Who Wins With Smart Electricity Meters: The Consumer Or The Utility?

National TV in the United Kingdom has been reporting the excessive profits that some electricity providers are making. And just to rub salt in customers’ wounds, some of those utilities are talking about further price increases of 10% this winter.

It’s a timely story. Many of us are starting to feel the winter chill and switching on the heating. So, what about smart metering? Will it help consumers, or is it really just a way that utilities can send out ever-increasing bills more efficiently?

The U.K. is forecast to have a large number of smart meters installed by 2016. Cellular solutions are key in the U.K. due to the general structure of the utilities and grid operators, and cellular machine-to-machine (M2M) devices are the most likely technology option.

The Plan Is Underway

Some suppliers already plan to ship cellular meters next year. As telecoms companies see the business opportunity in the United States mature, telecoms providers in the U.K. are likely to follow suit and make pricing per meter very competitive. These are some of the conclusions in a recent study, “The World Market for Smart Electricity Meters – 2011,” from analysts IMS Research.

The report forecasts that the U.K. and U.S. will experience the largest volumes of cellular meter shipments up to 2016 for clear reasons. In the U.S., telecoms have reduced the cost of data plans for meters significantly to about $1 (or less) per meter, per month. Utilities are beginning to realise that they can cut capital expenditures by more than 40% and reduce operating expenses by using public telecom providers.

Here in the U.K., the Department of Energy and Climate Change (DECC) announced its intention to have smart meters in all homes by 2020, although there are public concerns whether such a rapid introduction is wise and whether it represents a greater risk to consumers in terms of cost.

The U.K. rollout will involve meter replacement in more than 27 million homes, and the start date for implementation is 2012. The statutory watchdog for energy customers in the U.K. has already requested assurances that an accelerated rollout will not lead to reduced consumer protection or opportunities being missed to deliver benefits to consumers. Consumer protection groups are concerned that currently there is no monitoring framework in place.

Government assessments have been carried out to establish if there is a positive business case for national smart metering. These analyses looked at the potential costs and benefits of rolling out smart meters to suppliers, network operators, customers, and Britain as a whole. The latest DECC assessment estimates implementation in the U.K. will cost around £10 billion and that the cost will predictably be passed on to customers via their energy bills.

The DECC has also stated, rather naively, that the cost savings that energy suppliers will see will also be passed on to customers. However, industry observers argue this is an over-simplification.

U.K. consumer groups such as Consumer Focus stipulate there is currently no transparent mechanism in place to limit the financial risk to consumers, nor is there anything to ensure that if costs are added to energy bills that they are fair and proportionate.

The American View

The American Council for an Energy-Efficient Economy reviewed more than 36 different residential smart metering and feedback programmes internationally. This extensive study concluded that to realise potential feedback-induced savings, smart meters must be used in conjunction with in-home (or on-line) displays and well-designed procedures that successfully inform, engage, empower, and motivate people.

There are calls from both the energy industry and consumer groups for a national social marketing campaign to help raise awareness of smart metering and give customers the information and support they need to become more energy efficient. That may sound sensible, but will the utilities buy into the idea?

Can The Technology Do The Job?

According to Sierra Wireless, utilities have a choice of services via 3G networks that include Wideband CDMA (W-CDMA), High-Speed Downlink Packet Access (HSDPA), and Evolution-Data Optimized (EVDO) Revision A.

In CDMA networks, EVDO devices are more widely available than 1x RTT technologies. However, 1x RTT could remain a favoured option for smart metering because it is cheap and because higher data speeds are unnecessary.

So there is no doubt that the communication technology is there and fully capable. Or is it? There are still very important questions that must have unequivocal answers.

Can smart meters guarantee a reliable operating life span of up to 20 years without the need for major overhauls or costly component replacement? Will they use standard operating protocols to ensure compatibility with changing energy supplier equipment? What about consumer data security over wireless networks? Finally, will smart meters be frugal when it comes to their power consumption?

Smart metering is on its way, and so is winter. I wonder which one will make consumers shiver more.

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