With the rollout of smart meters across the UK due to start next year, Peter Brown reports on how energy firms are preparing and the challenges they face
The government’s smart metering implementation programme started in 2011 and aims to have a smart gas and electricity meter installed in every home and small business by the end of 2019. The project is currently in the foundation phase as energy companies prepare for the challenges of installing 53 million smart meters, a process Decc expects to begin in late 2014. In the non-domestic sector alone, 3.6 million electricity and gas meters will be replaced.
Smart meters record energy consumption in much more detail than conventional ones, allowing consumers to monitor and control accurately their own energy use via a display unit in the building. They can also be read remotely by the energy supplier, which means an end to estimated billing.
Decc’s impact assessment for the smart meter programme estimates the total cost of implementation to be £12.1 billion, and that it will result in a gross benefit of £18.8 billion. The majority of that benefit will be in reduced energy bills for consumers, with the energy department estimating that households could save, on average, £25 a year by 2020. Savings for non-domestic consumers are estimated at a cumulative £1.76 billion, with most of that (£1.75 billion) coming from reduced energy consumption.
Putting meters on trial
The smart meter rollout is one element of the UK’s transition to a smart grid, a transformed energy network in which distributors have greater insight into consumption patterns. In theory, a better understanding of energy use will allow suppliers to manage distribution more cost-effectively, take advantage of microgeneration sources and limit supply to non-essential uses at peak times.
The UK’s largest smart meter trial is under way as part of the customer-led network revolution (CLNR), a project in the northeast of England. The three-year, £54 million initiative is the recipient of the biggest single grant from Ofgem’s low-carbon networks fund, which was launched in 2010 to encourage distribution network operators to invest in smart grid technology and solutions.
CLNR, a joint effort between distribution firm Northern Powergrid, British Gas, Durham University and consultants EA Technology, will assess the impact of a range of low-carbon technologies on the existing electricity network infrastructure.
The project involves the installation of smart meters in 14,000 residential and business properties in cities including Durham, Leeds and Newcastle, as well as in some of the UK’s most sparsely populated areas. Around 2,500 of these customers are also trialling equipment, including solar panels, heat pumps and electric vehicle charging points.
The trials aim to explore both customer and network flexibility solutions. British Gas is managing the smart meter installations and it says that the response so far has been very positive, with less than 2% of customers opting out of participation. Some pilot options made available to consumers, such as time-of-use tariffs – where energy usage is charged at a higher rate during peak times in exchange for a lower rate at other times – proved so popular that the trial was oversubscribed.
Additional insight
Initial analysis of data from 5,500 smart meters in the trial has provided some interesting findings, such as that residential energy use on Mondays and Fridays is different from other weekdays. This analysis would not have been possible with the quarterly readings that energy suppliers previously relied on.
This added level of insight has benefits for both consumers and suppliers. Consumers participating in the trial are now using data from their meters to take advantage of previously unused features, such as dishwasher timers that can be programmed to run the appliance only during off-peak times. Suppliers can, for the first time, link energy consumption habits to customer demographics, allowing them to observe differences in energy use between, for instance, a family and a retired couple. This could lead to more tailored energy tariffs.
Other customer flexibility options being explored include demand side response (DSR), which enables the supplier to communicate directly with customers and request, for instance, that they do not use an appliance at a specific time owing to demands on the network.
Allan Row, CLNR project manager at British Gas, explains: “It’s not about controlling the appliance. We send a message to the customer and they have discretion whether or not to adhere to it. We don’t want to interrupt customer comfort levels. It’s about gauging customers’ flexibility around those load and generation profiles.”
Indeed, Row claims, when the correct financial incentives are in place via time-of-use tariffs, customers are more than happy to transfer discretionary energy usage to off-peak times.
Northern Powergrid (NPG), meanwhile, is leading on the network flexibility side and has had some success with DSR trials for industrial and commercial customers. NPG is offering financial incentives to customers who are able to provide additional generation or load-reduction capacity during times of peak demand.
