Smart meters – which display, store and transmit detailed data on energy usage between the supplier and the customer – are the central component of a dynamic, flexible smart grid, which will dramatically change the way energy is produced, bought, sold and consumed. In simple terms, the smart grid is a network that uses IT to manage the supply of electricity efficiently. Unlike the current, rigid grid, it enables greater consumer participation, giving customers the opportunity to interact with suppliers and other participants on the grid. Not only that, but immediate information about energy use and pricing incentives provides a more tangible, monetary incentive to us all to change the way we use energy.
Smart metering aims to encourage the customer to cut their carbon footprint by making them aware of exactly how they are consuming their energy, and, perhaps more persuasively, what that energy costs them. Of course, many of us already take part in car-sharing schemes, buy energy-efficient appliances and offset the carbon impact of our long-haul flights. So from a purely altruistic point of view, having a simple piece of technology in our homes that can help us cut carbon dioxide emissions sounds like a no-brainer.
Clear advantages, but there are sticking points
While they clearly offer considerable benefits by reducing energy consumption, many people have voiced concerns that the initial costs of smart metering will be passed on to the customer at a time when the state of the economy is punishing those customers who ill afford their energy bills as it is. But in fact, smart meters are all about giving customers the tools they need to understand their energy consumption and therefore cut their bills. At their most basic, they act as an electronic version of customers’ usual utility bills, providing very immediate and transparent way to see exactly how much energy they are using and what it is costing them.
And because it connects their meter with their supplier, it means that they can also benefit from receiving information on the tariffs that best fit their usage patterns and needs. The detailed data that will come from smart metering provides a more accurate breakdown of our energy consumption, and this more timely and accurate data puts an end to some of the longstanding issues with current meters, such as estimated billing.
But the accuracy and level of detail in the information is a further reason for resistance from some people, who are concerned about the security implications of having a smart meter installed in their home. Some fear that this open access to private information could make it easy for utilities companies to invade their privacy or to misuse or even lose their data. These concerns, which have hampered the smart meter rollout in the Netherlands, have not been lost on the UK’s Department of Energy and Climate Change (DECC), which cites data protection and system security as crucial issues for the success of the rollout and operation of smart metering in this country.
This is one of the foremost challenges facing the government in the battle for the smart metering hearts and minds of the public: securing buy-in and engagement from domestic customers is very dependent on the reliability and robustness of the infrastructure and technology that supports the new system. Without that buy-in, the smart metering programme will miss an important goal: if customers do not engage with meters, they are unlikely to reduce their consumption. With the country-wide roll-out approaching fast, the government and utilities will need to make a concerted effort to convey the message that smart metering is a safe and secure way to make cost savings as well as reduce the carbon footprint of the UK’s homes.
The final sticking point for some is that the compulsory nature of the smart meter roll-out could take away freedom of choice for consumers. After all, we’ll get a smart meter whether we want it or not, so why assume that we’re likely to have any choice in what happens to our data?
Changing relationships between consumers and utilities
In fact, choice is likely to be a key feature of the smart metering market as smart meters become a compulsory fixture in every home across the UK.The smart metering roll-out is opening up a new frontier for utilities companies – and for their customers. This unobtrusive piece of technology will start to change the relationship between the customer and the supplier: with increasingly detailed data on our energy usage – and better visibility on exactly where our money is going – customers will be better positioned to challenge suppliers to improve the products they provide and help them save money.
Smart meters give suppliers another way to differentiate themselves in what is set to become an increasingly crowded and competitive market, with enormous scope for them to tailor their range of products and services to increase value to customers and encourage them to get the best out of energy saving. It will allow them to provide easier ways for customers to save money by helping them reduce wasted energy (for example, as a result of unused equipment), cut peak-time usage with a minimum of effort and optimise their use of dual-fuel energy.
Utility companies will need to take on board the idea that different groups of consumers will use their smart meters in very different ways and will want different products and services based around the smart meter. This means that in order to attract and retain customer loyalty, they will need to segment their customer base, perhaps by demographic, location or usage level. This move towards increasing segmentation is likely to be one of the principal forces underpinning the evolution of the market. It will also drive the creation of more specialised smart meters catering for diverse sectors of the population, with different levels of technological functionality based on need, and on the degree of involvement that the customer chooses to have with their smart meter.
People who are fully engaged with cutting their costs and optimising energy-saving measures within their home will demand much greater functionality than someone who is happy to let the smart meter quietly do its work to improve billing accuracy, but has no real desire to interact with it. Similarly, a visually impaired user will have specific requirements in terms of the display. All these factors will encourage energy companies to work on developing customised products that deliver exactly what their users require of them.
Effective customer segmentation by the utilities - supported by the right technology for the job – will be crucial to the success of the smart metering roll-out. The meters must be robust enough to support the higher levels of functionality that many consumers will demand and to carry the security standards that allay some of the fears over privacy and data security.
Smart metering will be key
As a country, the UK needs to cut greenhouse gas emissions by 34% on 1990 levels by 2020, and by at least 80% by 2050. This commitment has tangible implications for everyone, and the presence of a smart meter in our homes is perhaps one of the most obvious. But having this technology is not the end of the story: it’s just the start. If we want to make smart meters work for us – and, ultimately, for the environment – we need to engage with them as a tool to help us change the way we look at our energy consumption. It’s all about changing the way we think and the way we behave when it comes to energy. These changes will require a small effort on our part, but the impact they will have on our carbon footprint and on our pocket is empowering, and cannot be ignored.
Editor’s note: This article has been contributed by Dr Mark England, Managing Director of Sentec, a UK company specialising in electronic smart metering products and solutions for the gas, water and electricity industry.
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