. Given Indian distribution companies’ (DISCOMs') financial constraints, they are likely to demand significantly lower price points than what’s found in North America or Europe—sometimes in excess of 50% less. Emphasis on functionality and capabilities will evolve later, as the basic smart grid building blocks are established.

Some DISCOMs may be wary of foreign and international vendors. Forming alliances or partnerships with India’s MoP and Central Electricity Authority is recommended, as these government agencies are allocating massive amounts of grant funding to the country’s public DISCOMs. While local partnerships are also recommended, global vendors must be cautious in the selection of local partners. Some vendors report challenges in reaching project targets and timelines when working with these Indian companies.

The future of India’s energy industry is still uncertain. The country has fallen victim in the past to grand ambitions and underwhelming execution in relation to its smart meter targets. Over 2020, however, India has arguably been the most active smart meter market in the world, with a spate of new announcements and several high volume projects in the pipeline.

Through 2029, India is expected to become one of the top smart meter markets in the world. With the country’s top importer seemingly on the ropes, smart meter providers have an extraordinary opportunity to expand into Asia’s sleeping giant, India.

For more information, see Guidehouse Insights’ report, Global AMI Tracker 2Q20. This Database Tracker includes information on more than 40 of India’s smart metering projects.