Where smart meter rollouts are going wrong – and how to put it right

Smart meters were supposed to result in significant energy savings, but in practice the results have been disappointing. Stefan Grosjean says rollouts should be rethought to engage consumers.

Almost every European country is rolling out smart meters – it’s a multibillion dollar industry. But will these initiatives deliver on energy efficiency?

Early results in some markets show that some initiatives are not cost effective and fail to deliver on energy efficiencies. The lesson for other countries is this: if you want consumers to change their habits and save energy, allow for a fun factor – and to make that possible, you need high quality access to the energy data.

By 2020, the European Union aims to replace at least 80 per cent of electricity meters with smart meters, the objective being to cut emissions in the EU by up to 9 per cent and energy consumption by equally as much.

Smart meters are not mandatory – yet. For now, the Commission wants to roll out smart meters where it is cost effective, although it did draft a proposal in 2016 to make it mandatory for member states to supply a smart meter when consumers ask for it.

European countries have taken up the cause for smart meters with enthusiasm. But while smart meters promise energy efficiencies of up to 20 per cent, and while smart energy monitors frequently report high energy savings for users, we have yet to see real success stories.

Take the Netherlands, one of the pioneers in smart metering. The Netherlands hoped energy use would fall by 3.5 per cent, resulting in savings in net present value of around €4.1 billion (£3.6 billion). The cost of the rollout was budgeted at €3.3 billion.

With a quarter of the Dutch population now using smart meters, it is clear the initiative will not deliver the projected savings. In fact, consumers are barely saving 1 per cent on their energy bill.

This has the unfortunate effect of pushing the entire programme into the red, with the deficit of €200 million set to be shouldered by Dutch citizens.

In the UK, consumers will foot an £11 billion bill, or £200 per smart meter. The UK has already installed some five million smart meters and is aiming for 53 million to be installed by 2020.

But again, they are not delivering on the promise of energy savings. While reports forecast energy savings of up to 20 per cent, consumers are so far saving only 2-3 per cent on their energy bill, or £33 per year.

Only in Germany are smart meters showing notable progress. Europe is having a less-than-stellar experience with smart meters.

Member states are pushing smart meter implementation, but not always for the right reasons. Instead of installing smart meters to create energy and cost-savings for consumers, governments push smart meters because they are necessary to evolve to smart transmission and distribution grids.

Energy savings for the consumers are not necessarily kept in mind when designing smart meters. Consumers are very interested in energy savings, but have no say in the design. They want to make environmentally conscious choices, but the device they get does not live up to its promise.

In other words, the incentives of the energy companies and those of the consumer are not always aligned.

The important question is why the smart meters are not delivering on their promise. One mistake both the Netherlands and the UK made is that they are not thinking of the consumer in the design process, which makes the consumer lose interest in energy savings.

How do you get consumers interested in saving energy? Research indicates the answer is in feedback loops. As the Netherlands Enterprise Agency noted in 2014, users will not change their habits if they only receive feedback on their energy usage every two months, as was the case in the Dutch pilot. Real-time insights, it seems, are the biggest driver of energy savings.

In fact, the Netherlands Enterprise Agency suggests any national smart metering project should aim to create a level playing field for third party applications that offer feedback to the consumers, and in the way they want it. Older consumers might prefer basic real-time meter readouts. More tech-savvy consumers might enjoy mobile apps that allow them to drill down into their energy use, or game-like experiences that help them cut down their usage.

Fun is an essential factor in getting consumers to engage.

The same goes for energy. If we want consumers to cut back on energy use, we need to make it engaging. Governments and grid operators should have the self-awareness to realise they are just not very experienced in delivering fun to their subjects – it’s not their job after all. If we want smart meters to deliver on their promise, governments must open up smart meters to third party developers and provide them with access to the data.

European countries are finally embracing the ideas of open data on a macro level – opening public data to entrepreneurs to build on it. But when it comes to private data, again we see a tendency to keep the high frequency, real-time data locked in a black box, only accessible to the grid operator or the energy supplier.

The EU seems to have understood the challenge of making its member states understand this. The Commission specifically states member states should “fully” consider the objectives of energy efficiency and benefits for the final customers. Also, “the metering systems must provide final customers with information on actual time of use”.

The good news is that the solution is dirt cheap. It consists of a simple P1 port that allows third party access to the real-time, high frequency readings of the meter. Germany and recently Flanders have seen the light – they will require a P1 port in smart meters. Let’s hope the rest of the continent will follow their example. European consumers deserve access to their energy usage data.