Market view: ‘Smart’ is game-changing
The control that smart meters will give consumers over energy in the home is revolutionary, and the rollout presents the UK with the opportunity to become a European leader, says Simon Anderson.
Smart interfaces are bringing about a ground-breaking change in how customers interact with energy. The recent EU referendum makes no difference to the UK’s commitment to fitting all homes with smart meters by 2020. Equally, the development of other smart devices that can use smart meter data will have an impact not just on consumer interest and engagement in the UK but across many other countries in Europe. This is an area in which the UK excels and is able to establish a very clear exemplar. What is more, we are now able to do it faster.
You only have to look around to see homeowners embracing smart technology as part of a broader picture that includes thermostats, lighting, sensors and demand response systems. Much of this is driven by industry and consumer demand, and smart meter data will give it added impetus. A new term has even been coined to describe the combination of equipment that measures the supply of power, generates power, uses power, and the devices that can control and take vital information from them all – the Internet of Energy, a specialist element of the Internet of Things.
The long-term potential of smart energy technology in the home is huge. A report from MTW Research in April identified that the added value of such features would encourage double digit growth in the heating market alone in the near term.
However, a lot of technology is scary, and none more so than energy technology. We have much to thank Apple for. People are now far more receptive to (and demanding of) the digital screen of an in-home display, a mobile energy app or smart thermostat. We can now design these screens so consumers can visualise and interact with their energy usage. The great advantage of smart technology is that it puts consumers in control. It is no coincidence that the key selling point behind the smart metering advertising campaign is that this technology will bring an end to estimated energy bills and help get “Gaz and Leccy” under control.
This is a crucial point, because if we are committed to decarbonising energy generation, consumers must be put at the heart of policy. The current centralised energy system places too much demand on the supply side and is unsustainable, so we need to move to a more efficient distributed model, and this will only work with the involvement of consumers.
We know that consumers will engage with smart devices, but for a tangible revolution in energy policy to work, consumers also have to be committed. They have to be encouraged and rewarded for managing their energy. To do this they need access to local data that relates directly to them and they need it in real time. This is what UK smart meters do and why they are the game-changer.
Clearly, this is challenging on many levels. Consumers follow a fairly standard path: see, control, automate. First they need to see what is going on so that they can understand the issue and the benefits. Then they want to play around and control some of their energy use. Soon they realise that it would be so much better if it was automated and the problem taken away from them – just like a car’s engine management system. But live data is key to doing all of this: back to the right sort of smart meter – one that provides local real-time data to the consumer.
The other challenge is rewarding consumers for managing their energy: that is, passing supply-side financial benefits to users. Once this is done there is a sustainable business model, but this will take time. Meanwhile, in order to capitalise on the raised awareness smart meters will bring, we must incentivise consumers to get involved and take the next steps. Our view is that this needs to be done not through subsidies but through tax incentives, for example through reductions in VAT and stamp duty on energy efficient homes. This path now seems clearer because it no longer needs to be harmonised across 27 other EU countries.
In this way, the developments we are making here in the UK mean that we are acting as something of a forerunner for other European countries: the Netherlands, for example, which has implemented a local data port on their smart meters and Scandinavia, where we are currently helping with demand management trials. If everyone across Europe is equipped with the right smart technology, instead of energy being under someone else’s control, we will be entering an era where householders have a choice, and a major part to play.
So in summary, we need to do three things:
- Put consumers at the heart of energy policy.
- Ensure that consumers have access to local real-time meter data.
- Kick-start the extended market by exploring tax incentives to bridge the gap to consumers being paid for managing their demand.
The UK is now in a stronger position to influence this through example, industry innovations and light-touch regulations rather than through extended political negotiation. Now is the time for industry to stand up and take the lead. Where there is change there is opportunity – we need to make the most of this opportunity.
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