EU Member States are required to ensure the implementation of smart metering under EU energy market legislation in the Third Energy Package. According to the European Commission, “implementation may be subject to a long-term cost-benefit analysis (CBA). In cases where the CBA is positive, there is a roll-out target of 80% market penetration for electricity by 2020.” Also, the Commission estimates the roll out for all Europe will be €45 billion compared to a possible €18 billion (£14 billion) in the UK as mentioned below. One would hope the CBA should be undertaken from the consumer’s perspective since it is the consumer paying. Andrew Warren, chairman of the British Energy Efficiency Federation, gives his views on the roll out in the UK in the February issue of Energy in Buildings & Industry. He raises some important issues that certainly question the approach being taken. What is your experience in your country?
Stick or twist? The UK’s smart meter dilemma looms
The Smart Metering Implementation Programme requires energy suppliers to replace 53m meters in 30m homes and small businesses with “smart” electricity and gas meters by 2020. All costs of the exercise are being borne by consumers via their energy bills. To date, around 2m have been installed.
The overall programme costs have crept up, from an initial £5 bn, to the current official £10.9bn, towards a possible £14bn.
Why has this been mandated? Back in 2008, with Ed Miliband as the energy secretary, the then-Government introduced this policy, beginning in 2012 and concluding by 2020, for several practical business reasons. Each remains very beneficial for energy retailers.
For a start, no more visits by meter readers: such people would become redundant. As would 30 per cent of t hose employed in energy company call centres: that is the proportion dealing with queries regarding estimated bills. Plus reductions in theft from tampering. And better payment management. All considerations pertinent to today’s market.
These are genuine rational savings, that should improve the gas or electricity suppliers’ bottom-lines. Certainly, practically all discussions on the protocols being laboriously developed with Government are heavily dominated by just two interests: the energy suppliers, and the meter manufacturers.
Government Ministers have continued to reiterate the energy-saving benefits to consumers of these new meters. As other parts of (particularly residential) buildings-oriented programmes have been dismantled, so the rhetoric on the energy savings to consumers from smart meters is hyped up. Emblematic was the continuously unsuccessful efforts of the energy efficiency minister Lord Bourne, appearing before the Commons energy select committee last month, to invite questions on the virtues of the programme regarding reducing overall consumption. Similarly, Andrea Leadsom, his Minister of State, is claiming that by 2030 smart meters will be showing a net benefit of an astonishing £6.2bn.
Little evidence in support
The problem is that there is very little evidence to support this from earlier experiments in the UK and elsewhere in the world. While there may well be a short-term impact, this swiftly fades. Even the Smart Meter programme managers claim to be anticipating no more than an “up to 2 per cent” saving. A big problem is that the Government has got itself locked into mandating existing technologies for smart meters, when technologies are changing so fast. This is leading to consumers paying for investment in a system that is out of date.
Kit that is being installed in homes and businesses as standard is seldom compatible with smartphone apps, despite many consumers expecting to be able to use their phones to monitor usage. As smartphones spread, so the entire in-home display requirement can become redundant.
Even more basically, while it does display consumption in terms of cost as well as the conventional kilowatt hours that existing meters provide, its “smartness” does not even require informing anybody about precisely which items in the building are causing the meter to gather speed – thus rendering even short-term behavioural change less likely.
Every gas and electricity supplier is permitted to develop and install their own meters, even though one energy company (EdF) reckons that a national procurement programme would be saving £1.24bn. There is no requirement to provide compatible pre-payment meters. And noting to stop suppliers removing its pre-installed meters when they lose customers.
Little account has been taken as to how 99.25 per cent penetration can occur where key telephony requirements remain unavailable.
The Government is primarily relying upon assumed competition in the gas and electricity supply industries to control costs and deliver benefits. A large part of Ms Leadsom’s claimed net benefits are dependent upon these suppliers passing on to consumers practically all the enormous system savings they will be making.
Already the various House of Commons oversight committees have raised warnings. In September 2014 the Public Accounts Committee produced a litany of recommendations for change, seemingly few of which have been followed-up. Last year the Energy Select Committee warned that plans to install energy saving smart meters in every UK home and business by 2020 were in danger of ending up a “costly failure.” This is because civil servants had not been managing the project effectively.
The MPs raised detailed concerns about failures with technical, logistical and public communication issues – each of which have resulted in yet further delays to the much-postponed national roll-out programme. The committee had “inspected the programme’s progress back in 2013, highlighting issues which we urged the Government to address.” Many of these had not been corrected. So “the programme runs the risk of falling far short of expectations.”
The entire smart meters policy is at a “crossroads.” Continuing with the current approach would “risk embarrassment through public disengagement,” turning this “flagship policy into a costly failure.”
The consumer group Which? Has already called for the complete abandonment of the smart meter roll-out programme. The Institute of Directors has expressed concern that it may end up being yet another Government IT programme failure.
If these commentators prevail, then please don’t let this be branded as another failure of an energy-saving project to deliver. That can only be a very, very peripheral reason.