Smart meter roll-out - Energy and Climate Change Contents

6  Consumer savings

Estimated savings

73. DECC has outlined the energy and bill savings that it expects consumers to make as a result of smart metering:

    Overall, and taking into account all costs and benefits, we expect the average dual fuel household to realise an annual bill saving of around £24 by 2020, in comparison to a situation without a smart meter roll-out. For non-domestic dual fuel customers, we expect annual bill savings of £164 by 2020.[162]

Several witnesses agreed that DECC's projections for savings by domestic consumers were achievable with the right information and support.[163] A few witnesses agreed with DECC that these projections were in fact conservative.[164] However, Policy Exchange was more cautious, stating that it was not clear whether the projected savings could be delivered.[165] Consumer Focus questioned how achievable the estimated savings for non-domestic consumers were.[166]

The role of information provision

74. The extent to which consumers will benefit directly from smart meters through energy and bill savings, will depend largely on how willing and able they are to engage with smart meters and technology.[167] Dr Raw said that "the amount that consumers benefit is partly in their own hands [and] how they make use of the technology that is there".[168] Paul Spence said that EDF trials had been focusing on how to get "the right consumer engagement and the right behavioural change sustained over time to deliver those benefits."[169]

75. Witnesses agreed that the quality of information and support provided to consumers before, during and after smart meter installation were important, and that some people, particularly vulnerable consumers, needed more assistance than others.[170] Paul Spence reported some of the findings from EDF trials in this regard:

    One of the things that app trials and pilots have taught us is that we need to work especially hard to help segments of the consumers who are disengaged, either because they are vulnerable or because they do not want to engage, to understand smart meters…to understand whatever device they might use and…what it might require of them by way of behavioural change if they want to see the benefits of smart metering. We already know that we have to work particularly hard to make sure that we communicate right with different segments and it is not a one size fits all.[171]

Policy Exchange suggested that although the provision of up-to-date billing and consumption data would address one important barrier, other information barriers existed, such as knowing what action to take to reduce consumption, or how much energy particular actions would save.[172] The provision of information and advice is discussed in more detail in the next chapter on consumer concerns and engagement.

The role of real-time feedback

76. As outlined in chapter 2, accurate billing and access to real-time consumption data are seen as being key to helping consumers manage and reduce their energy usage.[173] However, witnesses had mixed views on the best means of providing consumers with this data. Paul Spence said that "it is essential that you are given information about your consumption in a way that you can understand...It may be you want it on paper, on a display, on your smartphone, or on your computer. The range of devices that people use to access information is enormous."[174] Dr Gary Raw suggested that "what people benefit from most is really simple, direct information presented in a very visual fashion".[175] Sean Weir of SmartReach agreed that consumers need a simple means of accessing consumption data at first:

    We need to provide a basic service or basic device in the home so that all consumers have some level of information that enables them to understand their gas and electricity usage minute by minute, day by day. It is through that that they will start to change their behaviour.[176]

77. DECC believes that the in-home display (IHD)—a small device with a screen that displays up-to-date consumption and billing data—is key to providing this information, and has mandated that all domestic consumers should be offered one with their smart meter:

    To help consumers realise benefits, the Government is requiring energy suppliers to offer in-home displays (IHD). IHDs will give consumers easy access to information on their energy consumption in pounds and pence that will help them manage and control their energy use. This requirement was informed by evidence that provision of real-time information is important in delivering energy savings.[177]

It said it was ensuring that the "design of the IHD is easily accessible to as many consumers as possible".[178]

78. Alex Henney felt that it was a waste of money to provide IHDs as a matter of course and suggested that consumers should buy their own if they wanted one.[179] He said:

    I have no problem with people going into a shop and buying an IHD. I have a lot of problem with £600 million worth of socialised costs, of which a significant proportion will get wasted.[180]


79. Evidence on the extent to which IHDs help consumers to manage and reduce their energy use was varied, with some witnesses seeing them as a useful tool.[181] Baroness Verma said that consumers had told her that just having an in-home display had "made them think very carefully about how they use energy."[182] Jacqui Russell told us:

    The Energy Demand Research Project, which was carried out for a couple of years in the run up to 2011…showed that the combination of a smart meter and IHD made a real difference to the level of energy savings that people were able to make. That is what informed our requirement that all domestic consumers should be offered an IHD, because we saw a real difference in that trial.[183]

