SPICe has recently received a number of enquiries about smart meters. This blog explores some of the issues around the technology, and its introduction to homes and businesses.
What is happening with the energy smart meter rollout?
Energy smart meters are advanced electricity and gas meters which can offer a range of intelligent functions like more accurate billing, easier supplier switching and reduced energy consumption. Suppliers are also expected to benefit through reduced overhead costs and fewer on-site visits.
The Energy Act 2008 gave powers to begin a smart meter rollout. Since then, successive Governments and Ofgem (the regulator) have been working on a rollout programme in Great Britain (Northern Ireland has a separate energy market).
The UK Government originally committed to offering smart meters to more than 50 million homes in Great Britain by the end of 2020. Consumers do not have to accept the offer of a smart meter, but suppliers were still expected to take all reasonable steps to install them for their customers by this deadline.
The new proposals delay the duty to complete the installation of smart meters until December 2024. These proposals also give energy suppliers some leeway, meaning that they are required to complete installations in a minimum of 85% of customers’ properties by December 2024. This new obligation is expected to take effect from 1 January 2021.
At General Question Time on 26 September 2019, Paul Wheelhouse MSP, Minster for Energy, Connectivity and the Islands, stated:
“It is important that all consumers, especially those who are struggling to pay their fuel bills, have the opportunity to use smart meters to better understand how to manage their energy usage and to allow them access to the best tariffs. The smart meter programme is reserved to the UK Government. However, I will consider the implications of last week’s announcement and raise my concerns about the impact of the delay on consumers with the UK Government.”
What is delaying the rollout?
The smart meter rollout was initially planned in two phases.
- Foundation Stage (March 2011 to October 2016): transition phase to set policy frameworks and install first-generation smart meters (SMETS1).
- Main Rollout Stage (November 2014 to December 2019): installation phase of second-generation smart meters (SMETS2).
The Foundation Stage allowed suppliers to make their own private arrangements for accessing mobile networks to accommodate SMETS1 meter communication. This resulted in problems with exchanging data or communicating between different systems or devices when customers switched suppliers (known as interoperability). Since the new supplier was unable to communicate with the SMETS1 meter via their own networks, the “smart” meter was rendered a traditional (or “dumb”) meter. Mobile phone coverage also became a determining factor for whether certain consumers could have a smart meter installed.
The Main Rollout Stage was rescheduled to begin during 2015 with completion in December 2020. The UK Government granted the Data Communications Company (DCC) a license to develop the infrastructure for the rollout of SMETS2 meters. This infrastructure meant SMETS2 meters would not have SMETS1 interoperability issues because suppliers would be using DCC’s communications network. The UK Government also indicated in January 2019 that existing SMETS1 meters will eventually be enrolled onto SMETS2 infrastructure.
SMETS2 technology became available to suppliers in November 2016 with the first trials in summer 2017. However, the UK Government permitted the continued installation of SMETS1 meters in the main rollout. These installations continued to count towards the target of over 50 million installations by December 2020.
“7.1 million extra SMETS1 meters have been rolled out because the Department [BEIS] wanted to speed up the programme. The Department knows that a large proportion of SMETS1 meters currently lose smart functionality after a switch in electricity supplier and there is real doubt about whether SMETS1 will ever provide the same functionality as SMETS2. The full functionality of the system is also dependent on the development of technology that is not yet developed.”
The most recent UK Government figures (June 2019) state that 14.9 million smart meters have been installed. DCC indicate that there are over 1.3 million SMETS2 meters in operation. A geographical breakdown of smart meter installations is not available.
How is this affecting Scottish consumers?
Rollout costs will be recouped by suppliers from consumers’ energy charges. The UK Government Cost-Benefit Analysis 2019 (forecasted to 2034) estimated that the smart meter rollout will result in net benefits to consumers and suppliers of £6 billion.
Delays to the SMETS2 rollout might mean some consumers incur further short-term disadvantages, such as not being able to access preferential tariffs and losing smart functionality of SMETS1 meters with switching suppliers.
However, Citizens Advice Scotland have advocated for this delay since Scotland has a higher proportion of rural homes and homes with prepayment meters which would benefit more from SMETS2 technology.
SMETS2 meters can notify the Distribution Network Operator of power outages, which are far more common in rural areas, providing consumers with more security. They also don’t rely exclusively on an area’s mobile phone coverage meaning remote homes should be able to benefit from the full functionality of a SMETS2 meter.
Prepayment customers are more likely to be “fuel vulnerable” and typically pay more per unit of energy than credit customers. With SMETS2 prepayment meters, this consumer group are able to switch more easily, keep better track of energy consumption and make use of preferential tariffs for homes with smart meters.
Is the rollout just about updating energy meters?
With climate change and net zero emissions by 2045 high on the agenda, the smart meter rollout is not just about deriving savings for consumers and suppliers but upgrading the entire energy infrastructure. Smart meters are just one step towards realising the smart grid needed to reduce emissions and meet net zero targets.
Courtney Aitken, Researcher, SPICe