By Engage Consulting Smart Metering Practice

This briefing note summarizes the content from the Department of Energy and Climate Change’s (DECC) consultation conclusion document titled “Towards a smarter future: Government Response to the Consultation on Electricity and Gas Smart Metering” as published on 2nd December 2009.

It is intended to be used to inform interested stakeholders and to summarize proposed government policy in a short, consolidated document.

Key messages

There are a number of key messages (domestic metering unless otherwise specified) contained within the document and these are summarized below:

  • The central communications model with metering services remaining the responsibility of suppliers is the chosen market model for smart metering in Great Britain.
  • The net benefit in the impact assessment for this central communications model is £5.98 billion, up from the £3.59 billion figure in the consultation.
  • Functionality requirements remain as preferred in the consultation paper, although the inclusion of a valve in gas smart meters will be subject to further expert analysis.
  • Government policy remains that a display should be provided with smart meters.
  • Government confirms that smart meters should be rolled out to non-domestic customers in the same timescales as domestic, with however key exceptions so it is not universal and with no gas valve or in home display mandated.
  • The DECC/Ofgem will start a Smart Metering Implementation Program now to design and implement new cross-industry arrangements.
  • Government has identified network requirements as a key area that requires more work, although progress has been made.
  • Government has confirmed they don’t believe there is a case for establishing a scheme to compensate for stranding costs, but the National Measurement Office (NMO) will investigate the in-service testing arrangements for recertification of pre-MID (Measuring Instruments Directive) legacy meters.

Domestic sector – the delivery model

Moving forward with the central communications market model
The government has confirmed its preferences from the consultation paper and concluded that the central communications model will be delivered into Great Britain for smart metering. They have added further clarity to this model by also confirming that metering services will continue to be delivered as a responsibility of the supplier in competitive arrangements. They have concluded that the central communications model combines strong incentives for energy suppliers to deliver a high quality service to their customers, with wide scope to simplify and improve industry processes, making it easier to switch between suppliers.

There is still no definition of the scope of the central services and how much data management will be defined centrally to give the opportunity for further industry simplification and is likely to be the key area of debate in the first phase of the program.

The government notes the Energy Network Association’s progress on developing requirements for networks businesses, and states that more work is required as part of the implementation program. Government states that formal requirements need to be agreed alongside incremental cost benefit before they can be considered against the base case for smart metering. The government was clear in specifying that network businesses requirements need to be reflected in the minimum meter specification and communication solution – it believes smart grid development can be fostered effectively under this approach.

Interoperability is an inherent assumption in all of this and there is a lot of work to be done to ensure that any central arrangements are interoperable. Interfaces will need to be defined for data exchange and protocols and service levels for presentation of data.

Local coordination of rollout
Government believes that strong positive engagement with local communities will be particularly powerful in generating the necessary awareness, enthusiasm and take up.
Government has noted its intention to develop measures to promote coordination of deployment at local level and manage the rollout to ensure that as many customers as possible within local communities have their smart meters fitted at the same time. The practicality of combining this with a supplier led rollout will have to be discussed within the smart metering implementation program.

Priorities for early rollout
The government has acknowledged that as part of the Implementation Program the optimal approach to smart metering deployment needs further consideration and measures to tackle fuel poverty should also be an integral part of the program. This program will also need to consider the alignment with government strategies and policies along with full engagement with the full range of stakeholders.

Distribution network models
A further review of the impact assessment identified three further alternative models based on more active roles for distribution network operators. An evaluation exercise was carried out on these models. However, government has concluded that the central communications model still offers the best model for Britain’s smart meter rollout.

Stranded assets
The government have confirmed that their position on stranded assets remains the same and do not believe there is a case for establishing a scheme to compensate for stranding costs rather than allowing them to lie where they fall. Government acknowledges that where a network company has provided the meter under regulated price control as part of their license obligations and an adjustment of the price control is needed due to the premature replacement meters, the network company will need to discuss this with Ofgem.

Consideration will be given within Phase 1 of the Implementation Program as to whether any arrangements need to made for smart meters installed early (e.g. early movers or trials).

Proposals for the domestic sector: Functionality

Discussion of proposals – electricity and gas
The government has confirmed its functionality requirement proposals as set out in the consultation document; this is with the exception of the functionality to remotely connect/reconnect gas meters. They conclude that further work is required to assess some of the issues raised before a final decision is taken and will be commissioning expert analysis to determine the options and the implications.

In addition to the need to consider network requirements highlighted above, the government acknowledges that the security and safety of the smart metering system and the protection of customers is fundamental in the functionality design process and will ensure that this is at the heart of the Implementation Program.

The Smart Metering Implementation Program will develop the agreed list of high level requirements into more detailed functional requirements following the detailed nature of these issues raised in Consultation Responses. It will also take into account the independent analysis on the gas valve issue which is still being completed.

Displays and provision of information
The government’s position remains unchanged and a standalone display should be provided for domestic customers. They believe further work is required as part of the implementation program to consider the specific requirements that should apply in cases where it is clear that the individual consumer does not wish to have a free-standing display, along with the minimum common information to be provided to all customers.

Proposals for the domestic sector: Impact assessment

Government concluded that on the basis of the responses they received and further analysis that has been undertaken there has been a significant change in the net benefit from £3.59 billion to £5.98 billion for the central communications model. These changes are the result of: the reduction in the assumed average volume of gas used by sites; lowering of the costs of advanced electricity meters; including the BAU costs of the provision of basic meters; and revising the assessment of the predicted levels of future energy and carbon prices.

Proposals for the non-domestic sector

Discussion of the government’s proposals
Following the consultation, government is adjusting its proposals in this area. They have confirmed their intention to mandate the installation of meters with smart functionality at non-domestic sites on the same timescale as for domestic sites, but with three key exceptions, where:

  • Advanced meters have been installed:
    • before April 2014 and the customer wishes to retain those meters; or
    • after 2014 under pre-existing contractual arrangements; or
  • There are technical constraints on the achievement of smart functionality.

Government believes this new approach will best balance the need to support future smart grids by maximizing installation of smart functionality with the desirability of allowing energy and carbon savings from advanced installations to continue.

The new proposals will be discussed with the key stakeholders to refine the details before consulting on more detailed proposals in the near future.

It was also concluded that unlike the domestic sector, non-domestic metering we will not be required to include functionality to support remote enabling and disabling of gas supply and there is also no requirement to provide real-time display devices to both gas and electricity customers. However the level of data being provided to customers does require further work and this needs further consideration.

SME delivery model
Government has concluded that the Implementation Program will have to undertake further work on a variety of issues relating to the establishment of the central communications model and this will encompass the arguments for and against use of central communications to support meters in the non-domestic sector, along with how market arrangements and rules should be developed to support the development of smart grids.

Other issues and next steps

The decisions by the government within their response document will provide the basis to initiate the program of work that is needed for the full rollout of smart meters.

The first phase of the Smart Metering Program will be a joint DECC/Ofgem initiative. DECC will chair an over-arching DECC/Ofgem Strategic Program Board and intend to revisit the costs and benefits for smart metering at each phase of the program.

Government also recognizes that whilst smart metering will improve the efficiency of the change of supplier process there are a number of difficulties within the market that would prevent this from being totally seamless. They suggest the settlements process along with
renewables and distributed generation will need to be reviewed with future plans.

For further enquiries, please feel free to contact Mary Norris (mary.norris@engage-consulting.co.uk) or Peter Goodwin (peter.goodwin@engage-consulting.co.uk) at Engage Consulting.

For the response document “Towards a Smarter Future: Government Response to the Consultation on Electricity and Gas Smart Metering” Click here.