Ten years ago, in his speech on climate change, former prime minister Gordon Brown said: “For every household over the next decade, there will be the offer of a smart meter that will allow two-way communication between the supplier and customer, giving more accurate bills and making it easier for people to generate their own energy through microgeneration and sell it onto the grid.”
This speech was a prompt for our report, also from 2008, where we made predictions about the move to smart meters. We looked at the different options and routes, challenges and potential unintended risks in “Smart metering in the UK: policy, technology and market drivers” – our joint paper with The Manchester Business School.
So where are we 10 years on? The idea was fundamentally about transforming the way that households buy and use gas and electricity, to both save money and cut emissions, by having smart meters provide accurate information about energy usage and ensure customers only pay for the energy they use, rather than an estimated amount. Critically, the priority was addressing the issue of fuel poverty, for example by exploring new types of pre-payment schemes. However, the programme failed to gain pace and has subsequently fallen behind schedule. The government might estimate that the rollout of domestic and non-domestic smart meters will generate benefits of £16.7 billion, with domestic devices saving £47 on the average bill per year by 2030, but to date, the £11 billion project has been beset with problems.
One reason is the undoubtedly fragmented UK market which was a feature of the impact of deregulation and has resulted in significant complexity. It’s also fair to say that 10 years ago, we didn’t foresee the massive explosion in issues around cyber security, or the detailed legislation such as the General Data Protection Regulation (GDPR) and the effect this would have on the industry. However, these forced changes around data management are resulting in better business practice with regards to the use and storage of personal data and smart meters are an additional way of ensuring this is achieved within the energy sector.
Considerable scepticism
In addition, with initial safety concerns and the perception that smart meters turn off “switch savvy” consumers, the introduction of smart meters has been met with some considerable scepticism. But in most cases, such concerns have proved to be unfounded: the rollout is providing the first opportunity for a national safety check, as part of the engineer’s meter installation process is to check installations for soundness, thus identifying any potential dangers to health and safety. The reality is that smart meters are part of a secure ecosystem and use an encrypted wireless network and there is no personal information stored in them beyond how much energy is being used. The current aim is that by 2020, all smart meters are planned to be connected to the same communication networks, giving customers the flexibility to switch between suppliers more easily than ever before.
Ten years on, we’re moving ahead with pace. Only with a transformation to smart energy and smart meters will the UK be able to have a reliable and sustainable energy system. The Netherlands smart meter rollout continues to draw interest as a good test case for how to digitise electricity and gas measurement at scale. The European Union member state mandated a smart electricity and gas meter deployment following a cost-benefit analysis of €770 million of positive benefits. In addition, there was a recognition that smart meters present an exciting new opportunity for innovation. Now, with the right data that can be analysed and processed properly, energy suppliers can improve retail processes with accurate billing; allow distribution system operators to manage power quality and outages; with the smart meter acting as a connected platform to enable third parties to create new products and services.
Exciting possibilities
We’d argue it’s critical to keep sight of the priorities and the associated opportunities that switching to smart meters offers the UK. Whilst these immediately fall into the areas of data access, billing transparency, energy efficiency, performance and compliance, smart meters could eventually redefine the energy supplier’s role to that of an energy advisor. In-home displays will provide real-time feedback and empower customers to analyse their consumption patterns and maximise savings with flexible pricing schemes – all according to individual energy requirements. And from an industry viewpoint, these will integrate new technologies and innovations across the power grid.
Analytics and technology offer even more exciting possibilities in the future; imagine a smart meter dashboard which predicts usage, provides money back on innovative pre-payment schemes and eradicates issues such as fuel poverty and debt. Smart meters also provide the chance to improve energy conservation, usage at off-peak times, as well as integrating the supply of renewable energy options back to the grid to improve reliability at peak times.
Advances in the Internet of Things and big data analytics also pave the way for multiple devices to be connected, supporting companies in offering variable pricing plans based on consumption patterns. For energy and utilities companies, this could improve grid intelligence and provide predictive models that combine historical data and weather forecasts to integrate the supply of renewable resources.
Smart meters are undeniably a force for disruptive good in the dynamic energy market. We’re excited to support the next wave of adoption by businesses and consumers to ensure they can fully embrace the advantages of the emerging smart energy market.