What are smart meters?
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What are smart meters?

At a time when energy consumption and efficiency have become critical concerns, smart meters have emerged as an innovative solution for managing household, small business and commercial energy metering more effectively. These digital devices are gradually replacing traditional meters (smart meter installations have tripled in the last decade.)1 And with smart meters on track to comprise 93 percent of all metering systems, they are transforming the way utilities and consumers interact with energy resources.2

Here, we’ll give you a comprehensive understanding of smart meters and why they're quickly becoming an essential tool in modern energy management.

A key component of advanced metering infrastructure (AMI), smart meters are digital devices that measure and record electricity, gas or water consumption in real time and relay the information to utility companies. Unlike analog (traditional) metering, which requires manual readings by meter readers, smart metering provides accurate and up-to-date consumption data that enables both utilities and consumers to monitor and manage energy usage more effectively.

Smart meters are essential for building smart grid infrastructure—a modernized electrical grid system that uses digital technology to enhance the reliability, efficiency and sustainability of electricity usage distribution.

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How do smart meters work?

The metering device within a smart meter is designed to accurately measure energy consumption using digital technology. However, the sensors and measurement techniques you will use depend on the type of energy you’re measuring.

For electricity meters, sensors measure the voltage and current flowing through the electrical circuits. These values are then multiplied to calculate the power consumption (measured in watts). By integrating the power consumption over time, the meter can determine total electricity use (measured in kilowatt-hours).

Natural gas and water meters use flow sensors to measure the volume of gas or water passing through the meter. These sensors can utilize a range of technologies, like ultrasonic, turbine or diaphragm-based meters. The smart meter then calculates the energy consumption based on the volume of gas or water used and the energy content of the respective resource.


How do smart meters send data?

Once the smart meter has measured and recorded energy consumption data, the communications module is responsible for transmitting usage information to the water, gas or electric company using one of the following methods:

  • Radio frequency (RF) signals: Many smart meters use wireless RF signals to transmit data. This method is cost-effective and allows for long-range communication, making it suitable for large-scale deployments. However, RF signals can be susceptible to interference from other wireless devices and may require additional infrastructure, such as repeaters or gateways, to ensure reliable communication.

  • Cellular networks: Some smart meters rely on existing cellular networks (e.g., 4G or 5G) to transmit data. This approach offers widespread coverage and can be more resistant to interference than RF signals. However, using cellular networks may create additional data transmission costs and may not be suitable for areas with limited or unreliable cellular coverage.

  • Broadband connections: Another option for smart meter communication is broadband connections, like DSL and fiber-optic networks. This method can provide fast and reliable data transmission, but may require significant infrastructure investments, especially in rural or remote areas where broadband coverage may be limited.

  • Power line communication (PLC): PLC technology allows smart meters to transmit data over existing power lines, eliminating the need for additional communication infrastructure. This method can be cost-effective and provide reliable communication, but its performance can be affected by electrical noise and distance from the substation.

Regardless of the communication method you use, data transmission typically occurs at regular intervals (every 15 minutes, 30 minutes or hourly). This ensures that utility companies receive up-to-date consumption information for billing, demand response and grid management purposes.

How do utilities use smart meter data?

Once the utility company receives the smart meter data, they process and use for a number of purposes:


Because smart meters transmit real-time consumption data, utility companies can charge customers based on their actual usage rather than relying on estimates or manual meter readings.

Demand response

Smart meter data can help utility companies better understand and manage grid demand. By analyzing consumption patterns, utilities can identify peak demand periods and implement demand response programs (e.g., offering incentives for customers to reduce energy usage during peak times).

Grid management

Utility companies can use smart meter data to optimize the distribution of energy resources, predict and prevent power outages and integrate renewable energy sources more effectively.

Customer engagement

Many utility companies provide consumers access to their smart meter data on cell phones and computers with online portals or mobile apps, faciliting two-way communication and helping customers monitor their energy use in real-time.

Challenges and benefits of  smart meter systems

The benefits of installing smart meter technology typically outweigh any challenges companies may encounter during implementation, but we will discuss both here. 


Despite the numerous benefits of smart meters, there are several challenges that must be addressed to ensure successful implementation and adoption.

