27/02/19 – Smart Meters: Progress, Problems and Benefits

Speakers: Dhara Vyas, Head of Future Energy Services at Citizens Advice; Robert Cheesewright, Director of Corporate Affairs, Smart Energy GB; Stephen Luckhurst, National Audit Office; Oliver Sinclair, Head of Consumer Advocacy and Engagement – Smart Meters Implementation Programme, BEIS

Wednesday 27 February 2019

All-Party Parliamentary Group on Energy Costs

Smart Meters: Progress, problems and benefits’

Chair: Alan Brown MPS

Chair’s Opening Remarks:

I’d like to extend a warm welcome to you all to this, the 48th meeting of the All-Party Parliamentary Group on Energy Costs.

I am Alan Brown MP, the SNP’s energy spokesperson and a vice-Chair of this Group.

We meet this evening to discuss smart meters. It’s a massive programme and I think it’s fair to say that there are questions about progress and benefits.

It seems unlikely that the target of every home should have one by 2020 will be met.

There have also been questions about the cost with the 2016 estimate from BEIS of £11 billion under question.

We have the best possible line up of speakers this evening to address these complex issues.

Firstly, we will hear from Dhara Vyas, the Head of Future Energy Services at Citizens Advice. Dhara gave evidence to the BEIS Select Committee and called for an updated cost benefit analysis.

Then we will have Robert Cheesewright, the Director of Corporate Affairs at Smart Energy GB, the consumer engagement body supporting the rollout.

Next, we will hear from Stephen Luckhurst, the lead author of the National Audit Office’s report which said that the costs estimate will be exceeded.

And finally, we will have Oliver Sinclair from BEIS. He is the Head of Consumer Advocacy and Engagement for the Smart Meters Implementation Programme.

Thank you all for coming along tonight. Please limit your contributions to 5-7 minutes so that we have adequate time for a Q&A.

Dhara Vyas, Head of Future Energy Services at Citizens Advice

We have no doubt that smart meters are a good thing, and really important for the future. They will change the way we engage with energy in our homes.

However, there has been no cost/benefit analysis since 2016, and we question whether 2020 is the right end point for the rollout. Should we be pushing, and if so, at what cost? Not just the cost of installation but also the cost of talking to customers. It’s been found that customers need advice on energy saving and this should be provided by the supplier and the installer. It’s part of the installation code of practice and a really good supplier will make sure that it is done.

It’s really hard for us as to represent consumers without having access to proper information: the rationale for the timescale, the costs, and so on.

At Citizens Advice we have unique insight into the problems that consumers have had with their smart meters. Many of the problems relate to issues around the installation, which can be irksome to consumers, especially when they don’t want a smart meter in the first place. There have been cases of condemned cookers and boilers resulting from installation visits (situations that are handled really inconsistently between different suppliers) and there is a lot of ignorance and confusion around the submitting of meter readings. 

Something else I would like to mention, which I’m sure will be touched on by other speakers later in the meeting, are the issues around the different meters: compatibility issues with SMETS1 meters and availability of SMETS2 meters, but I’ll stop there and let others have a say.

Robert Cheesewright, Director of Corporate Affairs, Smart Energy GB

Smart meters are: valued by consumers who have them, and wanted by consumers who do not yet have one, and are essential for our future energy system.

The smart meter rollout is essential for Great Britain. It will help to create a modern energy system that can cope with future demand, and help us to tackle climate change. Smart meters alone could help us save 29.7 million tonnes of CO2, taking the equivalent of 600,000 cars off the road by 2030.

We know that fracking and nuclear development aren’t going to happen any time soon, and we will increasingly find ourselves relying more and more on renewable sources of energy. Smart meters are therefore more crucial than ever to help us cope with future demand and balancing the grid. 

We also know that people are aware of smart meters and that those that have them would recommend them to others and are taking steps to reduce their energy use and save money.

Our campaign is extremely effective. Independently conducted econometric analysis shows that last year our campaigns were in significant part responsible for consumer demand to take up smart meters, and that in the second half of last year our campaigns were generating new seekers and accepters of smart meters at a faster pace than ever before.

