The Government has instructed energy companies to install smart meters in every household in England, Scotland and Wales by 2020. This means that energy suppliers will need to replace 53 million meters (30 million electricity and 23 million gas) at an estimated cost of £11 billion.

As every homebuilder knows, the only thing we can rely on is that the estimated cost will not be the final cost.

What Exactly is a Smart Meter and What Does it Do?

A smart meter is one that sends meter readings of electricity and gas to your energy supplier and to an in-house display (IHD). That is it — that is all it does.

Essentially, it puts a display in the owner’s hand that shows how much energy (electricity and gas) has been used in the past hour and day.

It also eliminates the need for someone to read the meter.

The Government suggests that smart meters will give consumers:

  • Near real-time information on energy use, expressed in pounds and pence
  • The ability to manage their energy use, save money and reduce emissions
  • An end to estimated billing — people will only be billed for the energy they actually use, helping them to budget better
  • Easier switching — it will be smoother and faster to switch energy suppliers to get the best deals.

The Government’s stated motivation is that a smart meter will enable consumers to reduce the energy bills and the consequent CO2 emissions.

But as the smart meter does not tell the consumer where the energy is being consumed, it is difficult to see how that will work. It also seems to ignore human nature. The IHD is a gadget that might be interesting for a week or two, then its interest will diminish and it will be switched off, put in a drawer and forgotten.

Benefits for Energy Suppliers

But for energy suppliers, smart meters have two big benefits:

  • They remove the need to employ an army of meter readers
  • They allow for Time of Use tariffs, where people pay more (or less?) for electricity used at different times of day.

The national electricity grid is under huge pressure — in some areas (south Wales, for instance) it is at capacity. Time of Use tariffs encourage consumers to use electricity at times of day when there is surplus electricity supply, typically midday and overnight.

The question is: will the supply companies reduce the price at those times or just increase it for consumption at peak times?

What Does a Smart Meter Cost?

There is no upfront cost to the consumer, but the cost of a smart meter will be added to the energy bill. There is also a degree of uncertainty over the actual cost as the final specification of the smart meter is yet to be determined.

The Public Accounts Committee has calculated that the cost should be £215 and that the consumer will pay £43 per year for five years.

Will it Save Money?

Some research shows that people who monitor their energy consumption tend to use less of it. Smart meters make it easier to monitor consumption but people who want to do that can do it with a standard meter.

The Public Accounts Committee estimates that the savings from a combined gas and electric smart meter is likely to be £26 per year, which is less than the cost of the meter.

Problems with Smart Meters

There is still no single specification for smart meters, so each energy supplier can install its own device. This means that if the consumer wants to switch supplier, they may also need to switch the smart meter — and presumably pay for that new one.

It is also likely that before the official roll out is completed, the functionality of the smart meter will be improved and the consumer will be urged to buy a new one (perhaps before the old one is paid off). And there may well be an app for your smartphone that does exactly the same thing, making the IHD redundant.

Some critics, including Scottish Power and Which?, have suggested that smart meters are a waste of money and that at a cost of £11billion (to be paid by the consumer) the whole plan needs rethinking.

Other Ways of Saving Money

  • Simple draught proofing will probably cost less than a smart meter and have a far bigger impact.
  • Spend the £215 that the smart meter costs on LED lighting and reduce the electricity bill by at least 5 per cent, rather than the 1 per cent predicted for smart meters.

Read more on smart heating controls


About the Author:

Tim is Homebuilding and Renovating’s expert on sustainable building and energy efficiency. He runs the green home consultancy Weather Works, advising clients on renewables and energy efficiency in the home

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