UK smart energy meter rollout hit by rising costs and delays

Gaz and Leccy are two colourful cartoon characters who wreak havoc wherever they go.

“Let’s get Gaz and Leccy under control” is the message in television advertisements that promote the benefits of smart meters — devices that track consumers’ energy usage in real time and feed the information back to suppliers. They are meant to end the hassle of estimated energy readings, and lower bills by enabling households to reduce their consumption of gas and electricity.

But the rollout of the £11bn scheme to install smart meters across Britain by 2020, a key part of the government’s energy policy, has been far from under control. It has been beset by rising costs and delays, which are now fuelling industry concerns that the 2020 deadline cannot be met.

More than 10m meters have been fitted so far — reflecting how the scheme is one of the biggest national installation programmes ever undertaken — but analysis by Which?, the consumer body, in February found that large energy companies would need to install 24 devices a minute, every day, for the next three years to meet the 2020 deadline.

On Tuesday, the House of Lords will examine a government bill going through parliament that is meant to underpin the smart meter programme. Labour on Friday tabled an amendment that would require ministers to outline quarterly goals for energy suppliers on the roll out of devices.

The National Audit Office, parliament’s spending watchdog, is meanwhile investigating whether the scheme will save households money, as well as the likelihood of the government hitting the 2020 deadline.

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Publicly, the energy industry is committed to meeting the 2020 target. Privately, some executives have admitted they are concerned.

“It is extraordinarily challenging to meet the deadline and to do that safely,” said one executive at a utility, who declined to be named. “Given the recent bad press about the programme another challenge we face is customer acceptance. The supplier has to persuade you to have a meter installed but energy companies are not the most trusted these days.”

Smart meters are meant to end the hassle of estimated energy readings, and lower bills by enabling households to reduce their consumption of gas and electricity

The last Labour government announced a smart meter campaign in 2009, which subsequent administrations have persisted with. Energy companies are required to take all reasonable steps to offer every home in Britain a device by the end of 2020. If they do not, they potentially face steep fines.

Energy suppliers are footing the bill of installing the smart meters, but the costs will be passed on to consumers in their gas and electricity bills. Ministers estimate net benefits of £5.7bn as households reduce their energy usage and suppliers have lower administrative costs.

In 2016, the government said the rollout was expected to reduce the combined gas and electricity bill for the average household by £11 in 2020 and by £47 in 2030. But suppliers fear the final cost of the scheme will be more than £11bn, reducing the net benefits.

One key problem with the scheme is technology. So far most of the meters that have been fitted are based on first-generation technology, called Smets1, and some are not interoperable between suppliers — meaning that if a customer switches energy provider the device may go “dumb” and the new utility may not be able to access the data.

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Meters based on second generation technology, called Smets 2 — all of which will be interoperable between suppliers — are starting to be installed.

Perhaps the biggest issue has been repeated delays to a sophisticated wireless network that will, among other things, allow customers to switch suppliers while retaining their original meters.

The company in charge of setting up the wireless network — the Data Communications Company, part of UK-listed outsourcer Capita — declined to comment.

The Department for Business, Energy and Industrial Strategy said “designing, building and thoroughly testing a national communications and data network is a significant undertaking. It has been important to get this right”. It expects Smets1 meters to start being connected to the network by the end of this year.

Ovo, a smaller energy supplier, said: “There are challenges in encouraging consumers to book a smart meter but we believe that the introduction of the second generation meters, and introduction of Smets1 into the central network, will improve this”.

Despite the problems, the evidence shows that most customers who have had a meter fitted are satisfied with the device.

Smart Energy GB, the independent body responsible for promoting the scheme and architect of the Gaz and Leccy ads, defended the pace of the rollout.

Sacha Deshmukh, chief executive, said the public has understood what smart meters can deliver. On average, people who have one are saving 354kWh a year — the amount of energy needed to heat and power an average house for a week.

The business department said: “Millions of homes are already saving money as smart meters help them take control of their energy use, and more than 440,000 are being installed every month.”

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