Sites, including a web-hosting business with standby diesel generation and a mining plant with combined heat and power generation, have participated in successful trials, with smart meter data being used to verify customer response to requests from NPG.
Success factors
There are several other large-scale smart meter trials under way around the UK. Low Carbon London (LCL), a project between UK Power Networks, EDF Energy and Imperial College London, has, for example, installed 6,000 smart meters in domestic premises across the capital in a trial that will run until 2014.
Data from the meters in the trial instantly show householders the amount of electricity they are using each time they boil a kettle, turn on a microwave or use a washing machine. The meters also display historic consumption in kWh and cost.
Rich Hampshire, senior business consultant at IT firm Logica (now part of CGI), whose “instant energy” prepayment solution is being used in the LCL trial, believes that educating consumers about the potential benefits of smart meters is essential to the success of the government’s strategy.
“It’s not just about installing the smart meter, it’s about the education programme that goes with it,” he says. “It’s about consumers recognising that they have the ability, for the first time, through feedback, to take control of their energy expenditure.”
Hampshire points to the example of a project in Växjö, Sweden, which demonstrates how critical consumer engagement is to the successful deployment of smart meters and related technologies. Over the duration of the trial, some residents were given access to a web-based feedback system that offered detailed insight into their energy consumption habits and costs. The system included a competitive element, whereby householders could compare their consumption with their peers and win prizes based on reductions in their energy usage.
Among residents with access to the website, average electricity consumption decreased by 17.5% over three years. For those without access to the site, the reduction was just 1.29%. The results from residents who were actively engaged with the website outstrip the UK government’s estimates of a 2–3% energy consumption saving made possible by the installation of smart meters. While acknowledging that market conditions are different in Sweden, Hampshire thinks this trial has useful lessons for energy companies in the UK as they face the challenge of educating their customers around the benefits of smart meters.
“In Sweden, they used the stories of those higher-level savings to promote awareness, by getting those people as advocates,” he says. “It’s not just about marketing campaigns but things like taking the information into schools and using it as part of learning projects, developing online platforms and running competitions around energy saving.”
The importance of effective consumer engagement was also shown in the Netherlands. In 2009, the Dutch government had to rein back its planned compulsory smart meter installation programme after consumer groups exposed serious security flaws in the proposed technology. In response to this and related concerns, Decc has produced a data privacy framework, which sets out the conditions for supplier access to consumers’ energy consumption data and gives consumers control over how it is used.
Research into public awareness and attitudes around smart meters, published by the energy department in August 2012, reveals that the process of consumer engagement still has a long way to go before it can claim widespread support for the national rollout.
The survey showed that 49% of energy bill-payers in the UK had heard of smart meters and that 5% claimed to have had one installed. However, given that the second figure wildly overestimates the number of actual smart meter installations, it seems likely that many respondents failed to understand what a smart meter is.
Again, while 32% of respondents supported the idea of a national smart meter rollout, 20% were opposed and 48% were undecided. Decc acknowledges that concerted education efforts from both the government and energy suppliers will be essential if smart meters are to be embraced by the public.
Complex market
In addition to the consumer engagement challenges, some metering experts believe there are also technical issues that could seriously hamper the industry’s ability to meet Decc’s target of a full rollout by the end of 2019.
One major technical challenge facing the smart meter programme is the issue of interoperability. The government is establishing a centralised data and communications company (DCC), which will manage the communication of data to and from smart meters. All meters and communications hubs installed by the UK’s energy companies need to be able work with each other and with the DCC to ensure that consumers can seamlessly switch supplier when they choose. The complexity of the UK’s deregulated energy market makes this a big challenge.
To address this issue, the government has developed smart metering equipment technical specifications, the second version of which (SMETS 2) has been sent to the European Commission for ratification. The energy department claims that SMETS 2 includes the necessary specifications for fully interoperable smart metering equipment, allowing manufacturers to begin production and suppliers to start procurement, confident that any equipment produced under SMETS 2 will be suitable for the national rollout.
