Smart metering has been portrayed in some circles as the answer to all the issues impacting the energy industry. From encouraging less wasteful consumption to banishing estimated bills, from providing each customer with a personal tariff adapted to their behaviour, and to ending the need for prepayment meter charge cards, a host of ever more creative applications are regularly mooted.
But how many of these possibilities are likely to come to fruition? Smart metering is now firmly on the agenda but there are different views about how the technology will take hold. British Gas, the country’s largest domestic energy supplier, is a keen supporter of innovation and regards the opportunities that smart metering could present and the benefits it could deliver, for customers and suppliers alike, as very exciting.
However there is a need to ensure that the technology not only provides customers with the information they will value but also is commercially viable. It is also important to take care in the selection of the technology and the approach to deploying the new meters. For example recent reports in the British media would have one believe that smart metering is set to take the country’s homes by storm, bringing with it substantial reductions in household energy bills.
Headlines like ‘Smart meters to cut power bills’ (BBC News, Jun 2005) have generated understandable interest among householders who have seen a sharp increase in their energy bills over the last few years. High wholesale energy prices in the UK have led to price jumps and while everyone, suppliers included, would like to see bills come down again, portraying smart metering as the panacea is a little premature.
Ofgem, the UK energy regulator, is soon to launch a series of industry trials that will assess the value of smart metering and other devices and approaches, in delivering energy saving. British Gas has applied to participate in these trials by testing a range of consumption monitors that will make the invisible visible.
These smart wireless devices provide a real-time display of exactly how much electricity is being used throughout the property and should help to make householders think twice about leaving the television on stand-by or over-filling the kettle. The results of the trials will assist in ascertaining whether smart metering can help change customer behaviour around wasting energy, or whether it would be better to invest in more simple consumption monitors that make daily usage more visible – or indeed whether a combination of both is required.
UK energy market
In the UK the majority of energy meters, whether they are measuring gas or electricity consumption, are hidden away in the least accessible of locations - in a cupboard under the stairs, behind a panel in a kitchen cabinet, or even on a wall outside the property. Thus arguing that smart meters alone will immediately deliver bill savings as they will encourage people to use less energy is debatable, when most householders will not see the increased array of information they can display. In terms of changes to consumption patterns, there is no doubt that two elements need to be considered:
- The ability to measure consumption across different time periods in the day, which smart meters can provide, and
- The ability to show this information to customers in an immediate, relevant way, where the smart consumption monitors are obviously key.
However, the UK is unlike other countries where peak electricity loads cause a problem. Thanks to the climate, there is not a great dependency on air conditioning and home heating systems are, in the majority, fuelled by gas. So the benefits assessed elsewhere for electricity peak load shifting are probably less applicable. Energy saving results aside, British Gas believes that smart metering provides real benefits for many types of customers and hence why a segmented approach to roll-out is supported.
Prepayment customers who are supplied with energy through meters that need to be regularly re-charged with credit are a prime example.
A smart meter that can be re-charged remotely by mobile phone or online at any time of day or night means the customer no longer has to go out to his or her local shop when the meter runs out of credit. Installing a smart meter in a property that is typically hard to gain access to would allow the provision of more accurate bills to these customers without having to get a meter reader inside the property. If microgeneration takes off as expected, customers and suppliers alike will require meters that allow import and export of supply – yet another possible smart metering application.
British Gas believes that a supplier-led, segmented approach to deployment is preferable to a ‘blanket’ solution. It allows for continued innovation, which in turn will stimulate competition and help drive down costs. And from a business point of view it allows the supplier to target the highest value applications by first tackling those areas that deliver maximum impact. The UK energy market enjoys some unique features that sets it apart from many of its peers and makes a differentiated approach to metering a realistic proposition.
Metering competition came into force several years ago and has delivered considerable benefits in reducing the costs of metering services and driving improvements in the service that customers receive. Whichever approach is adopted, it is clearly very important that meters, once installed, do not need to be removed if the energy supplier changes and that, in the competitive retail market, all suppliers can make use of the smart meter functionality. British Gas supports the work that is being done by the regulator to help agree ‘interoperability’ and is eager to see all suppliers adopt industry-wide policy that minimises the risk of meters being removed and results in the adoption of interoperable systems and processes. Achieving agreement on this area is a key to the success of smart metering in the UK’s unique competitive metering environment.
