Time for retailers to step back from the smart meter rollout?

Marred by connectivity issues and a lack of consumer interest, there are still 50% of properties without a smart meter more than a decade into the rollout and the chances of completing the project by 2025 now seem remote. Should the rollout be handed over to the networks as a ‘plan B’? Or should the devices remain optional for consumers but with greater incentives? Will the deployment ever actually end? Utility Week asks the experts.

It has been 14 years since the Act of Parliament which gave powers to begin the smart meter rollout and 12 years since it actually began. In that time the latest government figures show just 50% of operational energy meters by the end of 2021 were smart.

The devices are seen as an integral part of the energy transition, the beginning of a digitised power system. There are some estimates that they will deliver a £6 billion net benefit to the UK and a government spokesperson tells Utility Week the rollout is making “good progress” and is making the energy system “cheaper, cleaner and more efficient”.

Despite this “good progress” there remains the fact that the original deadline has shifted from 2020 to 2024 and, thanks to the pandemic, further still to 2025. There is therefore an understandable level of scepticism and even pessimism that 2025 is an achievable goal.

Under the new four-year framework which commenced on 1 January this year energy suppliers have fixed, annual installation requirements. With retailers facing the prospect of installing as many smart meters in the next two-and-a-half years as they have in the last decade, there are some in the sector who believe work needs to start now on what happens if, more likely when, the 2025 deadline is missed.

“My definite view is we should start the debate now,” says Duncan McCombie, chair of Western Power Distribution’s Customer Engagement Group and chief executive of Yes Energy Solutions, a company which helps those in fuel poverty with energy efficiency schemes.

He adds: “…if it takes time to do something different, we need to start thinking about doing something different now because we are going to run out of time otherwise.”

McCombie is not alone in his concerns about meeting the deadline.

Speaking at Utility Week’s Future of Heat conference in March, Energy UK’s deputy director Dhara Vyas shared an intriguing comparison between the rollout of smart meters and the take-up of Amazon Alexa devices.

Said Vyas: “In 2018 less than 10% of households in the UK had a smart speaker, by the end of 2022 it’s estimated that 50% of households will own one. It’s taken smart meters 11 years to get to that point where 50% of households have them. So it’s an amazing comparison there, I think.”

Despite the pessimism, McCombie still believes the rollout will be completed in the next decade.

“So on the current strike rate if it did start 10 years ago then we should be hitting it, but it was never a 20-year programme,” he says.

The energy sector has much ground to cover before 2025, yet what can be done to speed up the process?

Original sin

A key debate surrounding the rollout has been on whether it should be optional for consumers and retailer-led or given to the distribution networks to install street-by-street as has been the case in many other European countries.

This was the position of Eon Energy from the outset. At Utility Week’s recent Customer Summit Eon boss Michael Lewis went as far to label the decision to hand the rollout to retailers as the “original sin”.

“But once you went down the route of saying it’s up to retailers, for the right reason that we wanted to engage customers, then you have to do it properly and you have to make the underlying systems work,” he added.

Gillian Baker, Eon’s director of smart field connections, says it “makes sense” to go street by street from a “pure delivery standpoint”, but that is only the immediate challenge.

She adds: “Longer term it’s about embedding the benefits of smart into people’s lives for decades to come – that means suppliers and solutions providers.

“As it stands now suppliers have long established relationships with consumers and remain best placed to engage customers and help them understand the benefits of smart meters and to encourage customers to engage with their meter and in-home display (IHD).

“Stronger endorsement from central government and making smart meters mandatory would enable more efficient, lower cost deployment.”

Matthew Roderick, founder and chief executive of n3rgy, previously spent five years at the Data Communications Company (DCC) as its chief technology/ innovation officer.

While he believes the “ship has sailed” in terms of handing responsibility over to the networks now, he thinks it could be reapproached in light of 2025. However, he adds, the question is less to do with who rolls smart meters out and more about whether the rollout is mandated or continues to be optional.

Says Roderick: “Logically an optional rollout should be led by the organisations that have the best relationship with the consumer because they can market it and encourage the consumer to adopt those meters. So a supplier-led rollout in an optional scenario makes sense to a degree, there’s plusses and minuses to both approaches.

“Mandating smart meters, which is a very big decision to make, logically rolls into potentially a distributor led rollout because they can go street by street, house by house, driving the rollout.”

