Are Smart Meters Good Value?

Over time the cost of the Smart Meter roll-out have been going up, and the benefits going down.

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 (2016) £10,981M breaks down as follows:

Smart Metering Costs 2016



 
Cost Item Value%
Meters£2,809M25%
IHDs£551M5%
Installation£2,077M19%
Communication hubs£1,082M10%
DCC services£2,044M19%
Suppliers' and other participants' system costs£1,001M9%
Other costs£1,418M13%

Suppliers will recover this cost from customers over a number of years, for example the maximum annual amount added to bills will be about £11 in 2017.


The Latest View of Benefits

The latest view of benefits (2016) £16,726M breaks down as follows:

Smart Metering Benefits 2016



 
Benefit Area Value%
Energy Savings £5,302M 32%
Supplier Cost Savings £8,250M 49%
Network-related benefits £839M 5%
Peak load shifting £943M 6%
Carbon Savings and air quality benefits £1,392M 8%

What are these benefits and how will they be realised? The most relevant item to customers is the 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
Energy Savings With near real-time information on energy use and costs, customers are expected to make energy savings through enhanced energy efficiency behaviour.
Supplier Cost Savings 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-related 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.
Peak load shifting 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 Savings and air quality benefits This reduction in energy use also brings with it a reduction of carbon emissions.

Trading off the costs and benefits together there is a net benefit of £5.7bn resulting in lower energy bills for customers. Residential customers will see their average dual-fuel bill reduce by £11 (1%) in 2020 and by £47 (4%) in 2030. The average dual-fuel business customer is expected to see bill savings of £128 in 2020 and £147 in 2030 (both in 2012 prices).

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


How do I top-up my smart meter PAYG if the mobile network is down?
Normally your PAYG top-up will be sent automatically to the smart meter, however if the communications link through the mobile network is not available then this cannot happen. However you can enter the long authorisation number that you received when you paid for the credit into the meter to apply your credit.
However this is not easy to do, so if you have difficulty with the entry of this number then your supplier can provide a special keypad to allow you to enter the authorisation number more easily and, probably, in a more convenient location. These devices are known as PPMIDs (integrated in-home display (IHD) and pre-payment meter interface device).

How much will it cost me to run my In Home Display?
Your In Home Display (IHD) uses a very small amount of electricity. A typical IHD left on all year will cost less than £1 to run.

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 2020 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.

Will a smart meter save me money?
A smart meter itself won't save you money, but the extras your smart meter will come with can offer much insight into how to lower your bills. Your In Home Display lets you see how much energy you are using at different times of the day, week, month or year, which could help you cut your energy usage and your bills by highlighting ways you can be more energy efficient. Also, many hope that the technology will lead to the creation of innovative new tariffs and personalised plans individually tailored to fit your lifestyle and energy consumption.

Can I still switch energy supplier if I have a smart meter?
Yes. Ofgem has put in place regulations to ensure that smart meters do not present an obstacle to customers wanting to switch suppliers. Should a customer have a smart meter installed and wish to switch to a supplier not yet supporting the technology, the new supplier is obligated to take on the customer, and the smart meter will be operated as a traditional meter, meaning you will have to provide meter readings. The new DCC system being used from 2018 will allow customers to retain Smart functionality when switching between suppliers.

Who owns the Meter?
Traditionally the Distribution Network Operator (DNO) owned all the meters but the Supplier led rollout means that the suppliers must purchase or rent the Smart Meters. Companies called MAPs (Meter Asset Providers) will now often own the meters and charge the current supplier a rental fee.

What is the cost of the meters?
Traditional meters (sometimes called dumb or legacy) meters lasted for about 40 years and cost about £10. Electricity Smart Meters cost about £50, gas meters about £80. The life is not yet certain but expected to be from 10 to 15 years.

How often will my IHD (In Home Display) be updated with data from my meters?
Your IHD will be updated by your electricity meter about every 10 seconds and by your gas meter about every 30 minutes. The gas meter updates less often in order to preserve its battery life which in normal use is expected to be at least 10 years.

Can I have a smart meter if I'm a prepayment customer?
Yes. Smart meters work in both credit and prepayment modes. In fact, prepayment customers will have more flexible payment options available to them with smart meters, including remote top-up facilities.

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.

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 £25. 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.

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 £11 billion, however the estimated savings are expected to be £17 billion. So even after the investment of installing smart meters for everyone, there should be a national saving of £6 billion by 2030.

Who will install my smart meter?
Your energy supplier or an installer acting on their behalf will fit your Smart Meter and In Home Display. Ofgem has enacted the Smart Meter Installation Code of Practice (SMICoP), which protects customers by prohibiting sales attempts during installation (unless previous consent has been given by the household). The code also ensures companies will properly explain how the smart meters work, and outline how households can use the data available to them to improve their energy efficiency.

How much is this all costing?
The total cost is estimated to be £11 billion, however the estimated savings are expected to be £17 billion. So even after the investment of installing smart meters for everyone, there should be a national saving of £6 billion by 2030.

How much can I save on energy costs every year?
The average household can expect to make yearly savings of £11 by 2020, and with rising energy costs the saving will rise to £47 a year by 2030. The equivalent saving figures for business customers are £128 and £147 respectively.

Do smart meters work with home generated renewable energy?
Traditional meters are only capable of recording consumption and consequently don't take into account any energy generated by a household. If you have or are planning to install solar panels or any other renewable energy generating system in your home, a smart meter will enable you to measure how much energy you produce. The smart meter will also calculate whether or not there is a surplus which you could sell back to the grid.