Utility Week Live, 22nd - 23rd May 2018

UTW

Smart Meters: Consumer Experience

How transformative will the technology behind smart meters really be?

Author: Heidi Vella

infographicThe smart meter rollout could lay the formulations for some much-needed change in the energy retail sector, winning back disillusioned customers and repairing relationships broken after years of poor service, inaccurate bills and ever increasing prices.

It could also enable the acceleration of smart grid operation in the UK, giving networks unprecedented visibility of demand patterns and network reliability.

The government claims the nationwide roll out of 53 million smart meters into homes by 2020 will deliver these transformations and enthusiasts agree. Indeed, the industry itself has voted smart meters into Utility Week Live’s top ten transformative technologies. But can the technology behind the rollout deliver the disruption advocates anticipate?

The rollout and benefits case so far

To date, around five million smart meters have been installed – although these have been of the first iteration (Smets1) which have limited interoperability and functionality, rather than the second generation Smets2 meters which will offer consumers and retailers the complete smart experience.

By the current end date for the rollout, 2020, the estimated average savings for a household with both electricity and gas being monitored by smart meters is to be just £11 annually, though this rises to £47 by 2030, when total savings, after build costs, are expected to be £6 billion.

According to Smart Energy GB, the national body responsible for consumer awareness of smart meters, the main advantage for consumers is estimated billing being replaced by automatic and accurate meter readings.

This effectively ends an archaic and arduous system of meter readers pounding pavements and going door to door, and provides an obvious cost saving to energy retailers. But on the consumer side, it is hardly transformational. Most households nowadays can submit readings themselves online at no cost, or monitor their usage through the use of popular smart thermostats, like Nest and Hive which can be bought as standalone devices, or acquired via contracts with some suppliers – like Npower and British Gas.

Despite doubts over the resilience of the benefits case for smart meters, those households which have had smart meters installed have reacted positively.

A survey of over 1,000 UK consumers conducted by Utility Week and market research partner Harris Interactive showed that 64 per cent of those with meters in place are enjoying better visibility of their energy costs, 36 per cent said they had achieved savings and 76 per cent said they were impressed with the technical and service expertise of the individuals who completed the installation.

These findings echo official figures put out by Smart Energy GB. In February this year, the marketing body released results of a survey of over 10,000 adults in the UK which showed 81 per cent of those who have received smart meters from their energy suppliers would recommend them to others.

Furthermore, research carried out by YouGov shows these positive experiences are improving customer perceptions of their energy suppliers. In line with a doubling of smart meter numbers since January 2016, it found that the proportion of consumers that considered energy suppliers to be “reliable” increased from 26 to 29 per cent, and those rating them as “professional” rose from 17 to 20 per cent.

Consumer interaction with their smart meters is predominantly supported via their In Home Display or IHD.

According to Smart Energy GB nine in ten consumers with smart meters have accepted the mandatory offer on an IHD to help them make sense of their energy use. And despite considerable industry doubt over the usefulness of IHDs – Smart Energy GB says that, so far, those customers with displays show higher levels of satisfaction than those who have turned them down.

Furthermore, anecdotal evidence suggests that UK households with school-aged children show better engagement with their IHDs than those without.

Rob Smith, head of policy and public affairs at Smart Energy GB told an audience at a recent smart metering conference: “We have seen that children have a very positive impact on engagement with smart meters.” Households with children appear to reap bigger savings compared to those homes without school-aged children.

Smart Energy GB is now conducting trials with two schools in Wales to explore how this apparent link between children and enhanced smart benefits can be optimised, with the result due to be published in the summer.

Notwithstanding these positive reviews for IHDs, a small but significant number of customers have had alarming experiences with faulty IHDs. In March, SSE made national headlines after it was revealed some of its IHDs were displaying improbable energy charges on the back of a “routine” software upgrade. One customer found their IHD telling them they would be charged £30,000 for a single day’s energy use.

Real bills have not been impacted by such events, but they add to an underlying conviction at many energy suppliers – especially those who pride themselves on their forward-looking strategies – that IHDs are not an effective platform for increased engagement with domestic energy use.

Trials of apps and online alternatives to IHDs are forging ahead. Eon for example launched a smart phone app in March to give its customers an alternative way of tracking their smart meter information.

Flexible grid

Outside the UK, other national smart meter programmes have been led by energy networks. This is no whim.

Apart from the logistical efficiency of a network-led smart meter rollout, the benefits smart metering can offer to the smart grid transition are enormous. Whether the UK’s networks, who have been distanced from the nations unique supplier-led rollout approach, will be able to capitalise on this potential remains to be seen.

Much depends on their ability access smart data held in the central communications system – the DCC. A limited scope for access to smart data for networks has been agreed since the early days of the rollout, but its usefulness has remained largely untested because – as we will discuss – many of the smart meters so a deployed are not yet communicating with the DCC.