Roderick’s preferred option would be to keep the rollout as optional but have stronger incentives, such as new products and services, to boost take-up.

“Incentives are finally starting to appear with time of use tariffs becoming more popular, certain types of assets such as EVs demanding that time of use tariffs are far more economically efficient for the consumer and therefore that encouragement snowballs overtime.

“But it’s a timing issue as well. I think by 2030 maybe 50% of the cars on the road might be pure electric or plug in hybrid, it definitely won’t be 100% by the time the new car ban comes in place. So there’s a long tail of replacing those traditional vehicles.”

Baker takes the view that the rollout should be mandatory but still the responsibility of the retailers. She believes in a much stronger regulatory presence from both Ofgem and the government.

“I’m not sure handing the rollout to the networks post 2025 is the answer, especially as suppliers have spent years building up their own staffing levels and competencies, as well as systems, skills and partnerships in order to deliver the smart programme.

“Moving the programme to the DNOs now would only add cost to the overall supply chain and ultimately to the end customer bill. I would instead advocate a much firmer mandate or compulsion – which means a far stronger presence and position from Ofgem and BEIS to mandate smart metering for all customers.”

Similarly Mark Jobson, former strategy director at British Gas who is currently a principal in the energy and utilities practice at Kearney, believes suppliers have invested too much to hand over control now.

He says: “Suppliers have trained, hired or contracted the workforce to deliver smart installs at scale, nationally, and have the systems and processes in place to deliver it. We need to leverage these capabilities rather than unwind them.

“As smart penetration starts to plateau, new approaches will be needed to ensure the long-tail of still standard meters can be converted to smart meters efficiently, but passing the obligation to the networks does not solve that problem.”

Like Roderick, he too believes there are more incentives to increase the rollout.

“Growth in other electrical work in-and-around the home, such as EV charge point installation, also creates an opportunity to build a cross-skilled/fungible workforce with sufficient demand for suppliers to keep them productive,” he adds.

The role of Smart Energy GB

An optional rollout means consumers need to be convinced a smart meter is right for them and the government has tasked Smart Energy GB with this.

Known for its memorable advertising methods with the animated double-act ‘Gaz and Leccy’ and more recently a bathing Albert Einstein, the smart meter rollout’s official campaign goes to novel lengths to target consumers.

Yet its messaging has been accused of being “dumbed down”, certainly at the beginning of its campaign.

As the clock ticks ever closer to 2050, smart meters will become more than just bill-saving devices and this is where Roderick believes the educational piece fits in.

He says: “In the early days, Smart Energy GB’s strategy using Gaz and Leccy was quite significantly dumbed down and maybe that was appropriate given the country’s inattention to energy bills at that point in time.

“I think now with the public interest in energy, due to the crisis and the climate, general level of awareness has raised significantly. So there’s the opportunity now to really step up that level of awareness and education.”

A spokesperson for Smart Energy GB pointed to one of its most successful campaigning years in 2021, a year in which awareness of smart meters rose to 98% and a record decrease in those rejecting the idea of the device.

They added: “We will continue to further collaborate with energy suppliers to convert customer demand generated by Smart Energy GB campaigns into smart meter bookings and installations, paying particular attention to people whom our research shows have so far felt indifferent or negative about them; among customers in vulnerable circumstances and among microbusinesses.”

Will it ever end?

While the focus is on installing devices up to 2025, Roderick takes the view that this will not be the end of the rollout – quite the contrary.

“The rollout will never finish because there are early smart meters that went on the wall in 2009-11 that will come to their end of life by 2025. So they will have to be replaced and the rollout will continue and refresh,” he says.

Similarly Baker sees an evolution of the rollout over time.

She says: “I’d envisage the technology – at the customer end and things like the DCC – will continue to evolve over time but it will be an evolution rather than the revolution we are currently going through.”

“On a more basic level, the rollout will eventually end as traditional meters stop being manufactured and the remaining classic meters in customers’ homes require replacement. Smart will be the only option. It is simply a case of when, not if,” she adds.

The smart meter rollout has been a source of immense frustration for both consumers and the wider sector since its conception more than a decade ago. There is still a long way to go in a short space of time before 2025 and it is clear the conversation around what to do next needs to begin now.

As Baker observes: “Smart is the anchor technology, the foundation of the smart, personalised and low carbon energy system.”