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Reading electricity meters is not typically a dangerous profession—unless you happen to be employed by AES Eletropaulo. Robson Dourado says residents of São 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. “I just keep on doing what I’m doing until they come speak to me,” he says. “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, as much as 20 percent of electricity output is pinched. To combat the problem—and avoid violent encounters—utilities are turning to smart meters. The devices, which cost $150 to $400 apiece, allow power companies to 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. Smart meters “are the perfect solution,” says Fabio de Oliveira Toledo, chief technology officer for the distribution unit of Light, 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.” André Pepitone da Nóbrega, director of the national electricity regulator, says the meters may save utilities as much as 8 billion reais ($4.7 billion) a year.
Makers of the wireless gadgets, including Toshiba’s Landis + Gyr, Elster Group (ELT), and Echelon (ELON), 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, a research firm in Washington, D.C.
“Lots of U.S. companies are excited about Latin America and Brazil,” says Jeff Lund, vice president of business development at Echelon, based in San Jose. Brazilian utilities may install as many as 63.5 million smart meters by the end of the decade, according to Northeast. It estimates that Mexico will deploy 22.4 million, Argentina 4.9 million, and Chile 3.2 million over the same period.
Elster, which is headquartered 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 exec-utive officer, David Liang.
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 particularly violent slums, was stolen through illegal connections, says 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 says: “Now everyone receives invoices, and if they don’t pay them, they’re disconnected.”
Companies such as Elster are holding out for a bigger 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 yearend, says Brazil’s electricity regulator. If that happens, Landis + Gyr, the Swiss smart meter company Toshiba acquired in July for $2.3 billion, will be ready. The company has added three salespeople in Brazil over the past year, says Eduardo Casagrande, South America sales director. “I have no doubt the market will explode,” he says. “The only question is when.”
The bottom line: Latin American sales of smart meters are expected to generate $24 billion in revenue over the next eight years, led by Brazil.