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.
Energy in Demand - Sustainable Energy - Rod Janssen 
Seems a very one-sided point of view. Smart meters are an enabling step to deliver the energy system of the future (time of use tariffs, faster switching, demand side response, smart analytics, PAYG, the use of consumer access devices etc.) – all not mentioned above. Also evidence from DECC’s early learning project was a lot more positive; reflecting actual consumer experience.
I have been in contact with the author of the post, Andrew Warren, and here is his response:
My argument is not with the principle of smart meters per se, it is with the very peculiar way the policy is being implemented in Britain.
Given that the financial beneficiaries are almost entirely – as I point out at the start of the column – the gas and electricity providers, it must be wrong that they are effectively ratebasing the cost, so it falls entirely upon consumers . The technology that is being rolled-out is far from cutting edge, and is likely to be obsolete by 2020.
It is ludicrous to suggest that installing the presently authorised meters will assist the fuel switching process- not with each supplier customising the technology it is installing it won’t ( which as my EDF quote illustrates, increases system costs by £1.24bn)!
And if the initials PAYG (pay as you go?) actually stand for the contemporary equivalent of “shilling in the slot gas meters”, then I suggest “Bottletop” talk to anybody involved with seeking to eliminate fuel poverty in British households. And see if they reckon whether smart meters will provide much help to their clientele, the most likely to utilise “PAYG.”
Incidentally, I refer “Bottletop” to the long term “smart meter” experiments carried out by ScottishPower for OFGEM. Which sadly showed little or no consistent longer term impact upon energy consumption patterns – an experience mirrored in North America, in the Netherlands
Put simply if you are seeking to reduce energy wastage, I can think of far more effective ways to spend £14 bn . And so I suspect can most people not tied up commercially with this officially mandated gravy train.
Again Mr Warrens response is selective on facts and fails to respond to my point about enabling the energy system of the future.
Here are some facts to challenge Mr Warrens hyperbole:
• DECC’s latest Impact Assessment for the programme, estimates a positive net present benefit of around £6 billion from smart meters.
• Latest trials from E.ON estimates that smart pay as you go will save smart prepayment customers up to £104 a year.
• Smart meters deliver non-monetised benefits, such as an improved prepay experience, quicker and easier switching and better billing arrangements. There will be a transformed prepayment experience for smart consumers, with a variety of top up options and remote switching. More evidence here – https://www.smartenergygb.org/~/media/SmartEnergy/essential-documents/press-resources/english/Smart-Energy-Outlook-March-2015.ashx?la=en
• I’m surprised Mr Warren is not aware of Ofgems next day switching programme that will be delivered by a new platform managed by the DCC. Certainly not a ludicrous suggestion, but a programme that is already underway.
In summary, it’s a shame that Mr Warren has failed to paint an accurate picture of the value of smart meters. The majority of people I speak to think that they are a good idea; particularly when they understand the wider enabling function the meters will perform (as mentioned in my original post). Regards.
The anonymous Bottletop is simply repeating the official propaganda, so diligently as to make me concerned that she/ he may in fact be being remunerated in some way in order to do so.
I note that the examples given are all forecasts and estimates, I draw my scepticism from real life experience.
And whilst, as with those quoted in the final para, I too quite like the concept of smart meters, I remain deeply sceptical about the British scheme having been hijacked to deliver mostly obsolete technologies at quite disproportionate cost to energy consumers.
I note too that every time a Parliamentary inquiry has investigated what is going on, important questions have been raised regarding the differences between the promises and the practice, which those running this incredibly expensive programme resolutely fail to answer satisfactorily.
Not aware of any “official propaganda” Mr Warren; I’m simply challenging misinformation propagated by ill-informed commentators.
I fear that your real life experience is somewhat lacking in this area; hence still not answering my original question. Thanks for the discussion though.
Rod, I’d recommend publishing an article that covers my original points around the value of time of use tariffs, faster switching, demand side response, smart analytics, and the use of consumer access devices. Best regards.
Rod, please do ask Bottletop to submit a coherent rather than abusive article , obviously having first published it in an established magazine run by an independent editor as is always the case with columns of mine that you then circulate. .
When doing so, I trust she/ he will then sign with her/ his true name, rather than hiding behind such absurd anonymity ( Bottletop indeed!)
We shall then be able to know whether the real life experience, rather than theories and estimates, upon which you will note I have based all my arguments on this matter , is really quite as lacking as Bottletop alleges.
Incidentally, precisely what is the “original question” she/ he is so indignant I have not answered? I can find no evidence of any sentence ending with a question mark in any of her/his three lengthy contributions to date. So it is a bit difficult to know quite what Bottletop is talking about….