Energy and Climate Change CommitteeWritten evidence submitted by Itron (SMR53)

Executive Summary

1. Itron is one of the world’s largest suppliers of smart meters, data collection and software solutions, with nearly 8,000 utilities in the world using our technology.

2. Itron is pleased to have the opportunity to submit written evidence and has limited our evidence to areas of the enquiry where we can provide a useful perspective.

3. One of the key observations that Itron can offer about successful smart meter rollout is that public buy-in is essential. We would urge that engagement with consumers about the Smart Meter Implementation Programme begins as soon as possible, as consumer concerns are already beginning to be aired in the media and are not currently being addressed.

4. Itron has concerns about the impact of delays to the smart meter technical specifications (SMETS2) and the Data and Communications Company (DCC) licensing and services procurement, which are all essential preconditions for rollout.

5. Itron would also raise concerns about the limited volume of deployed smart meters achieved thus far, set against the significant investments made since the start of the programme. We believe there is risk to UK jobs and further investment until industry has confidence on final specifications and deployment.

6. Itron would also urge continued joined up working between the relevant security agencies, industry and DECC, to ensure that the appropriate level of end-to-end system security is built into smart meter rollout, to pave the way for a secure Smart Grid.

Introduction

7. Itron is pleased to have the opportunity to submit written evidence to the Energy and Climate Change Select Committee inquiry into smart metering. As a major smart meter manufacturer and DECC stakeholder, Itron is not in a position to comment on every point of the extensive terms of reference for the inquiry and, as such, has limited our points to areas where we can provide a useful perspective.

8. Itron is one of the world’s largest suppliers of smart meters, data collection and software solutions, with nearly 8,000 utilities in the world using our technology. We are a trusted partner within the energy and water industries and have extensive experience in supporting smart energy and water delivery programmes across Europe, North America and Australia. Itron has a significant UK footprint, with sites in Manchester and Suffolk.

9. Itron is supportive of the smart meter rollout programme and acknowledges the effort and commitment by DECC, Ofgem and industry stakeholders. However there are a number of issues about which further clarity is needed.

What lessons can be learned from successful smart meter implementation and usage elsewhere in the world?

10. Itron has extensive experience in supporting smart energy and water delivery programmes across Europe, North America and Australia.

11. One of the key observations that Itron can offer about successful smart meter rollout is that public buy-in is paramount. Itron has long made the point that a credible face for consumer engagement is needed. Our experience of other markets, such as the Netherlands, has shown that significant delays can be caused when consumers are engaged too late in the process.

12. Itron welcomed DECC’s announcement of a centralised consumer engagement vehicle, albeit at a fairly late stage in the rollout planning. However, timeline documents released by DECC state that engagement will only take place during the Foundation stage of rollout (ie from Q1 2014) to address consumer concerns about smart metering and build awareness, without inflating demand prematurely.

13. We would urge that consumer engagement begins during 2013, as consumer concerns are already beginning to be aired in the media and with local politicians. At the moment, these are being met with a vacuum of information; a situation that risks damaging public trust in the programme before it has even begun.

What are the potential obstacles to rolling out smart meters in the UK and how should these be addressed? What pitfalls have hindered roll-out programmes elsewhere and are we doing all we can to avoid them?

14. We have highlighted the main ongoing concerns about the rollout below:

Technical specification

15. Achievement of SMETS2, the full technical specification for smart meters for the UK, is a key precondition for energy suppliers to order equipment and plan roll-out to their customers in earnest. The process of compiling and notifying this document to the European Commission is complex and we believe that DECC has performed well in co-ordinating this work with industry. However, it remains concerning that the new timescale published by DECC in December 2012 only envisages completion of EU notification of the full SMETS2 specification by Q4 2013. As this deadline is also vulnerable to further delays, there is a risk that industry could enter the foundation period without a full technical specification, making industry and consumers vulnerable to the risk of stranded assets.

Functionality

16. Itron understands that part of the reason for the delay to SMETS2 is ongoing discussions between government departments and other stakeholders about adding additional functionality to the smart meter specification (for example, the ability to interface with third party devices eg CADs (Consumer Access Devices) and PPMIDs (Prepayment Meter Interface Devices). Itron is agnostic about this point and will work with government and industry to provide whatever functionality is required. However, we would make the observation that increasing functionality also increases cost, and that this will ultimately be passed to the consumer.

Prepayment

17. Itron acknowledges the importance of this important customer segment and we believe that the rollout of smart metering presents significant opportunities to extend existing benefits to a wider set of PAYG consumers. However it is important to ensure that this functionality is not implemented at scale until a stable and secure foundation has been achieved, to ensure a positive customer experience.

Cyber security

18. Itron would also highlight the importance of security in the success of the roll-out. Itron understands that adequate provision for this has been one of the factors behind the delays to SMETS2, however this is integral to consumer trust and buy-in for the roll-out, as well as the functional success of the programme and, indeed, national security. To ensure security measures are in place and all the specifications needed for rollout are still delivered in a timely manner, we would urge the Government to ensure that Defence and Security services continue to work with DECC in a joined up and well resourced way to ensure that the system security is adequate and proportionate. This is an essential precondition to a secure a Smart Grid.

Data and Communication Company (DCC)

19. Our concern about timescales also applies to the Data and Communication Company (DCC), which will provide the data and communications services providers for the rollout. According to current timescales, the DCC license will only be awarded in Q3 2013. Along with SMETS2, this is a key precondition for smart meter rollout and if delays to its formation are too long, energy companies would have to make their own arrangements for collecting and communicating smart meter data. This would mean extra cost and complications to ensuring data security.

February 2013

Prepared 26th July 2013