Market News

 December 02, 2009
Government unveils smart meter master plan

 The government today unveiled its long-awaited plans for smart meters and smart grids, pledging to ensure real-time energy meters are installed in every home and business by 2020 and releasing a report detailing the case for a nationwide smart grid.

Under the smart meter plans, which were set out in the government's response to its recent consultation exercise, suppliers will be tasked with rolling out smart meters that both transmit accurate data to energy firms and feature separate display units capable of showing a building's energy use in real time.

Energy minister Lord Hunt said, "Smart meters will put the power in people's hands, enabling us all to control how much energy we use, cut emissions and cut bills."

The technology will be deployed using the so-called "Central Communications Model", under which energy suppliers will be responsible for purchasing and installing meters, and the data provided by the smart meters is then co-ordinated centrally.

The government report argued this approach offered the best model for a rapid and cost effective roll out, noting that it "combines strong incentives for energy suppliers to deliver a high quality service to their customers [while] making it easier [for customers] to switch between suppliers".

Some respondents to the consultation had warned that tasking energy suppliers with rolling out the technology would drive up the cost of the roll out as suppliers would be forced to visit the same street a number of times. However, the government said it would attempt to manage the roll out "so that as many people as possible in local communities receive their new meters at the same time", adding that it "intends to develop measures to promote co-ordination of deployment at local level".

The new plans were accompanied by a major new report on the feasibility of smart grid technology, which argues that widespread upgrades to the grid would allow the more efficient transmission of electricity, support the roll out of renewable electricity, and when combined with smart meters would allow businesses and households to cut carbon emissions and save money by automatically managing their energy use throughout the day.

In addition, the Department of Energy and Climate Change (DECC) announced the launch of a new £6m fund designed to support businesses developing smart meters and smart grid technologies such as energy storage systems.

Lord Hunt said there was a strong economic case for the UK to accelerate the roll out of smart grid technologies that are currently being explored by governments around the world.

"Smart grids will help manage the massive shift to low carbon electricity such as wind, nuclear and clean fossil fuels," he said. "Globally the business of developing smart grids has been estimated at £27bn over the next five years and the UK has the know-how to be part of that."

However, shadow energy and climate change secretary Greg Clark said the government's timeline for rolling out the new technologies lacked ambition.

"Yet again, the Government is delaying when urgency is needed," he said. " Smart meters are sorely needed to give families greater control over their bills and to help the UK to meet its climate change targets. Sticking with the same slow timetable for rollout by the end of 2020 will leave the UK lagging behind yet again. The industry says that it can move faster, which is why a Conservative government would accelerate the timetable for rollout to ensure every family has the opportunity to benefit from a smart meter by 2017 at the latest."

The announcements were broadly welcomed by the emerging smart grid sector, but observers warned that smart meters would have to be supported by wider energy efficiency policies if they are to achieve the desired outcome of curbing energy use and carbon emissions.

"UK households want more than just a figure for energy usage – having a display box is only the first step," observed Graham Butler, utilities sector lead for IBM Global Business Services, the IT giant that is currently undertaking a number of high profile smart grid pilot projects around the world. "Utilities need to educate consumers on how they can use the information generated by smart meters to reduce bills and develop smarter ways of managing their energy usage."

His comments were echoed by Joel Hagan, chief executive of UK smart meter specialist Onzo, who warned that smart meters on their own were "virtually useless".

"While smart meters will result in more accurate bills, they will not provide people with the information they need to manage their energy usage and cut costs,” he said. "Consumers will only change their energy consumption if they can understand how much energy they are using when they switch on the kettle or put the washing machine on."

Hagan added that the government had undermined the development of the sector by again delaying the final decision on precisely what data and functionality the meters should incorporate.

"Today’s plans for smart metering rollout yet again raise more questions than answers," he said. "There is no clarity on what the energy display should do, and this prevents the industry from innovating and progressing development in time for rollout."

The government's response document said that it would now "consider further what specific requirements should apply in cases where it is clear that the individual consumer does not wish to have a free-standing display… This work will include the minimum common information which should be provided to all consumers."

Managing the rollout of smart meters could also prove more difficult than the government anticipates, according to a new survey of 2,000 people by consultancy giant Ernst & Young, which found that only half of respondents would be prepared to make and keep an appointment to have a meter fitted during the week.

"One of the most significant costs of the rollout is installation costs, and these are going to be driven to a great extent by how willing people are to make and keep appointments," said Alison Kay, partner in Ernst & Young's power and utilities group. "Over 50 per cent of the respondents said that a small financial incentive would encourage them to make and keep an appointment. These figures reveal that relatively small incentives could help offset the potentially high costs of low rates of access for installation."