Should the smart meter rollout deadline be scrapped?

Following a litany of setbacks and disappointments, and with the seemingly unattainable 2020 target fast-approaching, Adam John asks should the smart meter rollout deadline be scrapped?

Interoperability issues, missed deadlines and a deceleration of installations – the omens for the smart meter rollout have not been good.

Indeed, with the 2020 deadline looming, you would be forgiven for thinking suppliers might be ramping up installations. Yet official figures indicate the opposite.

The latest findings from The Department of Business, Energy and Industrial Strategy (BEIS) show that installation activity by large energy suppliers was in fact down by 16 per cent in the final quarter of 2018 compared with the same time a year earlier.

Which begs the question – with so many negative aspects plaguing the rollout, should the 2020 deadline now be scrapped? Alternatively, should suppliers and the government plough ahead regardless with their plans?

In a country dominated by the political fallout from Brexit, it is sometimes hard to believe the introduction of the devices has been ongoing since October 2008, when the then Labour government announced its intention to mandate the rollout of gas and electricity smart meters to all households across Britain.

Another key date was in April 2011, when the Conservative and Liberal Democrat coalition began the first stage of the actual scheme.

In 2015 the Conservative Party manifesto committed to ensuring “every home and business in the country has a smart meter by 2020”. Yet just two years later, before the snap general election, the party’s manifesto instead stated it would ensure smart meters were offered to every household and business by the end of 2020.

Since then, issues with first-generation SMETS1 devices, namely them becoming inoperable when a customer switches supplier, as well as consistent delays to the rollout, has led to a tide of negative media coverage.

But did these issues come as a shock to the sector? Ian Barker, managing partner at Bfy Consulting, does not seem to think so.

Barker asserts: “The delays to the smart metering programme don’t come as a surprise to anyone involved in the energy industry.

“There have been notable challenges and delays with systems (Data Communications Company – the body responsible for establishing and managing the infrastructure supporting the rollout); supply chain (access to SMETS2 meters); and customer engagement (getting customers to switch to smart meters which have a risk of going ‘dumb’ when changing supplier).

“With hindsight it’s very easy to say a street by street approach led by the distribution network operators would be a better approach to achieving a compliant position.

“There are still opportunities for suppliers to improve appointment booking through targeted and tailored journeys – but this must be done with the customer experience considered paramount during the interaction.”

Changing horizons

Even the government’s official smart meter campaign predicts the 2020 target will not be met.

Robert Cheesewright, director of corporate affairs at Smart Energy GB, says: “It is very unlikely that the rollout of smart meters will be complete by 2020, but energy suppliers are working tirelessly to enable consumers to benefit from smart meters as quickly as possible.”

Gillian Guy, chief executive of Citizens Advice, has previously expressed concerns about the rollout timetable and called for a deadline extension.

“Smart meters will provide benefits for customers, but with the rollout beset by technical problems, the current timetable is unrealistic.

“There’s little chance that the 2020 deadline will be met, it should be extended to 2023.”

Furthermore, a recent report released by the National Audit Office (NAO) warned that the government’s ambition of offering a smart meter to every home by 2020 will not be met, while the cost of the rollout will likely “escalate beyond initial expectations”.

The government also “underestimated” how long it would take to implement the infrastructure of SMETS2 smart meter devices, according to the spending watchdog.

Smart meters going “dumb” has been another bugbear for industry and consumers, with research commissioned by consumer group Which? suggesting over 50 per cent of SMETS1 devices became inoperable when customers switched supplier – something the Data Communications Company (DCC) will rectify in the coming months.

Installation rates

According to the latest statistics from BEIS, five million smart meters were installed in homes and small businesses across Britain in 2018, an increase of 3.5 per cent on the previous year. In total almost 14 million smart and advanced meters are now operational.

As stated, installation activity by the big six was down in the final quarter of 2018. Several large suppliers have spoken out in response to this, insisting they are “committed” to meeting their obligations.

SSE however, which recently paid out £700,000 to Ofgem’s consumer redress fund to make amends after failing to meet its gas smart meter targets in 2018, has called for a more “flexible” approach to the 2020 deadline.