One witness described how useful he had found his IHD:

    I have one in the house and we sit down for tea at 6 pm and I can tell straight away whether the kids have left their lights on upstairs, because it is a little bit higher than it was the same time yesterday. I say to them, "What's going on?" and off they go and turn the lights can see day to day, hour to hour what is going on, whether you have left lights on or put the tumble dryer on. It spikes up and you realise, "Actually, it's a sunny day, maybe I shouldn't have put the tumble dryer on today".[184]

80. Other witnesses were less enthusiastic, suggesting that IHDs might be used for only a short time before being shoved in a drawer, thrown away or otherwise falling out of use.[185] One witness described how his IHD had fallen out of use:

    I had one in the house. I looked at it, I paid attention to it, the batteries ran out and I have not seen it since.[186]

Stuart Rolland said that British Gas had found "the level of engagement at the time of installation and individually thereafter with in-home display was very strong but it does not remain the centre of attention in the home for a very long time."[187] However, Don Leiper said that E.ON's research suggested "that after 12 months 94% of customers are still engaging with their in-home displays on a regular basis and 78% believe that they have changed their behaviour because of them".[188]

81. Professor Harriet Bulkeley outlined the findings to date from her research in relation to the Customer-Led Network Revolution project:

    We have spent almost 500 hours now speaking to people about in-home displays and smart meters...What we found is roughly two-thirds of the people that we have spoken to are very enthusiastic about their in-home displays, about one-third of them are less enthusiastic, and about 3% actively disconnect them, so very few actively move away from them.[189]


82. Dr Raw and Professor Bulkeley thought that IHDs should be offered when smart meters are installed.[190] However, several witnesses suggested that instead of automatically being offered an IHD, consumers should be offered a choice of how to access their consumption data—for example, via a smart phone or tablet.[191] Tony House of SSE said:

    We think the IHD has its place and for [certain] customers...absolutely that would be something we would make available. However, we need to recognise that different segments have different expectations, so our suggestion is that we should be able to offer a multitude of different touch-points rather than just be focused on the IHD.[192]

Darren Braham suggested that consumers would benefit from a more sophisticated interaction with their consumption data:

    In our experience, our customers do not necessarily want a display…We think the enduring benefits do come from providing the information through a web interface or providing the sort of comparison data to similar homes that drives enduring behavioural changes and not through a display that primarily will show instantaneous changes in consumption.[193]

83. Professor Bulkeley agreed that "a large majority of people" would enjoy using other devices, but warned that it "won't suit everybody to interact with their in-home displays and their home systems in that way".[194] She described how easy some people found IHDs to use:

    The in-home displays we are looking at is a traffic light system—red, amber and green—and people find that intuitive. People don't even ask for it to be explained. People understand that if it is red, something is not quite right, if it is green it is fine, and they like that.[195]

Other witnesses pointed out that smart phones and other devices could be used in conjunction with IHDs. Sean Weir said that it was "entirely possible" to connect "through your iPhone, your iPad or on to the TV screen with smart TVs and so on...through this architecture".[196]

84. Several witnesses agreed that IHDs provided a useful starting point for understanding energy consumption, with some pointing out that this could lead to more sophisticated understanding of their consumption and interaction with smart technology.[197] Dr Darby said:

    There is a first order effect, which is that, for a lot of people, this particularly gives them an awareness of their electricity consumption that they did not have before and it gives them a tool that they can experiment with. They can switch things on and off and see what effect it has…In the longer term, it helps build up an energy literacy, so that they start to be more open to suggestions of the kind coming from people like London Power Networks about belonging to this whole thing, the grid, being active in it and being able to shift their consumption in such a way as to help the grid to function better.[198]

85. During our visit to California, Charles Goldman at the Lawrence Berkeley National Laboratory outlined the findings from a research study in Oklahoma that programmable thermostats might be more cost-effective than IHDs in helping consumers to manage their energy use and particularly in shifting consumption out of peak periods.[199] However, Dr Raw and Dave Openshaw warned that care should be taken in drawing comparisons between studies from different parts of the world, as differences in climate, heating/cooling needs, appliance types and power generation mix could all be significant.[200] Mr Goldman suggested that the UK should seriously consider doing large-scale pilots to develop realistic estimates of the savings that might be obtained from devices such as IHDs as well as from time-based pricing, and other enabling technologies such as programmable communicating thermostats.[201] As we heard from Professor Bulkeley and Dave Openshaw, such pilots are currently under way.[202]


