Who Benefits From Smart Meters?

Posted on 13. May, 2009 by Ross in Energy Prices, Government Policy

The UK Government, like many others around the world, is steam-rollering towards the widespread installation of smart meters for utilities into 26 million homes, but who benefits more: the energy consumer or the energy supplier?

Consumers - Will Smart Meters Make A Difference?

The basic premise behind the drive for the installation of smart meters in homes and businesses is that they make it easier for consumers to monitor their energy consumption, thereby making it easier for them to save energy, carbon emissions and money. This of course relies on consumers choosing to save energy, rather than saving on some appliances so they can use more elsewhere e.g. larger TV, better computer, etc. Those that truly intend to cut back on energy use do so anyway by switching off unused electrical appliances and investing in energy efficiency, incentivised by expensive energy bills.

Smart meters have the potential to interact with appliances too: they could broadcast the current price for electricity (based on current network levels of demand) to various appliances such as dishwashers, washing machines and so on, which could be set so that they only work if the price is below a cutoff figure specified by the consumer.

This would certainly save households money, as well as massive amounts of carbon dioxide from the national emissions, but such potential may well not be realised: the specifications for smart meters are yet to be decided upon by the Government. It has already been accused of underestimating the true cost of installing the meters (£7 billion), and cost pressures are likely to force cutbacks in order to roll the scheme out. Functionality would likely be one of the obvious things to be sacrificed.

Dangerous Data

There are privacy and security issues at stake with smart meters too. The purpose of the smart meter is to send continual information about your energy usage to the power companies who can then bill you accordingly. Intercepted data could easily be used to spot if a property is occupied or if it is habitually empty - a treasure-trove of information for innovative burglars. This concern recently scuppered attempts by the Dutch government to make smart meters mandatory, and how the data is protected will be vital at overcoming the concerns of civil liberties and privacy groups.

The costs would also end up being met by the consumer, with additional charges on utility bills likely to be the principal mechanism for energy companies to recoup their costs. So with so little overall incentive for consumers (the Government is only targeting a 2% drop in the average energy bill from this scheme) who really stands to profit?

Energy Companies - Protecting Their Profits

There is no doubt that the energy companies stand to benefit most from the widespread installation of smart meters. They instantly make the necessity of meter readings redundant - along with all those who are employed to carry out the outdated service. Such staff cuts would save the energy companies millions of pounds annually: the Government hope to see these savings passed on to consumers but energy companies have a rather poor record in this department.

The ability to charge dynamically using a demand-based real-time pricing system has the potential to save consumers some money if smart meters can control appliance use, but the resulting bills will be far more complex than at present. The current scenario is simple: read the meter, work out the difference from the previous reading, multiply by the energy cost and voila! - there’s your bill. Dynamic pricing will mean extremely complex bills which the consumer will be unable to challenge. Whatever the utility company says is owed will be comparatively final, with most consumers too bewildered by the generated data to feel able to say otherwise, which in turn is likely to cause distrust and resentment in the smart meters.

Energy companies are understandably profit-based. If too many consumers are saving too much money on their household bills, the tariffs are likely to rise in order to protect the companies’ profits. Competition in the energy market has largely failed to result in consistently lower bills and would be likely to fail to protect consumers from price hikes in response to falling demand and a shrinking marketplace.

The Government hopes that smart meters will reduce demand for energy, enabling the country to generate less electricity and therefore have to build less power stations in the future, reducing the UK’s carbon footprint. The energy companies hope to have more accurate and timely billing with reduced costs. Both these groups are likely to get what they want. The third group - consumers - so far has demanded nothing from the smart meter roll-out scheme so far. How much they may benefit in the future will depend on the system put in place and the desire of households to use the smart meters effectively. The incentives in a recession are clear (saving money), but what will happen when the economic gloom lifts and the purse strings loosen once more?

Image by cote at Flickr

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Tags: government, smart meter, uk

2 Comments

Angela Flynn

25. May, 2009

Good points on the issue. I have been looking into smart meters wondering if they will save energy. I don’t see how they will. For most people energy use is a cost factor. For people who are energy conscious they do not need a smart meter to tell them to use less energy. Another issue I wonder about is the energy use for the meters and their cost. Most systems are proposing wireless meters. This will add to infrastructure and energy costs. Then the meters themselves are fairly expensive and it is not clear how long they will last. Current meters last about fifty years.

Steve Davies

04. Jan, 2010

I have been looking at the possibility of getting a smart electric meter,

I trained as an electronics tech in the seventies and always remember that the household meters read resistive power, ie they do not take into account the type of load on a circuit. if it is inductive or capacitive, this is the basis of power factor correction.
my point is that although these meters may be more accurate it may not be in the consumers interest, they may have been getting low readings for years and suddenly their consumption is measured accurately.

a good way of demonstating this is to get a 10 quid power monitor from Maplin and plug in a small heater, say it consumes 1 kW then also connect a desk fan, the power consumption goes up, but if you reduce the speed of the fan for a moment it will read zero.

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