A smarter smart meter rollout would look again at in-home displays

Simon Hill asks why in-house displays are still mandated for smart meter installations when research indicates there are far more effective ways to modify customer behaviour.

The UK government’s smart meter programme is one of the largest attempts to date to change consumer behaviour and represents a huge capital investment.

Smart meters could cut consumers’ energy bills by £17.1 billion, but the way they are deployed will determine whether the potential is realised. The impact on behaviour – primarily encouraging consumers to use less energy – is a key success factor.

With a national programme of this scale, cost and complexity, there is a genuine risk that taxpayers’ money will be wasted and that smart meters will become the next NHS IT fiasco. There are also questions to be asked about the government’s consideration of international evidence that may contradict the UK’s current approach to the rollout. These questions have been tabled by MPs in the House of Commons.

At present, installation of in-home displays (IHDs) is a mandatory part of the rollout and UK licence laws for IHDs mean alternatives cannot be considered.

IHDs can be useful for certain customer groups, but large-scale rollouts in Canada, the US, Ireland and Australia show that most users don’t take lasting action based on a kilowatt-hour readout on a screen.

Alternative approaches to influence consumer behaviour are more effective than IHDs. Numerous studies have confirmed that behavioural energy efficiency (BEE), which uses normative comparisons and other behavioural-science-driven ‘nudges’ to change behaviour, produce significant and  sustained savings for energy consumers.

For instance, Opower has observed a 1.5-3 per cent drop in total energy consumption and a 5 per cent drop in peak demand when implementing BEE programmes for consumers in conjunction with our utility partners’ smart meter programmes.

Regulators and utilities in the US have recognised that BEE can help ensure that massive smart meter investments do what they are designed to: help consumers reduce their energy use, and their energy bills.

Smart meters are an important step in modernising the UK’s energy infrastructure, and provide a wealth of data that can be useful to utilities and their customers. But, the in-house displays currently mandated offer little extra value. International evidence suggests that they often become shelfware for customers, and could crowd out investment in more effective technologies.

Large-scale field trials highlight the disappointing gap between cost and value associated with IHD programs. Results from around the world call into question the prudence of rolling out the devices universally in light of more cost-effective and reliable behavioural efficiency programmes.

The benefits of using behavioural science to shape energy consumption are well documented. Opower works with more than 95 utilities and collectively reaches 52 million households and businesses. Customers engaged with behavioural nudges have consistently realised 1.5-3 per cent savings.

Opower’s platform uses big data analytics to crunch the vast volumes of data coming from smart meters, identifies personalised advice for each customer, and uses tailored communications to nudge consumers to save energy. One of Opower’s fundamental tools is ‘normative comparison’ – consumers are told how much they are saving relative to their neighbours, and motivated to improve.

Opower estimates the UK can save 2.1 terawatt-hours of electricity through behavioural energy efficiency alone. That represents annual cost savings of over £218 million and the avoidance of nearly 650,000 tonnes of CO2 emissions.

These benefits are maintained for long periods and achieved at a fraction of the cost of IHDs. Utilities should be empowered to give their customers more usage information in their bills and provide feedback elsewhere that helps save money and energy. It is only with this actionable insight that smart meters will deliver their promised value.

The pressure on UK policy-makers to cut energy consumption and household bills will continue in the run-up to, and well beyond, the general election. Customer dissatisfaction is high, and Which! and the IoD have launched consumer campaigns calling for more comprehensive residential energy efficiency planning.

The rollout of smart meters is one of the core policies that could address this pressure. The size of the investment means there are expectations that it will deliver results. There have already been delays and questions are being asked about the programme’s long-term efficacy.

The best way to strengthen the smart meter programme is to amend the Gas and Electricity Markets Authority licence conditions on utility firms, and let them match energy-saving tools to their customers according to their needs and demands, rather than being limited to providing only one unproven solution, in the form of an IHD, with the smart meter.

Allowing this minor tweak to the smart meter licence conditions could deliver the 2-3 per cent in energy savings required of the £11 billion smart meter rollout, while pulling about £1 billion from the total bill.

Each pound spent on IHD deployment crowds out investment in more cost-effective solutions. In today’s austerity-focused economy, judging such investments with due diligence at the outset is more important than ever. And given the evidence, imprudent decisions now could jeopardise the success of the entire £11 billion smart meter investment in the months and years ahead.

Simon Hill, vice-president, regulatory affairs, Europe, Middle East and Africa, Opower