Energy and Climate Change CommitteeWritten evidence submitted by Orsis (UK) Ltd
I. Executive Summary
ORSIS is fully behind the rollout of a smart solution for the UK domestic market. The supply industry would benefit from accurate consumption information, which can be used for accurate billing and more sophisticated ToU tariffs and transparency. ORSIS does not agree that the current process will deliver the best value for money, as it is not consumer driven. It lacks input from the consumer, whom ultimately will pay the higher cost of the smart meter.
ORSIS also suggests that the Government should consider a change in its the strategy, as the word Smart Meter may be a misnomer. Effectively, the government needs to provide a Smart Solution, integrating the Smart Meter into the customer domain, the current process seem to be overly focused on the features of an individual smart meter, and not on a consumer solution.
II. Responses to Questions
(a) Are the Government’s cost and timescale predictions for roll-out realistic and will it deliver value for money?
In Italy the rollout of electricity smart metering cost less than 3 billion Euros (for an equivalent population)—for an annual benefit of 500 million Euros. The cost of the current rollout proposals currently stands at around £12 billion—a significant sum or money, and what we would question is whether a more straightforward approach utilising existing technology, and current business processes has ever been considered. One would have to ask why the UK programme is set to cost 4 times this sum—and whether all the costs of the programme can be justified.
Given the status and complexity of the Programme, ORSIS UK believes that the target completion date of December 2019 is unrealistic. There is no room for any delays in the process at any stage and in any area of the programme. In the most recent consultation, DECC announced that it did not expect DCC to be live until Q4 2014, a delay of 6 months, and this is before any development has started—this deadline will only move one way.
The SMETs meter specifications have been sent to the EU for approval, but no decision has yet been made on the HAN solution to be implemented. ORSIS UK is aware that the Zigbee protocol favoured by many may be two years away from being fully available for use in the market.
As the recent NAO report states, there is little contingency in the proposals for delays to any of the key deadlines within the prospectus. The current installation workforce will only achieve 20% of this target—therefore there is an urgent need for a skilled workforce to be developed before 2014 that are capable of safe installation of gas and electricity meters, and explaining the workings of the meters and the IHD—all for a price of £58 per household (for dual fuel—£29 electricity and £39 gas). This factor alone could delay the programme and have a detrimental effect on the achievement of the Governments targets for energy savings. In this respect we feel that the NAO report does not investigate this matter in sufficient detail, and suggest that further work is required to assess the risk and cost of failure to deliver within the 5-year period.
(b) What are the potential benefits of smart meters for consumers, and what barriers need to be overcome in order for consumers to realise them?
The main benefit of Smart Metering is the availability of detailed consumption data, the demand profile. ORSIS is pleased to learn that the consumer can access the demand profile data and that is can be provided to the supplier for billing purposes. ORSIS believes that accurate demand profile information is very useful to both consumers and suppliers, but security and privacy must be considered carefully.
ORSIS strongly disagree with the current focus on the In Home Display (IHD), as it does not provide enough sophistication and detail. ORSIS does agree with the NAO report that there is little evidence to support the assumption that customers will make significant and lasting changes to their energy consumption as a result of the installation of smart metering. The “gadget” effect of the IHD may not have a lasting effect, Suppliers will only support it for one year, and there is evidence that suggests once the novelty has worn off, consumers lose interest, and the device ends up in a drawer. We believe that the IHD should be one of a range of solutions offered to consumers, and that it should be an opt-in rather than an opt-out solution. The fuel poor will not necessarily benefit from the level of information provided by an IHD—but rather from timely and user-friendly advice from their Supplier on the most effective tariff for their needs. The current estimate of cost of the IHD is £15, which we feel is hugely understated, the fuel poor are already struggling, this is an additional financial burden. We do not feel that the current proposals have considered the impact—financial and in terms of successful rollout.
(c) Is there a possibility that suppliers will gain considerably more than consumers from smart meters? Is enough being done to ensure that any financial benefits accruing to suppliers will be passed on to consumers?
The current state of the Smart Meter (not the Smart Solution) has been largely Supplier and Industry driven, supported by OFGEM and later DECC. The process has been structured around a number of working groups, and is now in the consumer engagement phase. It is naïve to think that the vested parties have not been able to influence the process to cater for their specific requirements.