Gas smart meter trials
British Gas has been a pioneer in innovative smart metering, beginning in 2002 with an 18-month trial of 50,000 gas credit meters. The trial was run using an emerging technology – fixed radio – which required a national network to support it. Feedback from customers was positive though not overwhelming, confirming the suspicions that the average householder was not sufficiently motivated by the removal of estimated bills nor particularly interested in the limited consumption data available from the meter itself (although increasing energy prices may well have changed this view subsequently).
The trial was completed in 2004 with the decision not to progress to full roll-out as the chosen technology was going to be quickly outdated and so the project would not be financially viable. However, the pilot proved invaluable in helping to ensure the right technology was chosen for the next project. Since then the available communications technology has moved forward in leaps and bounds, allowing trials to take place on a smaller and more targeted scale. The company is now developing smart metering plans in both the residential and business-to-business marketplace, with some very encouraging results.
In partnership with LogicaCMG 100 electricity prepayment meters have been trialled since July. Customers taking part in the pilot choose whether to charge their key card, which credits the meter at the shops as they have done traditionally, or to make an e-payment without leaving home via mobile texting, on-line or a phone call to the call centre. The SMS technology is popular with customers as they are already familiar with it from their mobile phones. Feedback also shows that they like not having to access the meter at home after the payment is made, so top-ups can be carried out at their convenience 24/7, meaning that they never need run out of credit.
Commercially, the hope is that the trial will demonstrate that the increased meter rental costs will be offset by savings in customer management costs, in issuing the devices (cards or keys) and in meter reading costs. The final, and most advanced, element of the smart metering programme to date sits within the business-tobusiness operation. In August British Gas Business (BGB) announced a significant scale up of its smart metering installation programme, with new connection small and medium enterprise (SME) customers now having the technology installed. Over 3,000 smart meters have been installed to date, with orders in excess of 5,000 in the pipeline.
Accurate billing information is the number one requirement for business customers and smart metering offers the perfect solution, as well as enabling better management of energy consumption. The aim is to phase this in as part of the service proposition and it is envisaged it will grow rapidly over the next few years. BGB’s smart metering product offering incorporates web-based energy management software to provide feedback on energy usage. This will facilitate further energy savings via improvements to onsite energy usage.
It is still early days but initial customer feedback regarding the transition period has been very positive and there is known to be a big appetite for the technology, particularly among multi-site customers. As a result of the decision to upscale installations, a better understanding of demand for smart metering amongst the SMEs, which make up the majority of business customers in Great Britain, is anticipated.
The domestic customer base
It is hoped that the success of smart metering that has been seen to date in the business division can be repeated across the domestic customer base. However, there remain some hurdles that need to be resolved before this can become a realistic proposal rather than a wished-for scenario. The regulator has ruled out returning metering to the distribution activity. However, there is still much cross-industry work to be done on agreeing a fit for purpose functionality.
Developments in electricity smart meter models continue apace and an approach for gas meters also must be agreed. With a large percentage of the country’s homes relying on gas-fired central heating the dependency on gas is almost as high as it is on electricity when it comes to fuel needs and a high proportion of all suppliers’ customer bases is ‘dual fuel’. The situation is not helped by the fact that gas meter technology currently lags behind electricity.
Add to that the nature of the fuel, which means that meters must be battery powered, and gas smart metering technology is more complicated. However, British Gas is exploring possible solutions to such technological challenges and is interested in speaking to manufacturers who may be able to bring relevant experience. With over 19 million homes on the gas network, safety and cost control will be the over-riding factors.
The time is coming for smarter metering solutions. The UK has already made some important and substantial steps in the right direction and it is expected that this will continue through the regulator leading the interoperability debate. Finding a way through the numerous issues is the key to opening the door to the successful introduction of smart metering in the UK energy industry. It will then require considerable investment by all interested parties and a quantum leap from the current position.
There is much at stake and so the technology solution will need to be carefully thought through. But there is confidence that in such a dynamic and competitive market there is the motivation and ability to deliver a solution that improves customer experience at a justifiable expense.