What will the impact of smart meter installations have on consumer and supplier?
Aug 08, 2018
With the UK Government mandating the installation of 53 million smart meters into UK homes by 2020, at a cost of £11bn, we look at what this means for customers and their suppliers, and what it’s going to take to make smart a success.
53 million Smart meters; £11bn. These aren’t small numbers. A quick bit of maths shows that this equates to a cost per meter of £207, which will ultimately be borne by the customer. The first question is; is it worth the money? The smart meter roll-out itself stems from EU wide legislation, so we’re not the only country weighing up the cost/benefit. Germany, interestingly, hired Ernst & Young to carry out an economic feasibility study and concluded that the numbers didn’t stack up. What’s more interesting is that the legislation coming from the EU isn’t iron clad – if there isn’t a viable economic case for the roll-out, you don’t have to do it. So, Germany opted out. Auditors in Australia and Canada have come to similar conclusion, with Australia citing a total net cost of £170m to customers.
Is it worth the money?
The case for smart meters is built on the foundations of data, and how this can be used to empower the nation to bring their consumption and costs down. This means behavioural change – not an easy task. In theory, having immediate visibility of costs, and knowing what you’re using and when, should encourage a more energy conscious Britain. Coupled with this newly empowered and engaged customer base will also be new time based tariffs that incentivise usage at off-peak times.
These two factors – empowering behavioural change with data, and incentivising usage at off-peak times – could result in a highly effective nation-wide Demand Side Response scheme. The government is citing that this could result in an average saving of £26/year per household.
Do the maths add up?
We’ve established that smart meters will cost £207 each. In return, and if it all goes to plan, customers can expect to save £26/year. This means it will take about 8 years to pay back the cost of a single smart meter – quite a long ROI.
Naturally, these are pretty rough calculations based on some generalised assumptions, but they’re not a million miles away either.
Engagement is the key
Data is a certainly a good thing, and empowers consumer engagement, but it will always be engagement (not just the the data itself) that’s at the heart of the issue, and will ultimately determine the success or failure of smart metering. To make the most of Smart, and for the numbers to make sense, customers will really need to engage with the data that smart provides.
The same is true for those higher up the supply chain too, including the suppliers themselves.
For suppliers, the challenge will be HH settlement. In order for time based tariffs to work, the industry will need to move to HH settlement, but the smart energy code requires supplier’s to gain consent from their customers before reading their meter more than monthly. An understandable precaution, but certainly a prohibitive one when it comes to suppliers readily offering the time of use tariffs upon which DSR depends.
If smart meters are to be a real success, it’s going to take a concerted effort from suppliers, and consumers, to not just engage with smart data, but also one another.
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