When the Republic of Ireland installed water meters on many of the country’s homes between 2014 and 2016, it was a bit of a shock to residents. Instead of having water fees embedded in their taxes, as was done previously, the Irish now pay according to how much each resident draws from their faucets.
Count this as a positive green initiative. As is common just about everywhere else in Europe, an awareness of use and costs tends to foster frugality—and the fixing of leaky pipes.
The water meters used on the Emerald Isle are Itron’s Aquadis+. Based in Liberty Lake, Washington, where Robert Farrow serves as vice president of treasury and strategic planning, Itron is a global provider of technologies and services that zero in on smart use of energy and water resources.
What the company was able to do for Ireland is just one example of how Itron products work and how Farrow’s role in making it happen occurs on a global scale. From New York to New Delhi, there are many leaky pipes, and Itron is there. The metering and monitoring of water and energy usage is key to how everyone, everywhere, can help cut waste, costs, and the environmental burden of resource use.
Itron’s technologies are also being applied to the Internet of Things (IoT). Everything from solar energy management to gas pipeline safety, streetlight management, and home energy and water usage can operate more rationally when monitored in real time using the wireless technologies found in many of the company’s products. Utility and building technicians are the new warriors against waste, with smart devices, tablets, and desktop computers as their weapons.
However, transacting Itron’s technology across borders is not as easy as transmitting high-frequency signals. Everything from foreign currency exchange rates to commodity price volatility—not to mention municipal, national, and regional politics—can affect this business.
“My main worries are about cash: generating it, using it, and protecting it in all the different places we do business,” Farrow explains. “We have to write contracts that set prices in different countries according to all these factors of exchange rates and risk. We have extremely complex business transactions for our size, which is about $2 billion per year.”
All of this is why Farrow’s role is important in the planning function at Itron. With a degree in physical geography from Aberystwyth University in Wales and experience at other companies in CFO, corporate treasurer, and vice president of financial services roles, Farrow is now an advisor to Itron’s senior management, as well as the company’s board of directors.
“My peers will tell you that cash forecasting may sound easy, but it’s difficult to do well. It’s never an exact science, and needs thoughtful estimation.”
“On strategy, the C-suite drives the vision. The operating teams know the products, and my role is about the financial side of it,” he says. “I am responsible for Itron’s liquidity and capital allocation, setting priorities on where and how to fund the business. When looking into a deal, for example, we have to consider whether it’s financially smarter to develop our own solution or to acquire.”
Another factor the company must deal with, as with any firm in the energy industry, is price volatility. “My peers will tell you that cash forecasting may sound easy, but it’s difficult to do well,” Farrow says. “It’s never an exact science and needs thoughtful estimation, especially for the longer term. We have to sometimes be comfortable with 70 percent accuracy in our forecasts. Some people who are used to clear-cut accounting find this difficult.”
So how does Farrow guide his staff—which includes fourteen people, many of whom are CPAs and MBAs—to deal with this inexactitude? “It’s the art of understanding the business flows, using everyone’s experience to call out poor forecasting inputs,” he explains. “The team has to have the confidence to make judgment calls.” Part of this means connecting his team with the field and getting them into the business of technologies and the customer applications. “Gaining that experience is what makes this so interesting to me,” he adds.
Judging by the vast global trend toward urbanization, it’s understandable that he feels this way. The United Nations projected in 2014 that 54 percent of the world’s population lives in cities, a number that will increase to 66 percent by 2050 during a time of overall population growth. This means that the world’s cities will add about 2.5 billion people over the next three decades. About 90 percent of that growth will occur in Asia and Africa, according to World Urbanization Prospects.
That is a lot of infrastructure that needs to be built, repaired, or modernized. And when it comes to the topic of infrastructure, it’s only inevitable to talk about the IoT. Therefore, in 2014 the company launched its OpenWay Riva solution, a first-in-class distributed intelligence solution that supports sensing technologies and dynamic applications at the device level. It essentially links smart meters, Cisco routers, and the Linux operating system for multicommunications and distributed intelligence for IoT applications. The solution is open to programmers and app developers to deliver computing power, control, and analytics for automated decision making.
Importantly, OpenWay Riva is particularly useful in dense urban environments with concrete high-rises or places where other technologies, such as wireless mesh networks, perform poorly. Hong Kong’s electric utility, China Light and Power, was one of the first pilots. It’s still in the rollout phase but holds much promise. “Getting OpenWay Riva right and used will enable company growth,” Farrow says.
He also emphasizes how government-scale clients use some of the company’s technologies, while others are consumer-driven products. In every case, the goal is to deliver earnings to shareholders. When Farrow joined the company in 2015, it was just a few years out from a turnaround scenario with a strong portfolio of products. “Itron has a reputation for smart metering and is moving into a higher level of product sophistication,” he says. “It is enabling people to control their water, gas, and electric consumption.” Most interestingly, he says, “We can help fix stuff.”
While still in its early phase, Irish Water reports that the leaks were greater than previously thought. But at least they know now. And the first wave of repairs already saves about thirty-four million liters of water per day.