Others, including Mark England, chief executive of smart grid and metering technology provider Sentec, are not so confident. England believes there are unresolved technical issues in SMETS 2, in particular the lack of final specifications for the home area network – the system that allows smart meters and domestic appliances to communicate with each other. According to England, ambiguity on such matters will prevent energy companies from fully engaging with the smart meter rollout.
“I know for certain that some of the energy suppliers are sitting on their hands and refusing to take part in any trials because they say the specifications are not fit for purpose,” he says. While England believes suppliers can still learn valuable lessons from trials conducted with currently available smart meter technology, he maintains that manufacturers will refrain from producing SMETS-compliant products in numbers sufficient to support the national rollout until they know exactly what the final specifications will be. This puts the government’s 2019 target in jeopardy.
“I can’t see anyone committing to large volumes of products in the next two years because it’s far too risky, it doesn’t make sense,” he comments.
The government’s own figures give some sense of how far away the rollout of compliant meters is. According to the first annual progress report of the smart metering implementation programme, published in December 2012, of a total of 622,900 smart-type meters installed in domestic properties by September 2012, only 300 were compliant with SMETS 1.
England is also concerned that the government has not yet awarded contracts for the communications and data services with which all smart meter manufacturers and energy suppliers will have to work. The UK has been split into three regions for the award of these contracts which could, England explains, result in three different providers using three different communications protocols: GPRS, long-range radio and ZigBee (the specification for a suite of communications protocols) being the three front-runners.
In that situation, meter vendors would need to make their products compatible with all three different types of communications hub. “This has to make it more expensive for the UK,” says England. “It would mean more testing, more inventory problems and fewer economies of scale. Until we know the communications service providers and what devices need to be integrated, no one can start to design products. It’s a large risk to embark on a product development process when you don’t know what the final specifications will be.”
Infrastructure challenge
Whether or not these challenges can be overcome in time to meet the government’s deadline, it is clear that the transition to a national smart grid represents a major challenge for the UK’s infrastructure.
Dave Roberts, future networks director at EA Technology, compares the challenge to the conversion of telephone networks from 52kB dialup in the 1990s to modern-day 20MB broadband. “Much of the technology has not been used at scale or in a UK context before,” he says, “so there is always a risk that things won’t operate as intended when they are implemented on a large scale.”
That makes trials, such as the CLNR project, invaluable, he argues, since they allow energy distributors to gather data on issues, including network loading and operation within statutory voltage limits – data that can then be shared with other operators around the country. “The challenge is that much of the technology is new and it has not yet hit the volumes, on a global basis, to bring the prices down,” he adds.
The smart meter rollout also poses significant challenges for the energy suppliers themselves, in terms of how they adapt to a new market for smart energy solutions.
“They need to become smart-enabled utilities,” argues Hampshire. “How are they going to change their businesses to respond to the new challenges of more intermittent demand, more embedded generation? Smart meters will provide greater volumes of data to drive those decisions, but suppliers will need to evolve back-office systems to take account of it.”
And, adds Hampshire, as well as issues of technical interoperability, the industry needs to come to terms with commercial interoperability. “A lot comes down to clarity in the market rules and mechanisms,” he says. “If I want to use someone’s physical infrastructure to deliver my proposition, how do I pay them for it? What are their obligations to allow me to do that?” These regulatory and legislative questions need to be addressed before the smart grid can become a reality, he believes.
Ultimately, as challenging as the smart meter rollout target is, Hampshire thinks it’s just one element of a much wider issue. “Smart meters create an information and communications infrastructure that allow you to operate smart homes,” he says.
“We’re all heads down, trying to solve the acute problem of getting smart meters deployed. If we look to the longer term, this is really about solving the chronic problem around making our energy use more sustainable and keeping bills affordable.”
