A smart world benefits us all

The rollout of smart meters should deliver benefits to every consumer and enable people to reduce their carbon footprints – and their bills. Anya Davis says there is a great story to tell.

The government has announced an ambitious target for rolling out smart meters, mandating energy suppliers to install smart meters in every home in England, Wales and Scotland by 2020. This involves installing meters in more than 26 million households, a process that will be underpinned by a new industry entity, the Data Communications Company (DCC).

This modernisation programme has attracted considerable public interest, with the government’s Science and Technology Committee recently asking to scrutinise the evidence behind the policy. So it seems a good time to take a look ahead at the upcoming smart rollout and analyse what the benefits will be for UK customers.

Impact on usage

Smart meters are part of a concerted effort to make the UK’s energy network smarter and are a fundamental component in achieving a low-carbon, reliable way to supply gas and electricity. It also contributes to the global effort to reduce energy consumption by providing information to consumers and encouraging behavioural change. The US, Australia and New Zealand have already adopted smart meters and most other
EU countries are in the process of rolling them out.

Near real-time feedback will provide greater visibility of consumption and should deliver insights that allow customers to control their consumption and potentially reduce bills. The in-home displays can provide information on both gas and electricity use, helping customers to see what they are using and what it is costing them, encouraging people to change their energy consumption habits. Many smart meters also report back electricity issues (such as periods of low voltage) to help deliver a better quality of supply and rectify any costly faults to their supplier and distribution network operator.

Metering technology has proved to be successful in the water industry, resulting in a national average of a 10 per cent reduction in consumption. Leading companies report usage down 16 per cent. These are comparable for energy consumption reductions ranging from 0-10 per cent, with the upper end being delivered by data insight coupled with consumer engagement strategies.

Clearer, more flexible pricing

The more detailed data which will be made available by smart meters allows for the development of more sophisticated tariffs. The most likely scenario is an increase in the number of time-specific plans, rewarding customers for using energy at off-peak times. As well as leading to cheaper bills for savvy users, this could also create a more resilient energy grid, shifting the load and making the network more resilient.

Smart meters will also help to reduce perceptions of unfair pricing. There are currently more than two million billing complaints every year, according to Smart Energy GB. The move from predicted consumption to actual consumption will make for clearer and more accurate bills and should boost consumer confidence. In terms of impact, it will be similar to moving from disposable cameras to digital equivalents, creating a quicker and easier process with more immediate effective results.

We recently undertook some research, highlighting the stark issue that exists within the energy sector around vulnerable customers. Our results show that one in three people in the UK would identify themselves as financially vulnerable and one in five customers do not have enough savings to cover an unexpected bill of £300. In the energy sector specifically, 35 per cent of financially vulnerable customers do not always have sufficient funds to cover their basic needs.

The increased information provided by smart meters could make it easier for vulnerable customers to budget more effectively. Currently, only one in ten customers who consider themselves financially vulnerable believes that they are given access to the best deals by their energy provider. We believe that smart prepayment will become a useful product for these customers in helping them manage their spending. It should also lead to more favourable pricing, as the cost to service these customers reduces, because of remote management of the meter and digital payment channels.

Smart metering will also bring greater flexibility for vulnerable customers, allowing them to change their supplier more easily and benefit from price comparison services. Ofgem has created regulations to ensure that smart meters do not present an obstacle to consumers wanting to switch suppliers. In fact, a more integrated industry framework will make for a smoother switching process.

Looking to the future

The upcoming rollout of smart meters represents good news for customers, giving them choice and flexibility about how they consume their energy. Through placing knowledge in the hands of customers, they can get the best possible deals, forcing suppliers to meet their needs. A smarter grid will also lead to a more resilient and sustainable energy network, which is good news for customers and for the planet as well.

Anya Davis, partner, Energy and Resources, Baringa