However, the rollout is a hugely complex infrastructure upgrade, and it is not without its challenges. Technical issues have meant that despite the demand our campaign has been able to generate, customers are not always able to have smart meters installed, and basic standards of customer service are not being met by suppliers.

As the consumer voice for the rollout, we share peoples’ frustration when the energy industry falls short of expectations. It is not good enough and industry needs to be better at responding to issues as they arise.

Despite the challenges the rollout is facing, we remain really positive about smart metering and the rollout.

Millions of people across Great Britain are already benefitting from smart meters, and we are committed to working with industry to ensure that the operational side of the rollout works as efficiently and effectively as possible.

Evidence

Key campaign stats

  • 98 per cent of the population are aware of smart meters
  • 13 million people are now ready to seek or accept a smart meter in the next six months
  • two thirds of people would recommend smart meters to others
  • three-quarters of smart meter owners have taken at least one step to reduce their energy use
  • two in three (64%) people take action to find out more about smart meters and their energy use after seeing our campaign
  • 65 per cent say our campaign is easy to understand
  • 59 per cent of people recall our campaign

Issues with the quality of the consumer journey (Populus research)

  • There are now approximately 3.7 million consumers who have tried to get a smart meter from their energy supplier but been told that they could not have one now or have been put on a waiting list
  • Of these, 1.7 million consumers were told they have been put on a waiting list, but over 1 million of these say they have not received any further contact or update from their energy supplier
  • Almost half (46%) of consumers who previously said they would be happy to accept a smart meter installation claim that they have not been contacted by their supplier with an offer of an installation
  • Of those consumers citing “a planned installation did not go ahead” as the reason why they did not get a smart meter, 38% say that was due to the installation being cancelled by their energy supplier or the installer simply not turning up
  • 97% of consumers who reported that their appointment for a smart meter installation did not go ahead report that their appointment has not been rescheduled
  • Around 10% of smart meter owners have lost smart functionality – this group are, understandably, now dragging down overall consumer satisfaction levels with smart meters.

Stephen Luckhurst, National Audit Office

Thank you for the invitation to speak at this event.

The NAO’s role is to scrutinise public spending for Parliament, including schemes funded via levies on consumer bills.

Over last few years we’ve looked at many of those schemes, including the Energy Company Obligation, Feed-in Tariffs, Contracts for Difference and smart meters.

In November last year we published our third report on the smart metering implementation metering programme, having previously looked at it in 2009 and 2014.

In our report we looked at progress with the rollout, the economic case for the programme, and the way the Department and Ofgem are managing it.

Starting with progress, to give an indication of the delays this programme has suffered, I should point out that when we published our 2014 report, we were told that DCC infrastructure would be in place to enable the programme to move on to its SMETS2 stage by late 2015.

In practice the DCC went live about one year later than that, and then on top of that, installation of SMETS2 meters started very slowly. For those two reasons, more than three years on from the original target date for DCC live, we only have a few hundred thousand SMETS2 meters on walls.

Moreover, when we talk about progress it’s important to note that the SMETS2 and DCC system is not yet fully built and proven, among the upcoming challenges are enrolment and adoption of SMETS1 meters, and rollout of the solutions required for the 30% of homes in which wireless communications face additional challenges like thick walls.

When we published our report we were also aware of technical integration problems with SMETS2 meters in the North of England and Scotland which meant installations in North were taking place much more slowly, and it is my understanding is that the industry is still working on addressing that issue.

Finally as a result of the slow start to SMETS2 we have a much greater number of SMETS1 meters than Department planned for and those pose a number of issues and challenges for the programme.

Moving on to the value for money case for the programme

In our report we found evidence that costs had increased by at least £500 million. The cost increase to date is not fatal for the value for money of the programme by any means but we also highlighted a number of risks which would potentially push up costs more.

On the benefits side, we said there was clear evidence that smart meters can help consumers to save energy, but we drew attention to the fact that the business case is built on those savings being maintained for 10-15 years, and nobody knows for certain how people’s behaviour will change or not change over such a long period.

