The electrification of Europe from the late 19th century transformed our society every bit as much as the Industrial Revolution. Indeed, it is hard now to imagine how we ever got by without electricity.
But the way that power is produced is changing, so the way its infrastructure is run has to adapt. In turn, new approaches to electricity generation and distribution are becoming more common, leading to a digitisation of energy.
In the near future, the development of smarter energy grids – supported through the introduction of smart meters across the UK – means that suppliers will be better equipped to plan the supply of gas and electricity. The shift will be led by a requirement by the supplier licence conditions to complete smart meter roll-out by the end of 2020.
The aim is to install 53 million of the meters by that time – a target that energy minister Lord Bourne recently admitted was “an ambitious and challenging aim”.
Increasing digitisation will allow consumers offered smart meters to see exactly how much energy is used in their homes. Those involved in the roll-out claim that it will help consumers to better manage their energy profile, while providing energy companies with information for managing supply and demand. They say digitisation is set to become the key enabler for the self-learning ‘smart home’, which could help people live more sustainably. However, some question the benefits to the consumer of the programme.
The total cost of the roll-out stands at £11 billion, which will be met by consumers in a levy added to their energy bills and spread over at least five years. But long-term, the programme will make savings that will amount to nearly twice as much as cost, claims the Department of Energy and Climate Change.
The energy industry needs to adapt in the period leading up to 2020 to support the increasing needs of consumers, and smart meters will lead this change, according to Claire Maugham, director of policy at Smart Energy GB, the national campaign for the smart meter roll-out.
“Traditional meters in homes haven’t changed since Victorian times, which means much of the industry has yet to be digitised,” she says. For consumers, these old meters mean estimated bills, manual meter readings and no realtime visibility of what they’re spending. In fact, ending estimated bills is the feature of smart meters that consumers are most interested in, recent Citizens Advice research shows.
Maugham says: “The digitisation that smart meters will bring will also mean more empowerment for consumers who would like to cut back on wasted energy and make savings at home. Many people want to save energy, but often find that it is difficult when they have no immediate visibility of gas and electricity usage or cost.”
The industry wants to improve service to customers, increase choice for people who want to shop around and play its part in bringing down Britain’s carbon footprint, and Maugham argues that smart meters are vital in delivering these aims.
“Upgrading to a smart meter will mean automatic meter readings and an end to estimates, so customers will only pay for gas and electricity that they have used. Customers will also get a handheld smart meter display to show day-to-day energy use in pounds and pence, in near real time. These modernisations mean consumers will be able to keep track of expenditure, identify where wasted energy could be reduced, and reap the rewards on bills.”
Consumers will be rewarded with the introduction of optional time-of-use tariffs, which will allow the cost of energy to vary throughout the day, so there will be the flexibility to do washing or charge devices when power is cheapest. The next step will be smart appliances, interacting through smart meters to help everyone save energy.
Efficient networks
As well as helping consumers, the roll-out will bring advantages for industry, says Jeremy Yapp, deputy director for smart metering at trade association Beama.
“There are network benefits, such as more efficient management of networks, and smart metering will be the foundation of innovations in energy management products, services and markets,” he says.
The benefits of smart metering will differ from user to user, says Yapp. “How much consumers decide to avail themselves of this upgrade will, at first, be a matter of consumer choice. But a lot of work is being done to engage consumers in the changes and communicate the benefits to them.”
He says international experience is a poor guide to how energy use will be affected by the UK roll-out, “because our roll-out differs from most others in that the consumer is at the heart of the programme”. Fundamental to this focus is the provision of an in-home display (IHD) on the smart meters here that will give consumers access to near realtime energy data, says Yapp. “Providing an IHD gives much greater consumer benefits than just providing a smart meter.”
Calling for a halt
But the roll-out has also encountered plenty of criticism, with organisations being set up to counter it. One such is Stop Smart Meters! – established in 2012 to call for an immediate halt to the programme – which it describes as “a £12 billion white elephant that will empower Big Energy at great expense to consumers”.
Criticism has also been fierce in areas where the installation of smart meters has been compulsory. The main reasons for opposition are cost and privacy. Some also think that smart meters provide energy companies with too much information about their customers. Theoretically, a company would be able to monitor when you are using energy, with the potential for targeted advertising and marketing.
One critic raises another potential problem for consumers – unpredictable exposure to wholesale electricity prices. Steve Thomas, professor of energy policy at the University of Greenwich, published the report “Not too smart an innovation” in the December 2012 issue of the journal Energy & Environment. For Thomas, the truly ‘smart’ potential of smart meters stands a chance of being overlooked.
The smart meter’s ability to allow energy suppliers to communicate prices directly to consumers could allow for an introduction of time-of-day pricing, “so that the price of electricity to end-users would vary, unpredictably, according to its wholesale price”, he says. Such a system could also allow the National Grid to become a smart grid, eliminating costly peaks and troughs in energy demands by varying prices according to demand, and so changing the habits of household consumers.
“I think it is important with anything called ‘smart’ to ask what is smart about it, because calling something smart seems to switch off people’s critical faculties,” says Thomas. “Smart meters are very different from smart grids. Meters are a specific piece of equipment that will be an additional cost to consumers in the hope the benefits will pay the huge costs – around £500 per household. Smart grids seem to be a range of modern equipment that will replace existing equipment as it is retired, so there ought to be little or no cost or direct impact on consumers.”
The rationale for smart meters is that they will smooth peaks in demand, saving on the costs of meeting peaks, says Thomas. All the other things that are talked about – such as getting rid of manual meter readings and estimated bills, and giving clear information on what electricity is being used for – do not require smart meters that are transmitting data every second of every day, via what is effectively a mobile phone signal, he adds.
“I have no idea what the point of smart gas meters are, and nobody has ever been able to give me an explanation. Whether smart electricity meters are a cost-effective way to smooth peaks, I doubt. The installation programme seems to be going badly wrong, with costs going up, and I would not be surprised if smart meters will be installed but not used as smart meters – in terms of transmitting data all the time.”
Thomas thinks that peaks will be smoothed only with time-of-day pricing, so that prices will vary unpredictably according to the cost of generating, which will be very high at peak times. “It doesn’t take much thought to see the welfare risk to low-income and vulnerable consumers of making electricity very expensive at the time consumers need it most,” he adds.
Despite these criticisms, Maugham believes the smart meter roll-out will not be negative for customers. “It’s early days, and there is still a lot of work to do to engage every consumer in what is essentially a very low-interest category. Smart Energy GB is delivering one of the biggest behaviour-change campaigns that Britain has ever seen, encouraging consumers to use their smart meters to better manage their energy.”
Looking beyond 2020, the challenges are likely to increase. We are committed to reducing greenhouse gas emissions in the UK by at least 80% by 2050, compared with 1990 levels. More than three million meters have already been installed in homes and small businesses, but whether smart meters are the solution to these goals is yet to be proven.