In theory however, the data will enable better management of energy supply and demand, giving networks a much more granular view of demand patterns at specific supply points. This could open the door for a dynamic local balancing market, as well as enabling smarter network investment planning.

One fundamental benefit that smart metering will offer networks is a “last gasp” and “first breath” alerts service. These signals will give networks near real time awareness of outages and restored power flows, enabling a step change in network reliability and customer satisfaction.

Northern Powergrid's head of trading and innovation Jim Cardwell, tells Utility Week that the near real time data from smart meters will enable the company to “question some assumptions” about how its network runs “that we typically have had to make for decades.”

Cardwell says that potential cost savings from the roll out have already been factored in to the company’s business plans. 

Functionality problems

It’s not just the networks that are waiting to see the true extent of the theoretical transformations smart metering will bring however.

The whole programme is considerably behind schedule and so the visibility that has so far been gained into customer experience and overall benefits provide only a glimpse of a fragment of what may yet come.

Considerable barriers stand in the way of realising a best-case scenario. Many of them linked to functionality problems.

Despite a major “go-live” event in November last year (12 months behind schedule) the central communications system for smart meters is still lacking in a number of core areas, including interoperability of first-generation or Smets1 meters and communications with prepay meters and meters in multiple occupancy dwellings.

There are around 330,000 smart meters installed which are not operating in ‘smart mode’ so far, according to the government.

However, industry estimates of the true impact of limited Smets1 functionality range considerably higher. Reports in the national press suggest that millions of Smets1 meters will need to be replaced outright because they will not be able to be adopted into the DCC.

These concerns are casting a shadow over the transformative potential of smart metering in the UK, and they will continue to grow until final testing for Smets2 functionality is fully complete and these more advanced meters can be deployed into homes.

It’s unclear at the moment when this will happen. A spokesperson for the DCC, told Utility Week: “The DCC went live in November 2016 and is ready to support energy suppliers to install and operate the next generation Smets2 smart meters on the national network.”

They added: “It is a matter for individual suppliers to determine their meter roll-out plans.”

It’s a message which conflicts directly with the experience that suppliers have privately shared. Sources are unwilling to be named for fear of damaging their working relationship with the DCC, which is critical to progress – though Eon UK’s outgoing chief executive Tony Cocker did admit in the recent interview with Utility Week that hold-ups to the release of key DCC functionality are “disappointing”.

Elsewhere, suppliers have said that testing for Smets2 meter communications with the DCC, using real meters rather than “emulators” is still ongoing. None are willing to deploy and commission Smets2 meters until this testing is fully complete and any issues resolved.

A distraction from true transformation?

While suppliers and the DCC attempt to iron out functionality issues, the cost burden of the smart meter rollout continues to mount.

Suppliers have already invested billions in IT systems, code compliance and installation operations, and some say this spend is eating up resource for investment in areas which could offer bigger transformative results for consumers.

In February, EY partner Rob Doepel told Utility Week that while suppliers are committed to make “a massive investment in an incredibly complex programme that no other country in the world has chosen to do in the way that we have chosen – a way which is inherently expensive”.

He suggested that this is reducing time and resource for innovation in new business models and non-smart meter related connected home services.

As the year has worn on Doepel says the squeeze on suppliers’ costs, and the room for innovation, has worsened. Following the Conservative manifesto pledge to introduce a retail price cap, which “has hit everyone’s P&L hard”, Doepel believes firms with “diminished scope for revenues and looking to shore up their balance sheets” are increasingly concerned about the cost of smart.

That said, Doepel, like many in the industry, acknowledges that smart meters can be an enabler for exactly these kinds of more innovative and disruptive products and services.

“The install is an enabler,” he says. “Differentiation comes post-installation, with new products, tariffs, time of use and so on.”

Transformational or redundant?

So, are the challenges being faced by smart meters just teething problems, or are they symptomatic of more fundamental flaws in the specified technology?

The truth is a bit of both.

Technology moves so fast it would be impossible to deploy the very latest on a national scale – not least because a best fit and up to date technology would look different for many different consumer profiles.

If we accept this, then we can ask, how ‘smart’ do smart meters need to be in order to deliver value and a platform for later transformation?

“If a smart meter is a device that is connected to the internet to report meter readings it doesn’t need to be that sophisticated therefore it is not too important if it goes out of date,” Professor Kenneth Grattan from the Royal Academy of Engineering at City University of London tells Utility Week.

Basic functionality, even if not connected to the DCC, should still allow for the delivery of touted consumer benefits like increased visibility of energy use, energy efficiency and savings on bills.

What won’t be delivered, if Smets1 meters – which are clearly already beyond their use by date – continue to be deployed, are radical alterations to energy retail models or smart grid operations.

These transformations rely on smarter smart meters and there is little visibility of when delays to their arrival will end.

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The best industry exhibition I have ever been to. Thought provoking, interesting, good networking, with a positive feel to the whole event… it was excellent!

Jacob Tompkins OBE, Managing Director, Waterwise