The smart meter rollout – now comes the hard part

The latest smart meter installation figures reinforced the long-held view that the 2020 deadline is now impossible. But, more worryingly the rate of installations among the large suppliers continues to fall month by month and according to one expert, the process is about to enter its most difficult phase.

After years of planning, the latest smart meter installation figures published by the government yesterday (29 August) mean it is looking more likely that the 2020 deadline is all but impossible.

Hampering the rollout is the fact that for the most part, installation rates are decreasing every quarter.

According to yesterday’s figures just short of 15 million devices were in operation as of the end of Q2 2019, a 4.2 per cent increase from the previous quarter.

Yet rates of installation among larger suppliers fell 2.2 per cent compared to Q1. BEIS’ definition of large suppliers is what would usually be deemed the big six and mid tier retailers.

As the 2020 deadline looms ever nearer, why then are we seeing the decrease in the rate of such installations?

Michael Jary, managing director at Energy Tech Consultancy, believes the answer lies within the nature of the rollout itself and how it is mandated that suppliers are responsible for the devices as opposed to the network operators.

He says: “If you strip it away – why is it even necessary to rely on customer demand for these things? It’s because it has been policy for this to be a supplier-led rollout.

“I think that approach was an historic error and therefore it became something that was very fragmented and disjointed from a technological perspective, fragmented from a delivery and operational rollout perspective and then it necessitated suppliers to actually ask customers permission to install rather than it being a mandated rollout.”

Furthermore, Jary argues, the most receptive customers have already had meters installed and therefore the rollout will slow from here on in.

He continues: “It’s an entirely natural phenomenon which is experienced in all mass rollouts of anything in any major campaign in that it’s the most receptive customers that sign up first.

“The second half is the final tranche of customers who are the most sceptical or who are the least available to have somebody come round and install the meter.”

The industry has seen the rate of installation decrease on several occasions.

The first quarter of 2018 saw a 6 per cent decrease in domestic installations by larger suppliers and while Q2 saw a 1 per cent increase, the following four quarters saw decreases by as much as 10 per cent.

From January to the end of March this year, just over a million meters were installed by large energy suppliers, split between 457,900 for gas and 573,700 for electricity. This represented a 6.7 per cent decrease from Q4 2018 and a 17 per cent drop in the Q1 installation rate in 2018.

Energy UK, the industry trade body, says in regards to the deadline it is important for suppliers to know what their obligations are post-2020.

A spokesperson adds: “Any target must be realistic, apply to all suppliers in the market and be supported by wider government policy – as well as being underpinned by an updated assessment on the costs and benefits of the rollout.

“The energy industry will continue to work with the government and other partners to enable the programme to be delivered in full and cost effectively.”

Perhaps one of the more disappointing figures published in the report was the fact that 2.7 million meters were “dumb” as of 30 June, with BEIS suggesting these are currently in “traditional mode”.

“Going dumb” is a phrase often seen in many a national news story on the rollout and refers to first-generation (SMETS1) devices losing smart functionality, often when a customer switches supplier.

This is currently being rectified by the Data Communications Company (DCC), which is in the process of connecting SMETS1 devices to its central network. That said, the fact that one fifth of smart meters have no smart functionality makes for grim reading.

Some experts are even claiming 24,000 meters per day need to be installed in order to hit the “impossible” December 2020 deadline.

Peter Earl, head of energy at Comparethemarket.com, says: “Hitting the December 2020 installation deadline for smart meters is mission impossible for energy providers. Suppliers would have to install over 24,000 smart meters a day for the deadline to be met, which is simply not going to happen.”

Earl further argues that confidence has been eroded by the “slipshod” rollout, with frequent reports of meters not working – particularly when a household switches suppliers.

Under the terms of the rollout suppliers are required by law to take all reasonable steps to install the devices to all homes and businesses by 2020. To this end, suppliers set individual annual targets for device installations, with Ofgem monitoring performances.

Enforcement action has however been taken recently against two big six suppliers, SSE and EDF, which paid over £1 million between them into Ofgem’s consumer redress fund for failing to hit their smart meter targets.

Yet recent analysis from Uswitch.com suggests that even second-generation (SMETS2) devices are throwing up problems.

Furthermore, the research claims 39 per cent of device owners have had problems with smart displays not working while 32 per cent said their device “went dumb” after switching energy supplier.

Some (13 per cent) even reported meters ceasing to function entirely.

Of those with second-generation (SMETS2) devices, 33 per cent said they encountered issues after installation.

Responding to Utility Week’s request for comment, a BEIS spokesperson urged customer facing problems with their in-home display to contact their supplier.

BEIS says: “The replacement of traditional gas and electricity meters with smart meters is a vital national energy infrastructure upgrade that will make our energy system cheaper and more efficient for consumers.

“Anyone experiencing problems with their in-home display should contact their supplier, which is obliged to replace it free of charge if it’s not working properly.

“With more than 14 million smart and advanced meters now operating across Great Britain, millions of consumers are already benefitting from having a smart meter, including reducing their energy bills and getting access to more competitive tariffs.”

At this point in time it is difficult to say what the fate of the rollout is, with the only real certainty that the deadline is not going to be hit. BEIS would not be drawn on the fate of the deadline and whether it will be scrapped.

Earl adds: “As the 2020 deadline looms, the threat of fines from the regulator for those energy companies not delivering will only add fuel to the fire.”

It is hard to disagree.