The Government is pushing ahead with its plans, announced in the Energy White Paper, to give all consumers access to smart metering. But there are still a number of questions to be answered first, as Simon Napper explains.
“Why on earth is the Government consulting about the introduction of smart metering? Surely, it’s a no-brainer?” commented one experienced energy consultant when the consultation was announced on 3 August. Be that as it may, the process has begun and will continue until October. The proposed legislation fits within the overall implementation of the EU Energy End-Use and Energy Services Directive (known more succinctly as the Energy Services Directive). And EU regulations demand full consultation on the implementation process.
The terms of reference for the introduction of smart metering were set out in the Energy White Paper published in May, that “energy suppliers should extend to all but the smallest business users in Great Britain and those larger businesses not subject to half-hourly metering, advanced and smart metering services within the next five years.” It is also proposed that from May 2008 “and where technically feasible” every household having an electricity meter replaced, and every newly built domestic property, will be given a real-time electricity display free-of-charge says the White Paper. This display will have to show real-time information about electricity consumption and cost – it will also have to have a minimum 95% accuracy level.
While the primary focus is on electricity meters, gas is included as well. The accuracy and timeliness of gas bills has long been a point of contention between business consumers and the supply industry.
Equally, the new units will not measure water consumption. Yet multi-utility meters are widely available. Although it may simpler to address one industry at a time in terms of putting legislation in place, from the householder’s point of view it would surely make sense to tackle all the utilities in one go with a single new meter.
In addition, the Directive requires that, as far as “technically possible, financially reasonable and proportionate in relation to potential energy savings”, final customers for district heating should be provided with heat meters showing usage. In this case, though, research by BRE found that two-thirds of all buildings with district heating and three-quarters of the dwellings involved did not have heat metering – because they were not perceived to be cost-effective. And BRE’s research concluded that while meters could deliver energy savings, these were insufficient to make heat metering cost effective – which means that the Directive would not require them to be installed.
Installation rate
The Government is proposing that from May next year, where “technically feasible”, every household having an electricity meter replaced and every household receiving a new connection, should be given a real-time electricity display, free of charge. The consultation document assumes a replacement rate of 5% of electricity meters a year. With about 26 million domestic meters in place, that means more than one million devices being provided every year.
A further option put forward is that all consumers should receive a display device within five years. However, it recognises there might be problems in sourcing enough devices and, although the potential carbon savings would increase, there is the danger that many would not be used as they had not been specifically requested.
The speed of the roll-out will be affected, crucially, by the technology. The Government is involved with the suppliers and manufacturers about developing standards for smart meter interoperability. It is hoped this will reduce costs and make widespread use more cost-effective. It would also reduce the potential problems associated with switching from one supplier to another that uses incompatible technology.
Other important issues that remain to be resolved include those of ‘asset stranding’ (where a supplier owns the meter but the customer decides to change his energy supplier) as well as the design and establishment of the communications infrastructure needed to support smart metering.
So there are several key decisions still to be made before the final programme can be established. The Government also wishes to build some flexibility into the system so that suppliers (and consumers) have some choice – but this will involve safeguards to ensure compatibility. All these issues have to be resolved in a very short timeframe if the deadlines in the White Paper are to be met.
Metering consultation:
http://www.berr.gov.uk/files/file40456.pdf
Cost benefit analysis
In November last year, the Government sought views on how it might best rapidly roll out real-time electricity displays in the domestic sector. Analysis undertaken following this process, and evidence from their use in other electricity markets, suggests that displays raise consumers’ awareness of energy use and help them reduce consumption. The Government’s analysis shows that, using central assumptions about costs and persistence of reduction of energy use, 0.15MtC per annum could be saved by 2020 through the use of displays. Central case assumptions, which assume a cost of £15 for the device, £11 for installation and an additional £3 for ongoing customer service and maintenance costs with a cost of capital of 10% indicates that these proposals will produce a total net benefit of £205m, based on a range of values for energy saved.
The analysis shows, says the Government, that providing display devices “is financially reasonable and proportionate in relation to the potential energy savings”.
In the business sector, the Carbon Trust has been conducting smart metering trials. The results indicated that smart metering combined with consumption data and advice was effective at reducing consumers’ consumption by 5% on average (although potential average savings of 12% were identified). However, the Trust concluded that deploying this technology was only cost-effective to higher energy users within the small and medium-sized business market.