A company spokesperson says: “Our commitment to the smart meter rollout and meeting our milestones won’t relent. But we continue to believe that the government should adopt a flexible approach to the 2020 deadline, to ensure the programme offers consumers value for money and customers’ experience remains positive.”

Smart benefits

Despite the negatives, BEIS still insists that this “world-leading” scheme will see smart devices becoming a “cornerstone” of the bid to build a smarter energy system of the future.

A BEIS spokesperson says: “Millions have already chosen to have a smart meter and take control of their energy bills. We’ve said everyone will be offered a smart meter by the end of 2020 to reap these benefits and we will meet that commitment, with suppliers maintaining the rate of installations in this latest quarter.

“This world-leading upgrade has seen more than five million smart meters installed in 2018 which will become a cornerstone of our move to a smarter energy system of the future, bringing benefits to consumers and industry worth up to £40 billion.”

Meanwhile another issue haunting the rollout, and consumers, is its two types of smart meters – with the SMETS2 device installation rate languishing behind its older counterparts.

The latest figures from the DCC show over 500,000 SMETS2 devices have now been installed.

A spokesperson for the DCC says:“SMETS2 installation rates are rising and the DCC continues to support energy suppliers with their smart meter roll out plans.”

The regulatory view

So what is Ofgem’s take on the rollout?

Although Ofgem was unable to comment on the matter the regulator did point to interventions it has made throughout the rollout, in response to Utility Week’s request for comment.

A recent notable one saw challenger supplier Avro Energy ordered to become a user of the DCC by 25 July. Avro was issued with a final order on 3 April, meaning the supplier could be banned from taking on new customers from 26 May if it fails to comply.

All suppliers were required to become DCC users by 25 November 2017 to help drive the installation of next generation SMETS2 meters. And suppliers with more than 250,000 customers must set individual annual targets for their installations, which are monitored by Ofgem.

Similar to the case of SSE, EDF was another big six supplier which had to pay into the redress fund after failing to meet its annual installations target for customers in 2017.

In both cases the regulator decided not to pursue formal enforcement action against the suppliers due to the steps they took.

But Ofgem says it “is closely monitoring suppliers’ approach to the rollout of smart meters and will hold suppliers to account if they do not meet their obligations”.

Hitting deadlines

Another key sticking point has been the extension of deadlines.

Initially, the end-date for regular SMETS1 installations was set for 13 July 2018, though it was then pushed back to 5 October, before being extended further to 5 December.

The deadline for prepayment meters was set for 15 March this year.

Following the deadline, installations of SMETS1 meters do not count towards the rollout figure and therein lies another problem.

It was recently revealed that several big six suppliers were continuing to install SMETS1 devices even though the deadline had long since passed.

Companies have cited technical issues in the DCC’s northern region, namely Scotland and Northern England. Some suppliers claim they have been unable to install SMETS2 meters due to problems connecting to the DCC’s network.

The DCC insists it is supporting suppliers to rectify the problems in the North and that the suppliers have been “testing better hardware”.

Delayed delivery

The raft of delays to the process has resulted in the actual delivery of the devices taking longer to implement.

Mark Coyle, chief strategy officer at software company Utiligroup, is of the view that offering smart meters is “only the start of a complex process”.

Coyle adds: “It is possible to make the customer offers by 2020, but the delivery was always going to take longer than that based on the delayed rollout commencement for SMETS2 meters and the complexity in reaching all properties.”

Still, this particular incident highlights the myriad of issues that have beset the smart meter rollout since the start, and which look poised to continue to afflict suppliers until completion.

Even as recently as this month, BEIS delayed the start date of an obligation on energy suppliers to install a smart meter when replacing a traditional meter, or fitting one for the first time, to 30 June – three months later than originally planned.

Consistent setbacks have made a soft target of the smart meter rollout for national media outlets, it seems everyone loves to hate a struggling government rollout and this is no exception.

There is no denying that smart meters are the future of energy consumption. Yet the smart meter rollout has so far been deeply flawed and has left a lot to be desired.