Clean technology Smart meters

The role of Smart meters in the solution to low carbon

Much has been made of the role that so-called “smart” meters could have on increasing energy efficiency in the home and thereby helping the UK meet its climate change obligations.  The Climate Change Act has enshrined into law a 34% reduction in carbon emission compared with 1990 levels by 2020.  Management of demand has a huge part to play.

A rushed roll-out of smart meters could result in some of the technology's benefits being lost, the UK energy regulator has warned.

"Smart meters have the potential to help deliver low carbon, security of supply and business efficiency benefits but the whole range of benefits need to be born in mind," said Andrew Wright, managing director of markets at Ofgem.

"It would be a shame if, in a hurry to put in place the technology as part of the solution to our policy objectives, we locked out some of the benefits that could be gained from not doing things in too much of a hurry.

"We are not calling for a delay, but we are calling to make sure that we don't rush to simple solutions that could exclude real benefits for consumers."

Speaking to industry representatives gathered at a recent Energy Forum in London, the Ofgem managing director warned power companies against trying to exert too much influence on the technical specifications of the technology.

"The prospect of the smart metering programme being captured by large producers is not one we would welcome and is one we would resist," he said.

Better information on energy consumption from smart meters is seen as crucial to improving both the energy efficiency of consumers and the network and generation efficiency of power companies and is a major priority for both UK and EU policy makers.

Faith in the technology is firm, despite inconclusive evidence of the benefits from smart metering in the UK, where early trials have not shown a significant impact on customer behaviour.

"It is fair to say that we are still waiting to see conclusive evidence that smart meters will lead to big changes in consumer behaviour", said Wright, arguing that early trials still had a long way to go.

"We cannot wait for that firm evidence before moving on with the specifications for designing the smart meter project."

Ian Plunkett, Energy partner at BDO commented:

"Whilst Ofgem are right to point to the lack of evidence, they do not deny the part that smart metering and grid technology have to play.  The fears of Big Six monopoly of the technology are well meant, but markets can remain competitive for smaller supply players provided the information captured by the new meters is made available to all licensed operators.  It is also true that consumer behaviour will not change radically until energy costs reflect the true costs of carbon.

We shouldn’t confuse smart meters from smart grids though.  Meters just provide information on usage.  It is smart grids, which enable management of demand by energy suppliers, say turning appliances on and off in the home to take advantage of the best tariffs and manage peak demand.  Real two way interaction between consumer and supplier could have massive benefits once the technology is developed and deployed.

Standardisation of technologies is crucial if the electricity grid is to develop so it can handle micro-generation (producing energy at home, say from solar panels on the roof and selling this back into the grid) and the signals from analysis of consumption patterns can drive decisions on when and how much generation capacity is needed.

Its estimated that better management of peak demand could be the equivalent of several large coal/gas fired power stations and could make a considerable contribution to meeting emissions targets.

Imagine a world where the difference between a dishwasher cycle in the early evening compared with the early hours was £1, £5, £10 per minute.  Pricing carbon into energy is coming as are variable tariffs which truly reflect the marginal cost of generation. Once this happens, smart grids will become as accepted into everyday domestic usage as the internet."

BDO provide audit, tax and advisory services to cleantech businesses and understand the business opportunities and challenges created by the Government’s response to climate change.

For more information please contact Ian Plunkett, Energy Partner at BDO.