It is also a risk that the true cost of the Smart Meter will not be transparent to the consumer, each supplier may have different commercial approach to financing assets.
(d) What lessons can be learned from successful smart meter implementation and usage elsewhere in the world?
There is much information available on Smart Metering projects in other countries. The primary difference is the complications in the UK, where the rollout is managed in part by Government, Utilities, Equipment providers, comms providers, and the DCC. Such a diverse and fragmented approach seems overly complex.
It seems that in other countries, the smart metering rollout has been largely been managed by the distribution part of the business. UK is somewhat unique as it is a de-regulated market, and it is now a supply driven rollout.
(e) Will smart meters empower customers to take greater control of their energy consumption?
Yes. As stated above, access to accurate Demand Profile data allows the consumer to make informed choices. The issue is how the data is being made available and how individual consumers can be empowered to make informed decisions. Providing an IHD is not a heuristic solution to a rather complex problem; how to take advantage of accurate demand profile data. There needs to be support in place for the individual consumers interest and involvement in their demand profile.
ORSIS main business is to provide energy consumption data for various parties, we provide accurate, timely information using very simple data collection devices. The DCC can be expanded to provide similar level of service for the Domestic Market.
(f) Will consumers on pre-pay meters obtain the same benefits from smart meters as other consumers?
ORSIS believes that current pre-payment customers have a better understanding of their energy consumption. Smart meters will give pre-payment customers additional information which may be helpful if the demand profile is made available.
(g) Should vulnerable customers and the fuel-poor be first in line for smart meters so they can get the benefits sooner?
ORSIS believes that these customer may need support in terms of how they can take advantage of a Smart Meter. We suggest that a Smart Solution to include support for the different segment of consumers.
(h) What is the best way of involving third-party trusted messengers, such as charities, consumer groups, community organisations, local authorities and housing associations in roll-out?
ORSIS has a strong portfolio of customer which includes Housing Associations. HA in particular welcome the introduction of Smart Meters, but there is a concern that it may be difficult to integrate the Smart Meter into their sustainability processes. The government is proposing several projects, such as the Green Deal and RHI. These projects have separate metering requirements, and it is seems difficult to unify the data from the Smart Meter and the ORSIS energy management services.
Housing Associations and other social landlords would fulfill an important role in consumer engagement to ease the roll out to the most vulnerable consumers.
Orsis believe the best way to involve the social landlord would be to provide an accurate message of the benefits of the roll out to the consumer and deliver advice regarding the roll out mechanisms that can be delivered in a concise message.
(i) 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?
(j) Are levels of public awareness of and support for smart meter roll-out increasing?
ORSIS believes that the current consumer engagement process has just started. It is difficult to provide constructive feedback on the rollout as this stage.
(k) Is enough being done to increase consumer awareness about smart meters? Could DECC’s consumer engagement strategy be improved?
ORSIS is not involved in the DECC planning process for the consumer engagement strategy, but we are looking forward to the disclosure of process, and we would appreciate the opportunity to provide feedback. We do believe that the Domestic Smart Metering project should have considered consumer requirements first, and not last.
(l) Are consumers’ concerns about privacy and health being addressed adequately?
N/A
(m) Is there any evidence that consumers’ concerns about smart meters are declining or growing?
N/A
(n) Will the commercial benefits of smart meter roll-out be captured within the UK?
N/A
(o) Will DECC’s current approach to roll-out, including on procurement and establishment of the central Data and Communications Company, deliver an optimal data and communications strategy?
The drive for interoperability has pushed the development down a complex path. Surely the most interoperable thing we have is the Data Transfer Network (DTN)? Any supplier can receive meter readings from any data collector via the DTN—whether that meter reading is provided in a “smart” way or via a meter reader is largely irrelevant. To that end, rather than spending millions on the DCC, and years developing and testing it, why has a continuation of the current business process arrangement not been considered?
A further way of delivering the benefits at a fraction of the cost would be to consider utilising a back office approach to data and bill management, as currently used to great effect in the mobile phone industry.
(p) What criteria should DECC use to measure the ongoing success of roll-out?
ORSIS suggests that the regulator (OFGEM) be involved in the auditing of the rollout. OFGEM should be consulting the consumers on the metrics required for the evaluation of the success.
February 2013