MPs warn against investment in 'out-of-date' smart metering technology

Out-Law News | 11 Sep 2014 | 11:05 am | 2 min. read

Smart metering systems may be out-dated before they are even introduced, a UK parliamentary committee has warned.

The House of Commons' Public Accounts Committee (PAC) said the government might be asking energy companies to invest in smart metering systems that consumers end up not using. This may happen because the technology being invested in could be superseded and alter consumer behaviour, it said.

"Some aspects of the [smart metering] programme could be out-of-date by the time it is rolled out," PAC said in a new report. "The current proposal is that every household will be fitted with a smart meter and offered an in-home display that allows consumers to see what energy they are using and how much it is costing. However evolving technology suggests that customers could receive the information on their smart phones, making the in-home display redundant. Energy suppliers will therefore be required to offer in-home displays, even though customers may not want or use them."

Smart metering enables a two-way flow of information, including consumption information, from electricity and gas meters to a central communications hub. The UK government expects this will bring a number of benefits – for example, it will bring an end to estimated billing and the need for meters to be read manually. It is also anticipated that the rollout of smart meters will enable a more sophisticated approach to the management of supply and demand than is possible with conventional meters.

The government hopes that by giving consumers near real-time information on energy use that shows them how much they are paying for energy at particular time they will reduce users’ consumption of energy at peak times. The ultimate goal is for a smart grid energy infrastructure to be implemented that will deliver supply more efficiently to meet demand. Mass rollout of smart metering is scheduled to begin at the end of 2015 and be completed by the end of 2020.

According to PAC's report, energy companies should be required to "provide a clear breakdown for consumers of the cost of smart meters, their operational cost savings and whether consumers are achieving the expected reductions in energy consumption". It is estimated that the cost of installing smart meters will be £215 per home but that by 2020 consumers can expect to save on average 2% of their energy bills, or £26 a year, by better regulating their energy use because of smart metering.

PAC warned that relying on competition in the market to control the costs of smart metering and deliver benefits of the programme "may not provide adequate protection for consumers". It recommended that the government and the UK's energy regulator Ofgem each detail how they intend to "minimise the costs of installing smart meters and ensure that the subsequent operational cost savings to suppliers are passed on to consumers".

Expert in commercial contracts in the energy market Becca Aspinwall of Pinsent Masons, the law firm behind, said: "The press has focussed on what is considered to be a relatively low annual saving for consumers - £26. What we have to remember is that smart meters have wider benefits than short-term consumer savings."

"The roll-out of smart meters is the first step in creating a smarter grid that will allow network operators to gain valuable real-time insight in to the way in which we use energy, allowing them to more accurately forecast energy usage in order to better balance the grid and prevent outages. The introduction of renewable technologies, the shutting down of coal power stations, ageing infrastructure and increasing electricity demand across the UK are all contributing to a strain on the grid. Real-time data is invaluable in helping to relieve this strain," Aspinwall said.

"A smarter grid will have a direct impact on the UK's carbon reduction commitments as there will be less wastage of electricity through better understanding of supply and demand. It is true that technology is by nature out-dated as soon as it is released. However, at some point we will have to 'bite the bullet' and introduce the technology to create a more connected energy industry. The longer we wait, the more strain is placed on our ageing infrastructure," she said.