Are Smart Meters Good Value?
Over time the cost of the Smart Meter roll-out have been going up, and the benefits have varied.
In September 2019 the Department for Business, Energy & Industrial Strategy (BEIS) said that the latest costs were £13.480bn, with benefits of £19.457bn, giving a net benefit of £5.977bn.
In 2016 the Department for Business, Energy & Industrial Strategy (BEIS) said that the latest costs were £11.0bn, with benefits of £16.7bn, giving a net benefit of £5.7bn.
In 2014 the UK Public Accounts Committee (PAC) said that the costs were £10.9bn, with benefits of £17.1bn, giving a net benefit of £6.2bn.
In 2011 the National Audit Office (NAO) said that the costs were £11.3bn, with benefits of £18.6bn, giving a net benefit of £7.3bn.
The Latest View of Costs
The latest view of costs (September 2019) £13,480M breaks down as follows:
|Meters & IHDs||£2,201M||16%|
|Operation of Meters||£666M||5%|
|DCC Related Costs||£2,900M||22%|
|Suppliers' and other participants' system costs||£1,001M||9%|
|Projected Future Costs||£192M||1%|
Suppliers will recover this cost from customers over a number of years. The maximum added to bills was £11 in 2018. After that year the benefits gradually increase and by 2034 the average bill is reduced by £36.
The Latest View of Benefits
The latest view of benefits (September 2019) £19,457M breaks down as follows:
|Demand Shifting Benefits||£1,363M||7%|
|Carbon and Air Quality Benefits||£2,026M||10%|
What are these benefits and how will they be realised?
The most relevant item to customers is the Customer Benefits through energy savings. These savings come from customers reducing their demand because they can see on their IHD the amount of energy that they and their appliances use.
Here is an explanation for each benefit figure:
|Customer Benefits||With near real-time information on energy use and costs, customers are expected to make energy savings through enhanced energy efficiency behaviour.
To put it another way, as customers see and understand the cost of running different appliances they will seek ways to reduce those costs through either reducing the time something is used, taking up time of use tariffs or using more energy efficient appliances.
|Supplier Benefits|| Suppliers can make a range of operational cost savings :
|Network Benefits||Network operators will be able to improve electricity outage management and resolve any network failures more efficiently once a critical mass of smart meters has been rolled out; and they will be able to realise further savings from more targeted and informed investment decisions.|
|Demand Shifting Benefits||By enabling time of use (TOU) tariffs which tend to shift a proportion of electricity generation to cheaper off-peak times, smart meters are also expected to generate savings both in terms of distribution as well as generation capacity investment.|
|Carbon and Air Quality benefits||This reduction in energy use also brings with it a reduction of carbon emissions and an improved air quality.|
Trading off the costs and benefits together there is a net benefit of £6bn resulting in lower energy bills for customers. Residential customers should have seen their average dual-fuel bill reduce by £36 in 2034.
Predicted Customer Benefits
The 2019 Benefits Case for domestic customers assumed all customers would achieve some reduction in energy use, split as follows:
- 33% of customers - Achieve a higher level of energy reduction:
- 3.0% for electricity (credit and prepayment)
- 2.2% for gas credit and 0.5% for gas prepayment.
- 66% of customers - Achieve a lower level of energy reduction:
- 2.8% for electricity
- 2.0% for gas for credit customers.
Customer Benefits from Surveys
Unfortunately the surveys we have found can't be compared directly to the domestic customer benefits above as they do not measure energy reduction. However they suggest the percentage achieving any reduction is much lower than expected and is decreasing as the wider, and perhaps less engaged, public are included.
Summer 2020 - 23% use less - A report from digital product agency Somo ("The Evolution Of Energy Companies: Satisfying Customers And Society") published in Summer 2020 found that only 23% of respondents with a smart meter say it has helped them to better monitor and understand their energy usage.
December 2019 - 31% use less - In December 2019 a survey of 1,000 households by researchers Consumer Intelligence for the Daily Mail found that only 31% said they were using less power after having a Smart Meter installed, including just 3% who said they were using considerably less. Other findings were that 53% of smart meter owners had not changed their energy usage after having one installed and 16% said they were using more energy!
November 2016 - 44% use less - A survey published in November 2016 by ECTA Training found that 44% of customers say that their energy bills have reduced after having a smart meter installed.
Questions & Answers
Ultimately all customers pay for this as a percentage increase which is applied by area. For a technical explanation see Electricity Distribution System Losses. (Updated: 2020-08-19)
The Centre for Sustainable Energy has advice on Smart Meters and other ways to save money on energy.
Also over time the technology will lead to the creation of innovative new tariffs and personalised plans individually tailored to fit your lifestyle and energy consumption. (Updated: 2019-10-21)
Arqiva Limited for CSP North region with a 15-year contract worth £625M using Long-Range Radio communications.
Telefónica for the CSP Centre (Midlands, East Anglia and Wales) and South (south of England) regions using the 2G/3G cellular radio communications network. The two Telefonica contracts over 15 years are worth £1500M.
The contracts were awarded in 2013. (Updated: 2020-11-15)
Electricity Smart Meters cost about £36 and gas meters about £53. The life is not yet certain but expected to be from 10 to 15 years. (Updated: 2019-12-22)
- More accurate bills
- Smart meters mean the end of estimated bills, and the end of overpaying (or underpaying) for your energy
- No one has to come to your home to read your meter; you do not have to submit meter readings yourself
- Better oversight and management of your energy use with a real-time data display in your home potentially saving you money.
Suppliers have an obligation to replace a broken IHD in the first year after installation. (Updated: 2019-12-22)