86. Consumer Futures has suggested that "the figure on the IHD may not include any debt, Green Deal charge or standing charge" and so could be "significantly lower" than a customer's actual bill and therefore affect their ability to budget for their energy costs.[203] Audrey Gallacher told the Committee:

    [IHDs] are only really going to be helpful if they do what customers want...Right now you can get information, or it is planned that you will have information, about your energy costs in pounds and pence, but that is only going to be an indicative cost. Research we have done says that about 93% of people would really value knowing through the IHD what their current spend was and what their obligation to the supplier was in terms of their bill. Right now, we are not going to have that completely accurately.[204]

She suggested that it might be worth investing a little more to ensure that the information displayed on IHDs was accurate and up to date rather than "wasting quite a lot of money because we are not giving customers what they want" from them.[205]

87. The provision of real-time consumption and billing data is central to consumers' ability to manage their energy use, but it is unclear just how accurate the billing information provided on IHDs will be. We accept that many consumers will want to access their data via smart phones, tablets and other means, but we are also convinced that in-home displays (IHDs) help many consumers to gain a basic understanding of their energy consumption and costs. If the projected consumer savings and other benefits of smart meters are to be achieved, consumers must be presented with the best opportunity to gain a fuller understanding of their energy usage from the moment they receive their smart meter. We support DECC's position that all households should be offered an IHD with their smart meter. However, we also recommend that more should be done to ensure that these devices provide accurate information so that they can be used most effectively by consumers.

Small and micro-businesses

88. Consumer Focus has raised concerns that although projected figures for energy savings among domestic consumers seemed "achievable", it was "unclear how realistic" the projections for average savings of £191 by 2020 were for small businesses.[206] It was particularly concerned that there was "no requirement to provide any kind of real-time information", which it sees as the "big key for behaviour change".[207] For example, suppliers will not be obliged to provide small and micro-businesses with IHDs. The FSB suggested that micro-businesses were "broadly similar to domestic households in terms of energy consumption" and should therefore receive the "majority of safeguards proposed for the domestic sector".[208] Both Consumer Focus and the FSB felt that small businesses should be offered IHDs or other means of accessing their consumption data without charge.[209]

89. DECC and Ofgem argued that IHDs would not suit all businesses' needs and that they could buy their own if they wanted one.[210] Jacqui Russell said:

    Non-domestic consumers is a different group of people from domestic. It is quite a diverse group...Some of those non-domestic businesses employ energy managers. They are already quite active. They may have advanced metering already, and it is someone's job to worry about energy. Actually, an IHD in that context is not likely to make a lot of difference. If businesses think an IHD or a wizzy gadget in their home with real-time in front of somebody relevant is what they need, they will be able to access those from the market and connect them to their meter within the home. What there isn't is a business case for saying, "Every non-domestic premises should be offered an IHD".[211]

However, she also accepted that the energy behaviour of many small and micro-businesses is "more like" that of domestic consumers.[212]

90. Ofgem suggested that different businesses had different data requirements and that smaller businesses were not being charged to access their consumption data:

    In the non-domestic market, the level of data provision and the complexity of the data service offers may vary and there are no rules governing charging for metering or data services. In practice, early experience from the installation of smart-type electricity meters to smaller non-domestic sites indicates that consumers are not being separately charged for access to half-hourly consumption data at the moment. [213]

Ofgem has also clarified that the Government intends to extend to smaller non-domestic consumers the requirement that already exists for larger non-domestic consumers to "be given timely access to the data provided by their advanced meter, on request".[214] It has also noted that "smaller non-domestic consumers with a SMETS 2 compliant meter will be able to directly access detailed consumption information held by the meter, for free...via the Home Area Network (HAN), using a compliant Consumer Access Device."[215] However, this may require them to purchase a device on which the data can be displayed. Also, it is unclear whether small businesses with pre-SMETS 2 meters will have similar access to their consumption data.

