The UK energy market is different from any other in the world and needs
a bespoke smart meter solution, say Jason Brogden and Tom Hainey.

In May, the Department of Energy and Climate Change (Decc) published its latest consultation on smart metering. The accompanying impact assessment confirmed the strong business case that the energy industry has been suggesting and Decc published its policy preferences in a number of areas.

Will this kick-start smart meter rollout? Well, not just yet. It has firmed up the probable shape of a rollout, but we will have to wait until the conclusion of the consultation towards the end of 2009 before we can be certain. There are still questions about what network requirements might look like, and the Energy Networks Association (ENA) and its members are working on this, and there is still no definition of what the transformation programme might look like. But it definitely feels like we have moved forward.

The government's preferred market model retains the principle that metering should be the responsibility of the energy supply companies. Central to its working is the use of a central communications hub.

This central comms model is unique around the world. Engage maintains a Google map of international smart metering as part of its work for the ERA (http://tinyurl.com/33ajnh) and no similar model elsewhere in the world has been found. The reason that Great Britain is being taken down a different path is that there are several factors that complicate a smart metering rollout here:

• an unbundled, competitive metering market is already in place;
• competitive metering is the responsibility of the supplier;
• a true dual fuel (electricity and gas) retail market exists;
• a fiercely competitive retail market exists with more than 100,000 customers switching supplier every week;
• a high proportion of prepayment customers need to be accommodated.

All of these factors have influenced the government's choice of a market model that retains the existing principle of suppliers retaining responsibility for competitive metering services and meets the need for a new communications infrastructure to serve both gas and electricity metering as a new industry service.

In almost all other international markets, metering services are the responsibility of network businesses under regulated arrangements, so we cannot just take an off-the-shelf solution from elsewhere.

So, what does the central comms model mean for service providers? For the big, integrated smart metering service providers, they cannot just sell an end-to-end smart metering/smart grid service to a utility because the supply chain has been broken up and there will be different purchasers of services and components through the supply chain.

Long way to go

Looking at the central comms service, there is still a long way to go in its definition. The key to the central comms service is to define the interfaces, data exchange formats and service levels, and assess service providers that say they can meet these requirements.
The earlier that energy industry tests the market with an request for information to see who is really out there to provide communications services, the better the definition of the service will be, because utilities can learn from service providers.

Any central comms service provider is likely to need a range of skills and products: communications networks, data management, asset provision, financing, and systems integration, to name a few. This is likely to mean that the bids will come from consortia rather than single companies, and in the absence of detailed, firm service definition, there is a lot of talking between potential providers as to how this might look.

This business equivalent of speed dating is likely to continue until there is more certainty about what will be procured and by whom.

Metering

Metering services (install, maintain, finance) will be retained as a supplier responsibility in the central comms model and therefore the competitive market will continue. We are yet to see how the competitive metering services market will pan out, but with accurate, consistent metering data so important to retailers in the smart metering world, it would be a reasonable assumption that suppliers will want to control and manage metering services themselves.

Interoperability is essential to ensure that metering systems are not changed on change of supplier, and this must consider commercial/contractual arrangements (such as meter asset provision agreements on change of supply).

Ensuring that there is an orderly run-down of the legacy metering market is a substantial challenge that should not be underestimated, particularly with existing service providers who may not be successful in winning smart metering service tenders. There will be dwindling numbers of legacy meters to maintain and service for meter operations, asset provision and meter reading/data collection. Unless we are careful with the transition from legacy to smart, we may miss the opportunity to start afresh with a clean set of data.

Customer to forefront

The customer should be at the forefront of everyone's minds and the opportunities for energy management and information services to customers will be a key growth area. Standardisation of the provision of data through an in-home interface will enable innovation and development in customer display and services.

The meter functionality set out in the Decc consultation is well aligned with the Energy Retail Association's Supplier Requirement for Smart Metering specification that the Engage team has been working on, so there should be no great surprises for meter manufacturers. However, there are challenges for meter manufacturers across European markets and Engage has collated a European meter standards resource for one of its clients that shows the breadth of standards across Europe, and where there are gaps.

There is work to be done to complete meter standardisation across Europe and any European standard should be flexible to allow all jurisdictions to operate their versions of smart metering or smart grid. To enable this, development work should concentrate on the functional requirements (the what), rather than existing standards and defining specific existing or new standards as the solution to be adopted Europe-wide for smart metering (the how).

Open questions

There are two topics in the Decc consultation that ask open questions of respondents: what are the requirements of network operators for smart metering? And what issues and next steps need to be followed?

Network operators are working on their requirements and some of these will have an impact on meter functionality, but more important and potentially much more significant could be the impact of network requirements of any communications network. If active network management requirements dictate higher service levels of the comms network (for instance, near real-time response) then that might require a totally different high performance comms network.

The next step after the conclusion of the consultation is for the government to initiate the major industry transformation programme outlined in May as soon as possible.
Smart metering in Great Britain will not look like anywhere else in the world, and with good reason. There are great opportunities for service providers in this market and the sooner the market model is defined in more detail, the sooner these can be realised. It is still uncertainty that is holding up the market, but momentum is picking up.

Jason Brogden is principal and director at Engage Consulting and smart metering programme manager for the ERA and Tom Hainey is a principal consultant at Engage Consulting leading work outside the ERA. Website: www.engage-consulting.co.uk

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1. HI,
   Please can you help me, i am trying to find out who it is I contact in order for me to tender as a sub contractor for the installation of the gas smart meters.
   If you could gide me on this I would be much oblidged.
   Best regards,
   James Mcnulty

   james mcnulty | 11 October 2009, 04:29 PM

2. Dear James

   We are still waiting for details of the roll-out from the Department for Energy and Climate Change. In the meantime, contact the gas industry body SBGI, details at www.sbgi.org.uk

   Janet Wood

   Janet Wood | 12 October 2009, 09:35 AM