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:

Smart Metering Costs 2019

Cost Item Value %
Meters & IHDs £2,201M 16%
Installation £3,208M 24%
Communication hubs £1,420M 11%
Operation of Meters £666M 5%
DCC Related Costs £2,900M 22%
Suppliers' and other participants' system costs £1,001M 9%
Other costs £1,170M 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:

Smart Metering Benefits 2019

Benefit Area Value %
Customer Benefits £7,623M 39%
Supplier Benefits £8,071M 41%
Demand Shifting Benefits £1,363M 7%
Network Benefits £374M 2%
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:

Benefit Explanation
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 :
  • They remove the need for site visits to collect meter readings and are expected to reduce suppliers’ call centre traffic, with fewer queries about estimated bills.
  • Smart meters are expected to make the customer switching process cheaper and simpler, thanks to accurate billing and more streamlined interaction between involved parties through on demand meter readings at the point of switching.
  • Suppliers should see improved theft detection and debt management.
  • Customers will also be able to avoid proactively the accumulation of debt, through access to and consideration of accurate, near real-time energy information.
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.
(Page updated: 2020-10-21)

Questions & Answers

Can my supplier charge me for a Traditional Meter?
Although you can simply refuse a Smart Meter when offered, you cannot refuse one if your existing meter is faulty or has reached the end of its certified life. In these circumstances some suppliers may have some stocks of traditional meters left which they could offer you if they wish. However, they have the right to charge you for the installation of a traditional meter as it increases their operational costs and does not help them meet their obligation to install Smart Meters.
In June 2020 BEIS stated that they considered such a charge can be reasonable, for example, if a non-standard metering service is requested by the consumer where a smart meter could be deployed. (Updated: 2021-05-07)

My supplier is charging more at peak times. Is this right?
Yes, that makes sense as it reflects the wholesale price that the supplier has to pay.
A single rate tariff will average the costs across the whole day, but a multi-rate tariff will have a lower base rate and a higher peak rate. This allows customers to save money by shifting their load from the peak times to the base times.
If you take no action the overall cost should work out about the same as a single rate tariff. (Updated: 2022-01-12)

Who pays for the meter electricity?
The customer does not pay for the electricity used to power the meter directly as the meter takes its own power from a point before measurement takes place. The power used by the meter will fall into distribution losses which also includes the energy lost through the distribution cables as well. This was also the case with traditional meters.
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)

How much will it cost me to run my In Home Display?
Your In Home Display (IHD) uses a very small amount of electricity, typically less than 0.6 W. So if we assume the worst case of 0.6 W and that it is on all the time over a year this will consume 5.256 kWh. If we assume 15p/kWh this add up to an annual running cost of 79p. (Updated: 2020-11-09)

Why are smart meters controversial?
Whilst earlier conversations about smart meters focused on safety (which you can read more about in Campaigns Against), more recent criticisms have sprung from how the government and suppliers are handling the roll-out. From cost to customer communication, the plan to get a smart meter into every home by 2024 has been a bumpy ride so far. In early 2014, EDF Energy, ScottishPower and npower called for a review of the roll-out, stating the cost to customers would be £1.8 billion. This, they said, was due to the "ambitious" deadline of every household in four years and the cost of the In Home Displays. The cost is ultimately paid by customers through measures on their energy bills. Instead, suppliers proposed, customers could link up their smart meter to their smartphone or tablet to save cost. In 2013, independent research commissioned by uSwitch found that 55% of us were "in the dark" about smart meters. That meant households did not understand what smart meters did and how they could benefit them. However, later studies of those with actual smart meters in their homes enjoyed more accurate billing and were more satisfied with their providers. (Updated: 2019-12-22)

Will a smart meter save me money?
A smart meter itself won't save you money, but the In Home Display (IHD) your smart meter comes with can offer much insight into how to lower your bills. Your IHD lets you see how much energy you are using at different times of the day, week, month or year, which should help you cut your energy usage and your bills by highlighting ways you can be more energy efficient.
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)

Why are there different WAN communication protocols North and South?
DCC went out to tender to find CSPs (Communication Service Providers) to provide the WAN (Wide Area Network) for three regions: North, Central and South. The winners of this commercial process offered different technologies reflecting the different population density and terrain in the regions :
Arqiva Limited for CSP North region with a 15-year contract worth £625M using Long-Range Radio communications.
Telefónica (O2) 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: 2021-11-15)

What is the cost of the meters?
Traditional meters (sometimes called dumb or legacy) meters lasted for about 40 years and cost about £7 for an electricity meter and £17 for a gas meter. Prepayment meters were more expensive for both electricity and gas, costing £43 and £95 respectively.
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)

What are the benefits of having a smart meter?
There are a number of benefits if you have smart meters:
  • 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.
(Updated: 2018-07-01)

What is the cost of the In Home Display (previously known as an SMD or HEM)?
In Home Displays (previously known as Smart Meter Displays or Home Energy Monitors) are provided free to customers and cost suppliers about £15. Some suppliers are expected to offer enhanced Displays at a cost to the customer.
Suppliers have an obligation to replace a broken IHD in the first year after installation. (Updated: 2019-12-22)

How much will a smart meter cost me?
Your supplier will install your smart meter for free under the national upgrade programme that begun in 2015. All households currently pay for the cost of their meters and required maintenance as part of their energy bills, this will be the same with smart meters. The overall cost is estimated to be £13 billion, however, the estimated savings are expected to be £19 billion. So even after the investment of installing smart meters for everyone, there should be a national saving of £6 billion by 2034. (Updated: 2019-12-22)

How much is this all costing?
The total cost is estimated to be £13 billion, however, the estimated savings are expected to be £19 billion. So even after the investment of installing smart meters for everyone, there should be a national saving of £6 billion by 2034. See this government document for more details Smart Meter Rollout Cost-Benefit Analysis. (Updated: 2019-12-22)

How much can I save on energy costs every year?
The average household can expect to see savings improve from an additional cost of £11 in 2018 to annual savings of £36 by 2034. (Updated: 2019-12-22)

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