Suppliers may team up to tackle smart rollout

Controversial measure forced forward by spiralling cost concerns and programme complexity

Energy retailers are considering how a collaborative approach to the rollout of smart meters may help them overcome worrying cost pressures arising from the national programme, Utility Week has learned.

Rob Doepel, an energy industry expert at consultancy EY said the company is “talking to senior stakeholders – budget holders and heads of smart, and above” about how a collaborative approach might be arranged.

He explained that stakeholders are interested in collaboration because their profit and loss outlook has been “hit hard” by the announcement that government will intervene in the market with an energy price cap.

“For companies facing diminished scope for revenues and looking to shore up their balance sheets, the significant cost demands of smart are a big concern,” he said.

In addition, Doepel reasoned that a growing consensus that smart installation does not offer competitive advantage, is opening the door to supplier alliances.

“There is a softening of a mindset that smart meter installation offers any opportunity to differentiate from your competitors,” he explained.

“The install is an enabler – differentiation comes post-installation, with new products, tariffs, time of use and so on.”

Doepel concluded: “If you accept that the opportunity to differentiate is post-install, then it frees up opportunity to talk about collaboration.”

EY’s power and utilities advisory partner admitted that forming supplier alliances for smart deployment has been “taboo” to date, and that it faces “some blockers”.

For instance, he acknowledged that there are a mutually appointed MOP (meter operator) – contracted to deploy smart meters for a consortium of suppliers – would need to reconcile a wide range of different meter types and that this might cause problems around commissioning.

He also said that exclusive contracts between individual suppliers and MOPs would need to be revisited.

However, Doepel argued that the operational efficiencies that would be gained by pooling customers and giving MOPs “rollout density” are attractive enough to warrant tackling these blockers.

“The pure economics are pushing people to start exploring different models,” he insisted.

Earlier this year, EY told Utility Week that the costs associated with the UK smart meter rollout pose a serious threat to energy suppliers, especially large incumbents who are responsible for the bulk of installations.

In February, alongside the publication of an EY thought leadership paper, Doepel claimed suppliers are being “hammered on price and competitiveness”.

“We want them to reduce their price – reduce costs to customers – but also to make a massive investment in an incredibly complex programme that no other country in the world has chosen to do in the way that we have chosen – a way which is inherently expensive.

“We’ve asked them to make that ridiculous investment, reduce costs for consumers, and innovate around products – for example, bundling and connected home. I am struggling to square the circle. Something has to give.”