DCP228 and Business Electricity
What is DCP228? DCP228 is a regulation to be introduced by Ofgem in April 2018 which will change the way busin...Read More
The country wide upgrade to smart meters will be the biggest IT infrastructure project that the UK has ever seen. It will also be one of the most controversial – something ITV investigated last week with an hour long program entitled ‘Energy Bills – How can we be smarter’.
So what’s the story behind smart meters?
The European Union, as part of its energy market legislation, requires all of its member countries to offer consumers smart meters. Britain has agreed to offer the devices to all UK domestic and business customers by 2020, delayed from the original target of 2019. This commitment has not been affected by Brexit.
Smart meters will allow customers to view half hourly readings of their electricity bills. The devices will also communicate directly with energy suppliers, eliminating the need for meter readings and estimated bills. The smart meter initiative is part of an ongoing global commitment to lower carbon emissions, the thinking being that if consumers can view their energy use (and how much it’s costing them) they’re more likely to take steps to lower their usage.
The latest Government research shows that three in five bill-payers are aware of smart meters, whilst 81% of those who have had a smart meter installed would recommend the devices to other people. More than 3.5 million smart meters are now in operation across the UK.
The smart meter initiative will see over fifty million devices installed in homes and businesses throughout Great Britain. The cost of this project will be upwards of 7 billion pounds. Although the meters are described as free, in that there is no direct charge for customers to upgrade, the project will be paid for indirectly by consumers through their energy bills. Estimates state that this could cost up to £350 per energy bill, although this will be spread out over a number of years.
The Government argues that the savings produced by more accurate billing and meter readings, combined with customers using less energy will outweigh these costs. They are also hoping that market forces will encourage energy suppliers to pass the savings they make onto their customers. However, lack of trust in suppliers mean that there is scepticism about whether this will actually happen, especially against a background where energy companies are seen to be pushing their luck with price rises. Others state that energy suppliers are already diversifying their revenue streams to include new products such as insulation and solar panels, and will therefore be less reliant on profits generated from gas and electricity.
It’s believed that savings will materialise partly due to a change in customer behaviour – the idea being that consumers will naturally reduce their energy usage when they see what it is costing them. Some initial stats back this up: 82% of people in a recent survey stated that they’d taken at least one step to reduce their energy use since installing a smart meter, whilst 76% stated they had a better idea what they were spending on energy.
Smart meters will allow energy suppliers to introduce new ‘time of day’ tariffs, which will charge less for energy used at off peak times. Suppliers have begun to experiment with these tariffs already, with British Gas offering a limited trial whereby smart meter customers got free electricity at weekends whilst Green Energy recently introduced the first permanent time of day tariff which sees cheaper energy late at night, and more expensive energy at peak times. Response to the new tariffs has been mixed, with some arguing that consumers may end up actually paying more if they can’t practically switch their energy usage to off-peak times. This is of particular concern to business customers, who are tied by working hours to when their own peak energy usage is.
The smart meter roll out has been dogged by controversy since its inception. Some are sceptical that the meters will actually cause consumers to reduce their energy usage. With smart meters, you get what you put in: if you don’t change your behaviour, savings are unlikely to materialise to predicted levels.
The roll out has been hit by a series of delays and it has been speculated that the project may run over budget by up to 1bn. Some have voiced concerns that the project is being rushed out before universal standards have been adopted, meaning that at the moment your smart meter may not work if you change suppliers. Additionally, standards have not been set in stone regarding technical security. In fact, an EU data watchdog has raised concerns about the potential vulnerabilities of smart meters to hacking. If somebody managed to use smart meters to shut down the energy grid the disruption would be considerable. On this matter MPs have been told that security controls have been built in to prevent mass disconnection.
The amount of customer data smart meters will be able to collect has worried privacy professionals. The devices will be able to track when customers are at home as well as what devices they use and when. This could potentially be used to build up a fairly in depth picture of somebody’s day to day life. Because of this energy companies have been told that they will have to comply with data protection regulations and be party to the Smart Energy Code. There is concern about whether they will be able to put the appropriate safeguards in place in time for the roll out completion.
If you’re a large business, you may have been on an advanced meter, with half hourly readings, for some time. Advanced meters work in a similar way to smart meters, without the internet of things (IOT) capabilities and displays. Businesses will find smart meters of particular use when negotiating new contracts – having a finely tuned understanding of your own energy usage will make it a lot easier to find an appropriate tariff. They will also benefit from accurate billing – there will be no risk of receiving a pricey back bill after underpaying on estimated usage, or overpaying if your use is overestimated.
What’s more, having almost up to the minute information on your energy will allow you to take steps to reduce your usage if cash flow is tight, or if it looks like a large bill is around the corner. Smart meters will allow you to see which appliances in your office are leaking money, meaning you can either replace them with more energy efficient models, or reduce how long they’re operating for.
If you’re not in a hurry to upgrade to a smart meter, the simple answer is to do nothing. If you’d like to embrace the new technology then we can help you to find a supplier who will offer you a smart meter now. One thing to keep in mind is that, as things stand, a smart meter that works for one supplier may not work for another, so you may need to have your meter replaced in future.
Whilst there are currently concerns surrounding smart meters, the situation is constantly evolving. Both energy suppliers and the Government are working hard to make sure the project is a success.
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