Privacy concerns: One of the primary concerns with smart meters is the potential for privacy breaches. Since these devices collect and transmit detailed energy usage data, they can be susceptible to unauthorized access, revealing sensitive information about consumers' habits and lifestyles. To mitigate this risk, utility companies can implement data protection measures (like encryption and secure data storage) to ensure that consumer information remains private and secure.

Customer resistance: Some consumers may be hesitant to install smart meters due to privacy, cybersecurity or health concerns about wireless communication technologies. For instance, consumers have expressed concern about the radio frequencies associated with smart meter installation (but the FCC sets strict limits on radio frequency exposure). To advance smart metering infrastructure in the face of these concerns, utility companies can invest in public education and messaging about the safety of smart meter technology.

Cybersecurity threats: Since smart meters are connected to the internet and often communicate using wi-fi, they are vulnerable to cybersecurity threats, such as hacking or denial-of-service attacks. These threats could compromise the integrity of the energy grid, leading to service disruptions or fraudulent billing. To counter these risks, utility companies should invest in advanced cybersecurity measures to protect their smart meter infrastructure.

High upfront costs: The initial cost of smart meter installation can be substantial, as it involves replacing existing analog meters and upgrading the energy grid's communication infrastructure. Though the investment can be a barrier for some utility companies, the long-term benefits of smart meters (i.e., reduced operating costs and increased energy efficiency) tend to outweigh the upfront costs.

Interoperability and standardization: As smart meters become more commonplace, utility companies will need more interoperability and standardization to ensure that all devices and systems can communicate effectively. These meters generate vast quantities of data, so it can be quite complex to integrate data with existing systems (e.g., EAM and APM systems). Standardization will enable seamless integration of smart meters with asset management systems and other smart grid components, like energy management systems and distributed energy resources.


Smart meters are revolutionizing energy management, providing consumers and utility companies with real-time, accurate consumption data.  Smart meters enable:

Accurate billing: One of the primary advantages of smart meters is their ability to provide accurate billing information. Traditional analog meters require manual readings, which can result in estimation errors and misreadings. Smart meters eliminate these inaccuracies by automatically transmitting precise consumption data to the utility company, ensuring that customers are billed fairly and accurately for their usage.

Real-time energy usage monitoring: When connected with EAM and APM systems (enabled by AI and analytics), smart meters allow consumers to monitor their energy usage in real time, providing them with valuable insights into their consumption patterns. This information can help consumers identify inefficiencies and modify their usage behavior to reduce energy consumption and save money. Moreover, real-time monitoring helps consumers understand energy usage relative to the time of day, helping them avoid peak demand periods and further save energy. 

Enhanced energy efficiency: Smart meters empower consumers to make informed decisions about conservation and the amount of energy they use. This increased awareness can lead to behavioral changes, such as turning off lights when not in use and investing in energy-efficient appliances, ultimately resulting in reduced energy consumption and lower utility bills.

Faster, easier service: Smart meters enable utilities to detect and resolve issues more quickly, as companies can remotely identify and diagnose problems with the meter and/or energy supply. This means faster response times and less inconvenience for consumers, since technicians can often fix issues without having to visit the property.

Integration with smart home technology: Smart meters can be integrated with various smart home technologies, allowing consumers to automate and optimize their energy usage. For example, smart thermostats can be programmed to adjust heating and cooling settings based on real-time energy pricing information, ensuring that the home maintains a comfortable temperature while minimizing energy costs.

Support for renewable energy: Smart meters facilitate the integration of renewable energy sources into the grid by providing real-time data on energy production and consumption. This information helps utility companies better manage the fluctuating supply from renewable sources, ensuring a more stable and reliable energy distribution system.

Reduced envrionmental impact: Customers use smart meters to monitor and reduce their gas, water and electric utility demand. And reduced electical demand will reduce the need for new power plants as well as our reliance on older, less cost-effective plants. Transitioning to more updated smart energy plants will ultimately decrease greenhouse gas and other air emissions, minimizing the negative consequences of energy production for the environment.


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1 US smart meter penetration to reach 93% by 2027, (link resides outside ibm.com) Smart Energy International, 03 January 2023

2 Electric company smart meter deployments: Foundation for a smart grid (2021 Update), (link resides outside ibm.com) The Edison Foundation-Institute for Electric Innovation, April 2021