Ofgem and the Department for Energy and Climate Change (DECC) are committed to implementing smart metering for electricity and gas customers throughout the UK. The plan is to replace more than 50 million so-called ‘dumb’ meters with smart meters and this will apply to both domestic and small business gas and electricity premises. The project is expected to be completed by 2019.
Smart meters are being introduced to provide consumers with more information about their energy usage, which should help to reduce energy consumption and the carbon impact. Although primarily applying to domestic customers, the roll out of smart metering will also incorporate 2.2 million electricity and 1.5 million gas sites for non-domestic customers.
For business gas and electricity users, smart meters will allow for data to be communicated to energy suppliers, allowing for more accurate and timely billing. The technology will permit meters to connect with other electronic devices, such as telephones and computers, which will in turn give consumers the opportunity to avail of optimal pricing. Smart meters will be usable between suppliers, which will mean customers being able to switch suppliers, should they wish to do so. In addition, smart metering will allow suppliers to enable and disable electricity remotely and accurately calculate Feed-in-Tariff (FIT) for any excess electricity sold back to the supplier.
With smart metering, the hope is that users will take steps to reduce consumption, when it becomes possible to identify wasteful practices. Ofgem conducted a trial of 18,000 households over a two-year period, which found that participants reduced their energy consumption by approximately 3%. The Government actually expects the reduction to be lower in practice, as the Ofgem group were voluntary participants with a potentially greater interest and commitment to reducing energy waste. The Government believes that smart metering will result in a 2.8% reduction in electricity and 2% decrease in gas consumption. However, it is also possible that education may further increase efficiency of energy usage. A sub-group of the Ofgem trial were given written advice about saving energy, as well as using the smart meter and results found that their reduction in energy usage was 5%, almost twice as high as those provided with just smart meters.
Currently some business gas and electricity customers already utilise advanced meters. However, according to Ofgem, smart meters will contain additional functionality that should improve service and choice for customers. The regulator has said that there will be a small increase in customers’ bills initially, but that the net benefit to non-domestic customers will be approximately £100 per annum by 2020. The implementation of smart metering is expected to cost £11.7 billion but the DECC has estimated that the overall financial benefits, including the cost of implementation, will eventually be in the region of £7.1 billion. These savings are expected to be a consequence of company’s not requiring people to read meters manually.
The DECC has come in for some criticism from the Public Accounts Committee and consumer groups, however. The committee expressed its doubts that the timetable for implementation of smart metering was realistic and also whether suppliers would pass on savings to customers. A spokesperson for the department agreed that the timetable was ambitious, although the planned end date of 2019 is still the goal. Currently energy providers are focusing on rolling out smart meters for electricity customers, with domestic and business gas customers due to receive smart meters thereafter.
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