91. We see a fundamental incongruity in DECC and Ofgem's position that on the one hand IHDs are integral to domestic consumers' ability to reduce and manage energy consumption and should therefore be offered to them, but that on the other they need not be offered to small and micro-businesses. We question how the ambitious energy savings that have been projected for the non-domestic sector can be achieved by small and micro-businesses if they are not given the same opportunities as domestic consumers to access their consumption data. It is in all our interests to engage as many consumers as possible with smart meters in the short term, as this may increase their ability and willingness to engage with more sophisticated demand response incentives in the long term which could bring wider benefits. We recommend that small and micro-businesses should be given the same offer of an in-home display, free of charge, that domestic consumers will get upon installation of a smart meter. At the very least, they should have free access to the consumption and billing data that IHDs are expected to provide.

162   Ev 93 Back

163   Q 59 [Audrey Gallacher]; Q 111 [Dr Raw and Dr Darby]; Q 161 [Dave Openshaw and Dr Raw]; Qq 294-304; Ev 85; Ev 99; Ev 106; Ev w118; Ev w122; Ev 110; Ev 126  Back

164   Qq 330 and 384 [Baroness Verma]; Q 266 [Stuart Rolland]; Q 267 [Darren Braham]; Ev 93 Back

165   Ev w127 Back

166   Q 56 [Audrey Gallacher]; Ev 126 Back

167   Q 59 [Audrey Gallacher]; Qq 60 and 76 [Allen Creedy]; Q 78 [Hans Kristiansen]; Q 163 [Dave Openshaw and Dr Gary Raw]; Q 221 [Paul Spence]; Ev 65; Ev 99; Ev 121; Ev 146; Ev w127 Back

168   Q 163 Back

169   Q 221 Back

170   Qq 62 and 69-70 [Audrey Gallacher]; Q 115 [Dr Darby]; Q 123 [Dr Gary Raw]; Q 232 [Paul Spence]; Q 262 [Stuart Rolland]; Ev w47; Ev 126. See also summary notes of LBNL visit in Annex 1. Back

171   Q 232 Back

172   Ev w127 Back

173   Q 59 [Audrey Gallacher]; Qq 79 and 103 [Sean Weir]; Q 114 [Dr Darby]; Q 269 [Stuart Rolland]; Qq 294 and 303; Qq 385-86 [Baroness Verma]; Ev 93 Back

174   Q 212 Back

175   Q 122 Back

176   Q 79 [Sean Weir] Back

177   Ev 93 Back

178   Ev 93 Back

179   Qq 181 and 194-96 [Alex Henney] Back

180   Q 195 Back

181   Q 61 [Audrey Gallacher]; Q 104 [Sean Weir]; Q 119 [Dr Darby]; Q 124 [Professor Bulkeley]; Q 269 [Stuart Rolland and Don Leiper]; Qq 294 and 303; Qq 385-86 [Baroness Verma and Jacqui Russell] Back

182   Q 385 Back

183   Q 386 Back

184   Q 104 [Sean Weir] Back

185   Q 104 [Tony Taylor]; Qq 190 and 194-96 [Alex Henney]; Q 269 [Darren Braham] Back

186   Q 104 [Tony Taylor] Back

187   Q 269 Back

188   Q 269 Back

189   Q 124 Back

190   Qq 132-35 [Dr Raw and Professor Bulkeley] Back

191   Q 78 [Hans Kristiansen]; Qq 190-94 [Alex Henney]; Q 231 [Tony House]; Q 233 [Andrew Ward]; Q 269 [Stuart Rolland and Darren Braham] Back

192   Q 231 Back

193   Q 269 Back

194   Q 138 Back

195   Q 123 Back

196   Q 79 Back

197   Q 79 [Sean Weir]; Q 119 [Dr Darby]; Q 133 [Dr Raw]; Q 269 [Stuart Rolland, Darren Braham and Don Leiper] Back

198   Q 119 [Dr Darby] Back

199   See LBNL visit summary notes in Annex 1. Back

200   Q 149 Back

201   See LBNL visit summary notes in Annex 1. Back

202   Q 108 Back

203   Ev 126 Back

204   Q 61 Back

205   Q 61 [Audrey Gallacher] Back

206   Ev 126 Back

207   Q 59 [Audrey Gallacher] Back

208   Ev 146 Back

209   Q 63 [Allen Creedy]; Ev 126 Back

210   Q 304; Q 391 [Jacqui Russell]; Ev 79 Back

211   Q 391 Back

212   Q 394 Back

213   Ev 79 Back

214   Ev 79 Back

215   Ev 79 Back

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© Parliamentary copyright 2013
Prepared 27 July 2013