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]
HOW USEFUL DO CONSUMERS FIND IHDS?
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 off...you 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]
SHOULD IHDS BE OFFERED TO ALL CONSUMERS?
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]
HOW ACCURATE IS THE INFORMATION
ON IHDS?
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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