Are Smart Meters the Way

If the government is to achieve its 2050 target of reducing greenhouse gas emissions by 80 per cent, relative to 1990 levels, then the way energy is supplied and priced will need to change dramatically.
Smart meters will be a central element in driving this change by enabling customers to act on real-time data to reduce energy consumption. Yet if smart meters are truly going to make an impact on carbon emissions then energy efficiency alone will not be enough. Smart meters will need to be part of a smart grid that has renewables as one of the major sources of energy.

Great Britain must meet a 15 per cent renewable energy target by 2020. However, the output from some renewables is not easily predictable and could result in peaks and troughs in supply. This means customers will no longer be able to assume that energy is on tap, but will need to understand that its availability and price varies throughout the day and the year.

What we are likely to see in the future is a range of tariffs that reflect both demand and supply and give real incentives to consumers to use renewable sources. This pricing will be much more sophisticated than current Economy 7 tariffs — and therefore potentially much more difficult for consumers to understand and manage. So, customers will need smarter appliances that can tell when prices are lower and respond automatically.

Yet automation will be only part of the answer. To maximise the benefits of this renewable world, customers will need more tailored advice. The unit cost of energy will become less important than how customers manage and use energy. However, for them to take advantage of this, they will need to know the best options. This will depend on factors such as their personal priorities, the nature of their property, their ability to generate energy, and the payback on potential energy efficiency investments.

That could have profound implications for the business models of the big six electricity providers. They will need to build much closer relationships with their customers, reaching beyond supply of energy into service management and advice in the home to encourage behaviour change.

According to an Ipsos MORI survey for Ofgem, “just under half of consumers are likely to adopt automatic switching of appliances … if energy is cheaper at certain times of the day.” However, evidence to date is that creating behaviour change is difficult in the energy sector. For example, since the introduction of competition last century a significant proportion of consumers have still not changed supplier, despite the potential savings.

Smart meters and the associated changes to energy pricing will be difficult for consumers to understand. Enthusiastic early adopters of the technology will be important to encourage mass consumer use. Central and local government can play a role in supporting this change by adopting the technology early — for example, visibly using smart meters in public buildings and schools; installing them in social housing and publicising them at advice centres.

While it is the responsibility of the energy industry to deliver the solutions to reduce carbon emissions, we, and particularly government, can all play a part in demonstrating the value of those solutions and encouraging the behaviour change required to exploit the technology.

Darrin Hill Opinion – Times
Darrin Hill is an energy specialist at PA Consulting Group

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