This uncertainty about the behavioural response is one of the reasons we think it is extremely important for people to be given advice on saving energy – in the Department’s trials for the programme, advice boosted peoples’ energy savings by up to 66%. That’s why we were very concerned that in 30% of cases, energy suppliers weren’t offering consumers energy saving advice when they got their smart meter.

We also pointed that there was unlikely to be widespread use by consumers of time of use tariffs until Ofgem implemented market reforms that will incentivise energy suppliers to offer those tariffs – this is known as market wide half-hourly settlement and we were told it is unlikely to be implemented before 2022.

Finally, a couple of points about the approach to managing the programme

What we said in the report is that the Department’s monitoring information for the programme is extensive, but there are still some important gaps.

For instance, some energy suppliers have said that they are having to spend significant amounts persuading consumers to accept smart meter installations. We don’t know exactly how much it’s costing and how much of that cost will translate into an additional cost for consumers, because the Department hasn’t been collecting that information.

Another area where we’d like to see more information collected and presented is on the distributional aspects of the programme. The distributional effects are a concern because while the costs are probably going to be spread completely flat across households, benefits probably won’t fall evenly, and in particular low-income households who consume little energy may not be able to save as much.

The Department has said it is going to update its cost benefit analysis in 2019 and we hope it will use the opportunity to fill in those gaps in its information, as it may help to ensure more consumers benefit from the programme.

Oliver Sinclair, BEIS

The development of a world-beating smart energy system is at the heart of the Government’s industrial strategy. Smart meters will provide the building blocks for much more flexibility than we have today. Overall, the programme will provide £40bn of benefits over the next few decades.

The Government has made a firm commitment that every household and small business will be offered a smart meter by the end of 2020. Subsequent energy savings and supplier savings should lead to around £300 million in bill reductions in 2020 alone, which will lead to a £47 p.a. reduction for each household by 2030: that’s £1.2 bn so significant sums of money are involved. Current forecasting is 5.7% of net benefits, so this is a good investment that will pay off if we do it right.

There are challenges – yes – but there has also been a lot of progress despite the bumps in the road. We have 12.8 million smart and advanced meters are already installed and operating and the programme is at a big transition point, with the move to 2nd generation meters well underway. As of today we have 450,000 SMETS2 meters installed so we are getting to a more positive place. But of course a programme of this size is a huge undertaking: as a programme, it’s unrivalled in its size and complexity.

We have plans in place to deal with the problems such as interoperability of first generation smart meters. The data communications company that runs the national network is upgrading its systems to accommodate these meters and that’s all been tested so that from May this year, those meters can go in with full functionality customers can keep all their smart services no matter who they switch to. So that’s positive progress.

We also require that dormant meters are prioritised and that this whole process is completed by the end of 2020.

As Rob has highlighted, consumer acceptance and engagement is crucial for this programme. It is voluntary and it’s something that people can say no, however much we want them to say yes. Whilst the vast majority of consumers who have received smart meters are satisfied, we can’t rest on our laurels and we know that word of mouth recommendations from friends and family are going to be increasingly important when people make their mind up as to whether they should have smart meters. We believe that as more people accept smart meters the positive recommendations will grow.

We need to ensure that the delivery chain is as efficient and optimised as much as possible: everyone’s time is precious. Engagement with consumers also needs to be more efficient, as we talk to more and more people, The Government is working closely with others to draw lessons from rollouts in other countries and rollouts of other technology in other sectors in order to identify and share lessons and best practice and really drive up performance.

With nearly 13 million meters installed, the benefits are not theoretical any more. 9/10 consumers are satisfied with the installation process: while admitting that there are challengers, a significant number of people have had positive experiences, most people are happy, and over 80% say they are taking steps to reduce their energy consumption.

Furthermore, British Gas, who have installed the largest quantity of meters and whose consumers are dual-fuel consumers, are reporting that their consumers are saving around 4%. That’s more than £30 per bill and so already we are seeing greater savings than we forecasted.

So I think that whilst there are inevitable challenges ahead, we are working really hard to meet them, and we do have a positive base to tackle those challenges in the remaining years ahead.

After some further discussion, questions and comments, the meeting closed at 6.50 pm.