The National Audit Office (NAO), the UK government department that scrutinises public spending on behalf of Parliament, has published a report - Preparations for the roll-out of smart meters – that highlights the uncertainties of consumer benefits, because of lack of evidence. The NAO believes the risk is compounded by potential cost increases, the challenges of delivering a fit-for-purpose and secure system and the risk that suppliers do not pass on all the savings to their customers.
The Department of Energy and Climate Change (DECC) has estimated that installing smart electricity and gas meters will cost £11.3bn and deliver economic benefits of £18.6bn between 2011 and 2030, so the net benefit would be worth £7.3bn. But among the figures is the fact that smart meters will save the average customer just £23 a year by 2020, which, given the NAO’s reservations, has been the focus for some in criticising this level of public expenditure.
The NOA is right to ask for more evidence of the smart meter benefits and also in asking DECC to make sure that supplier savings are passed on to customers. But smart meters (with smart grids) bring a lot of benefits that are difficult to quantify. Much of it was laid out in DECC’s original roll-out proposals.
• Consumers will have more visibility and control of their energy consumption and spending. Real-time information will give the power to change behaviour, saving energy and carbon emissions.
• Customers will be able to switch more easily between suppliers and benefit from more innovative energy tariffs, including time-of-use tariffs that support the shift of energy consumption to lower-cost time periods.
• Suppliers will be able to use consumption data to provide better energy products and services.
• The smart metering system will enable simplified and improved energy industry processes, including switching supplier, moving home, bill queries, debt management and tariff changes. There will be no more estimated bills and site visits to read meters and there will be improvements in the ability to detect electricity outages or potential fraud.
• Smart metering will enable the energy industry to manage the generation and distribution system more cost effectively. This is a major point. If renewable energy is going to become a significant contributor to the grid then demand has to be smoothed out, which means time-of-use tariffs, i.e. cheaper electricity at off-peak times and other incentives to manage demand.
• The ability to choose tariffs will also be an increasing factor in ownership of electric vehicles. The ability to charge cars at home using a low-cost/low-carbon tariff is likely to be a real incentive while also helping smooth out power distribution.
• Smart metering data will itself help network operators make informed decisions on investment in smart grids.
So, as DECC put it: “The rollout of smart meters will play an important role in Great Britain’s transition to a low-carbon economy, and help us meet some of the long-term challenges we face in ensuring an affordable, secure and sustainable energy supply.”
The trouble is that its not always possible to quantify the benefits, particularly since some rely on the future provision of smarter grids. That’s the real problem – the benefits of smart meters and smart grids really go hand-in-hand.