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Debate: what should be prioritised in the smart meter rollout?
Burning question: whose interests will win out?
Smart metering is coming, but how the rollout should be implemented remains a matter of opinion. We asked three key stakeholders to set out their view.
ENA: A gateway to smart grids
The ENA is a prominent supporter of smart metering but it is heading the call for the technology to be seen as a fundamentally important part of a bigger picture. Smart metering is, for consumers and suppliers, a gateway to smart grids impending new gas and power networks that will offer low-carbon and economic benefits across the energy supply chain.
Smart grids will be pivotal to the delivery of a low-carbon energy market, and the ENA has been a leading advocate of them. Smart grids will be able to adapt not only to shifting consumption patterns, but also to the radical changes that a low-carbon economy will bring to the way power is generated and gas is produced. Such changes may include growth in household generation, demand-side participation and biogas production, as well as wind and wave power.
The decision in December last year to begin a national rollout of smart meters was greeted by the ENA as progress towards smart grid implementation. But smart meters will achieve their full potential in carbon reduction and consumers' cost control only if they are linked precisely to the requirements of smart grids.
The importance of this link has now been recognised by the Department of Energy and Climate Change, and we welcome that. That awareness must endure throughout the rollout. The ENA will endeavour to advise and guide the programme to ensure that smart metering and its data communication systems are in step with smart grid requirements.
The smart meter rollout is a huge undertaking with an equally huge public expectation attached to it. There has to be a seamless link between the smart meter technology that goes into homes and businesses and the smart grids that will follow. Only then will consumers enjoy in full their expectations of a smart metering market and will government realise fully the technology's promise of gains for the environment and energy security.
The risk of stranded assets
Network companies are deeply concerned about the costs they will incur if their metering assets becoming stranded on the introduction of smart metering. Their concerns arise from the existing meter provision obligations on network operators. Gas network operators must provide metering on request. Their electricity counterparts were released from this obligation in 2007 but have legacy obligations that predate 2007.
So network operators are exposed to a high risk of asset stranding if smart meters replace recently installed conventional meters. And there is no provision for this risk in the current regulatory controls for either gas networks or power networks. The ENA expects energy regulator Ofgem to detail how networks will be compensated when it presents its plans for the smart metering implementation programme.
Other urgent issues include:
- a need to review the capability of advanced metering currently used by commercial and industrial consumers, because they are likely to be central players in smart grid initiatives such as demand-side management;
- radio-controlled load control (teleswitching) needs to be addressed because the long-wave radio band used will be phased out in 2014;
- safety issues have the potential to hold up the rollout. The ENA is talking to the Health & Safety Executive and the meter operators;
- the interface between the central communications system and existing systems in gas and in power need to be established by summer 2010.
by David Smith, chief executive, Energy Networks Association
ERA: We need clarity and cost effectiveness
The ERA and its members welcome the rollout of smart meters to every home by 2020 as an important step forward in the journey to deliver real benefits to consumers and to society.
Energy retailers will be central to the delivery of this once-in-a-lifetime opportunity to revolutionise both the relationship between them and their customers, and the way that consumers think about energy use in the home. It is suppliers that are experienced in managing the installation of metering, and commercial pressures will drive them to do this in the most cost-effective way.
When studying the detail of the rollout plans, the ERA and its members have welcomed the emphasis on localised communications with customers as a way of raising awareness of the importance of smart metering, because we believe this will help to deliver the overall benefits of smart meters to customers.
Other factors that may influence a rollout plan include: local co-ordination, promoting energy efficiency and carbon reduction, and benefitting the fuel poor and vulnerable customers. However, any targeted rollout, such as a street-by-street approach, is likely to add both complexity and constraints on suppliers, and the problem of consumers outside of earmarked deployment areas demanding smart meters remains.
Suppliers want early analysis of the effect of applying targeting approaches on the cost of the rollout. This needs to be a key component of the first phase of the smart metering implementation programme.
It must be stressed that a whole range of issues need solutions before the rollout can start to deliver smart metering interoperability (meters that "stay on the wall"). These include: new legislation and governance, new industry systems and processes, and technical and commercial solutions. These are all crucial to delivering smart metering that can be used by a succession of suppliers to deliver the products their customers want. And all this needs to be considered in the context of an aggressively competitive supply market and a mixture of dual and separate fuel supply.
by Gary Felgate, chief executive, Energy Retail Association
Ofgem: consumers come first
Putting consumers at the heart of the rollout of smart meters is the priority for Ofgem as it jointly manages with the Department of Energy and Climate Change the first stage of the implementation plan. Smart meters are a great opportunity to transform the way consumers view their energy supply and we want to ensure it is a positive experience for them. Consumers' interests must therefore take centre stage in the implementation phase to ensure that the benefits of smart meters - both environmental and cost related - are maximised.
For instance, if a consumer does not understand the information their smart meter provides, then the chances are they will just ignore it and make no change to their energy consumption. Also, for some people, a visual display showing the amount of energy they are using in pounds and pence could be potentially alarming. No-one wants the elderly turning down their heating unnecessarily. All these issues and many more have to be part of the rollout of smart meters and are just as important as the technical and IT aspects that will be needed to deliver the project.
Ofgem has devised a consumer engagement strategy to ensure the rollout is built around the consumer. Ofgem is setting up a Smart Metering Consumer Advisory Group. This will be supplemented by specific market research programmes, which will look at consumers' preferences, for example on display units. We will also be using Ofgem's Consumer First Panel to deepen our understanding of how consumers are likely to use smart meters.
Feeding into this process will be the results of the Energy Demand Research Project, under which suppliers have now installed smart meters in 18,000 homes. Ofgem will be working with its Disability Advisory Forum to better understand the needs of disabled people and how smart metering will have to take into account their needs.
Consumers must have confidence that the data about their energy consumption is protected and remains secure, and Ofgem will be making sure this information is subject to stringent safeguards. We also need to ensure that consumer protection keeps pace with the technical innovation that smart meters will bring. This is particularly important when we come to issues around disconnection and prepayment.
We will also be running a comprehensive stakeholder engagement plan so we can draw on the expertise of the industry in developing the commercial and regulatory architecture that will underpin the delivery of smart meters. Key issues that need to be tackled before Ofgem publishes its prospectus in the summer include defining what minimum functionality smart meters will have to deliver and the design and funding of the central body that will co-ordinate communications between smart meters and suppliers.
It is vital that we combine industry expertise with a detailed knowledge of what consumers want from smart meters, because this will ensure maximum benefits are obtained and that the change over programme is a success.
Sarah Harrison, senior partner for sustainable development, Ofgem
David Smith: smart meters are only the start
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