Smart meters – why the hold up?

New smart metering technology to measure energy use in the home would benefit electricity suppliers, consumers and meter distributors – but a lack of clarity over precisely where the benefits will fall is slowing the rollout, according to panelists at an industry round table earlier this week.

Experts agree that the case for smart meters is compelling.

Pilots have shown that they will help reduce consumers' energy bills by giving them more accurate information about where and how they are buying electricity, while they should also help improve competition in the market by making it much easier to change supplier.

Equally, smart meters will help suppliers meet government targets to reduce their customers' energy use and provide clearer ways of delivering supply and billing, while also ensuring that they should have to build fewer costly new power stations.

The government and businesses meanwhile should see overall energy use and carbon emissions fall as they seek to replace a 50 year old distribution network that needs updating anyway.

But while the benefits are spread far and wide, it is not financially viable for any one entity to take control of the rollout, which at the moment is estimated to take some 10 to 14 years depending on estimates.

"Although rollout would be beneficial to suppliers, distributors, customers and more widely UK plc, the competitive energy market over here has fragmented any holistic business case," said Chris Beard, principal consultant with technology services firm Logica.

Consequently, electricity suppliers and consumer groups both want a government mandate for rollout. "We support a mandate – we think with the relevant safeguards the barriers to rollout can eventually be overcome," said Cassie Higgs of the National Consumer Council.

Finlay MacDonald, advanced metering programme leader at Scottish Power, agreed that without a mandate, a wide scale rollout of smart meters remains unlikely. "We don't have a compelling supplier business case for universal rollout across our customer base," he admitted.

It is likely that other power companies have the same problem – distribution of the 45 million or so meters needed is a relatively minor issue when compared to the infrastructure investment required by energy suppliers to support them.

Scottish Power estimates full smart meter rollout would mean a 4,000 fold increase in data volumes and significant investment in back office IT would be required to deal with this amount of information.

The department of Business Enterprise and Regulatory Reform (BERR) accepts that the business case alone is not really strong enough to encourage adoption of the technology, estimating that suppliers are only likely to roll out smart meters to 20 to 30 per cent of the market if driven solely by the commercial case.

However, customers are keen on the idea of smart meters. According to a recent survey by the National Consumer Council, three quarters of consumers think they are a good idea across all socio-economic groups.

There are three proposed models for a mandated roll out that could tackle the fragmented nature of UK power supply. First, franchises on a regional basis that would leave each supplier responsible for rollout in a particular area. Second, a central rollout with one company contracted to operate it nationally. Third, mandated rollout of smart meters built around existing metering market structures.

The government is currently consulting on its options.

"This is a very big ball, so you want to make sure its pointing in the right direction before you push it down the hill," said Beard. "Probably the most likely option is a hybrid model of the different offerings."

And a mandated rollout must be accompanied by an effective education campaign to encourage consumer uptake.

"Getting into schools and educating children about these things is the way forward – they'll then persuade the parents," said Peter Kennedy, chief executive of smart meter distributor bglobal.

As well as communicating upstream with supplier systems, smart meters have the potential to communicate downstream with innovative home display units.

Ensuring this functionality is included in any smart meters that are rolled out under a mandate is vital to having a thriving home display market, said Patrick Caiger-Smith, chief executive of home display maker Green Energy Options.

"The meter needs to be able to communicate both ways and the requirement can be specified, but not the technology," he argued. "This will allow for a blend of home solutions to be offered, and means home displays will evolve fast."

Displays have the potential to measure the energy use of individual appliances, allow homes to compete with one another on low energy use, and present energy information in new and innovative forms, engaging the customer, he added.

A spokesman for BERR said the department is looking to make final decisions on how to manage any smart meter rollout later this year.