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On July 11 the Department of Trade and Industry of the UK published The Energy Challenge; Energy Review Report. It looks at a host of issues that face Britain’s energy future, with particular references to reducing carbon emissions to meet national and international targets.
Chapter Two of the report is entitled Energy Saving, and in it are several subsections that look specifically at smart metering, billing and customer display for the home as well as for SMEs. By looking at these details and highlighting some of the basic matters that emerge from them, I suggest that the spirit of this document can be assessed, and general conclusions can be drawn from the rest of it.
From the outset it would appear that the authors of this report are bound by the old axiom that the best-placed bodies to deal with energy conservation are energy suppliers. This approach is erroneous for the simple reason that a corporation that derives its revenue from selling a commodity cannot engage wholeheartedly in an effort to reduce the sale of the same commodity, even if demand was curtailed by ‘only’ 10%, as a recent study suggests.
The final soft point underlying this report is allowing a Government appointed regulator (Ofgem in the UK), to safeguard the interests of consumers, suppliers and the Government. Its blurred loyalties are obvious in this document, especially the recommendations for what is in effect a plan for inaction.
Some of the observations produced in the report regarding metering are at best inaccurate and in some cases straight forward erroneous. I will try to point them out in the context of my field of expertise.
Three aspects of the Review are examined here:
- Better energy bills
- Real-Time displays for Households,
- Smart Meters for Homes and Businesses
It does not take a genius to see that the current home energy bill is a list of periodic meaningless figures derived from an instrument hardly ever seen, with a sum at the bottom that does not provide any incentive to improve efficiency. None of the historic figures on a bill explains the usage pattern that caused it, nor is it coherently linked to specific tariffs.
The first point is therefore a righteous statement of the type ‘something has got to be done about it’, without actually saying what. Consumer Reading of meters and Efficiency Benchmarking are mentioned but both would be referred to Ofgem ‘for consultation’ – a code name for little action. Both are of course, problematic in their own right:
- Consumer reading is prone to errors in the configuration of most meters, requires high self-motivation and can only be induced by substantial incentives.
- Benchmarking requires incentives, as every weight watcher would tell. In addition it would raise the question of who sets the benchmark and for what purpose.
No doubt better home bill presentation would improve certain aspects of energy consumption, but without a firm link to smart metering, and a comprehensive CRM policy, there is little that would promote savings. After all, a bill is designed to make customers pay and unless the sum at the bottom is smaller, we do not care if it is written in green on recycled paper, or contains a long list of good housewifery advice.
Real-Time displays for Households are, in effect, a substitute / complementary device to the printed bill. The report is concentrating on electricity supply only, arguing the gas metering is too complicated to implement. This argument, whilst plausible, does provide a first glimpse at the short sightedness of the authors. True, some of the technical issues related to clamp-on smart metering in gas have not yet matured, but for a paper that claims to trace the way for the future, not to include a technology just because it is not yet perfectly accomplished, is inexplicable. Compare this to the thousands of words in this document dedicated to hydrogen and photovoltaic generation for example – both with a host of problems to be solved, and you get the thrust of the argument.
The display devices considered are one-way, meaning that the suppliers (who remain sole providers the displays, of course), can tell customers whatever they choose to, but customers still have to hang in with call centres or get lost in the limbo of cyberspace. In this case it is not the lack of bi-directional technology that lacks, but imagination.
The underlying assumption of the authors is that consumers really do want to save energy (not necessarily money) and that if only they knew how much they use, they would most certainly make great effort to reduce consumption regardless of their financial gains.
A Canadian research quoted (page 47), suggests that a saving of 6.5% in energy was achieved by home displays during a two-year trial. The report fails to point to other research suggesting that the smaller the financial incentives the faster these savings diminish. In other words, an annual saving of that magnitude would save the average British household £43 ($64) and would not induce many to change their consumption pattern, especially if it involved any discomfort.
The authors of the Review considered the display’s cost passed on to customers, thus offsetting any initial savings they might have obtained. No other option or mode of operation is even mentioned, never mind considered. Digital TV, Internet or independent operators of the type already in force in California are ignored, as are more imaginative options such as Telecom suppliers.
Customer display, like the clearer bills, appears in this review to be a means for energy suppliers to achieve greater efficiency – but not necessarily their clients.
This approach does not change when reviewing options for smart metering: the report still concentrates on the costs and benefits to suppliers only. The authors estimate the cost of a national roll out at £8bn with a running annual rate of £800.
These figures are misleading and are based on two assumptions: firstly, that there would need to be a one-off full roll-out rather than a incremental phase-in corresponding, for example, to a routine meter replacement program, or in new housing stock only. Suppliers have an interest to have a national rollout, as it would ensure Government grants and will not put them at disadvantage when others perform better. A natural penetration rate, of the type many household goods such as DVDs or PC computers have made, did not ‘cost’ and the beneficiaries are not only suppliers of any kind.
The second assumption is of the real cost of the present meters replacement scheme, which has not been deducted from the operating annual cost quoted above. Moreover, if independent operators were to run smart meters, these costs may not be passed on to consumers in full and the market will ensure a more even distribution of these costs between all stakeholders.
The evaluation of home smart metering in the report does not raise a contradictory element built into the concept: as smart meters are, by definition, on-line and highly accurate, they will inevitably trigger full real time competition, which in turn, will reduce energy prices and as a result increase demand – thus contradicting the stated aims of the report.
Other, less complicated but equally relevant aspects of smart metering and customer display such as social distribution (e.g. the present higher cost of energy unit to ‘pre-paid’ users who are often in a lower socio-economic classification) and data privacy that must result from this technology are not even mentioned.
In conclusion, the remainder of the document reviewed here, deals with a wide range of energy issues from nuclear to renewable generation, from efficiency campaigns to transport alternatives. It may be comprehensive and in-depth, but something in the approach to the metering topic suggests that little room was given to thinking outside the box and great care was taken not to outrage powerful existing players.
The UK may benefit from this review, but existing energy suppliers will almost certainly benefit even more. A vast amount of information will be gathered in the process, and our descendents will wonder why didn’t we use it to learn from our past mistakes.
