Energy and Climate Change CommitteeSupplementary written evidence submitted by Hans Kristiansen, Orsis (UK) LTD
I would like to take this opportunity to thank you and the members of the committee for allowing me to present my views to you during your review process. It was useful also to hear the views of the others giving evidence.
Given the recent announcement by the Government that the roll-out has been significantly delayed, your Committee’s inquiry and subsequent report will therefore play a crucial analysis on where the programme is and guidance as to what should now be done to ensure a successful roll-out. To this end I would like to take this opportunity to reiterate and elaborate my views further as you make your deliberations.
The delay in the smart metering programme only exacerbates my concerns that the current proposals are: over complex, too expensive and will not deliver the required benefits within the timescale. The latter point has already been proven because of the delay and is largely due to allow the full development of the DCC and for the technology required for the Home Area network to be developed and tested. I still have doubts that the new deadline will be achievable—a view shared by other members of the industry, since there is still a general lack of activity in the foundation stage.
The current proposals have a specified meter technology, referred to as SMETS2 which has been developed largely to meet the needs of the suppliers, rather than the consumer. There are elements within this that will not add value to the consumer, and yet they will ultimately be footing the bill.
The cost of the current proposed solution now stands at an estimated £18 billion, with anticipated benefits of c£11 billion. There remain serious concerns with the accuracy of the Impact Assessment and the figures used to calculate the costs and benefits. There are many that feel the costs used in the Impact Assessment are out of date, and understated. For example, the costs of the installation of smart electricity and gas meters is set to be £59 for a dual fuel installation—this figure is hugely optimistic based on the costs currently in the market place. There are other cost estimates that, in our opinion, require further investigation in the light of experience.
In addition to concerns regarding costs, we feel that the forecast benefits warrant further examination, and the balance of those benefits between the consumer and the Supplier. Whilst suppliers maintain that the high level of competition in the supply industry will ensure that all possible savings are passed back to consumers, there is little history to back this up, and we would urge the government to review the benefits as they are likely to impact interested parties.
The focus of the rollout has been on a “smart meter” rather than a “smart service” and the fundamental issue of what the customer really wants and needs has been lost in the lengthy consultation process. There is technology available now that will allow the consumer to receive an accurate bill, and the supplier to receive half hourly consumption data on which to formulate time of use tariffs to better reflect a consumers energy patterns. Utilising the existing business processes and systems, suppliers can receive actual meter readings via the DTN, and authorised parties can receive the half hourly consumption data in a safe and secure manner.
The foundation stage of the programme has failed to deliver significant levels of installations to date, with many suppliers choosing to wait until SMETS2 is fully specified before beginning any rollout of smart technology. Those who have installed in volume have not used technology that will be supported in the long term, and in many cases are not even SMETS1a compliant. If there is to be any progress before full rollout, then a solution which benefits all parties must be found. We recommend the use of a domestic half hourly meter, as utilised to great effect in the commercial sector; which facilitates energy management and fulfils the requirements of fiscal metering. This could be achieved with existing technology, in a cost effective and consumer friendly way, with rollout beginning immediately.
The basis of much of the saving to the consumer is that, by understanding how and when they use their energy, they will make significant and lasting changes to their consumption patterns, and that suppliers will be able to offer a more suitable tariff for their needs. The use of an IHD has been mandated in the current proposals, but we feel that: the sustained use of an IHD has yet to be proven, the sophistication of device which costs only £15 will be minimal, the fact that Suppliers are only obliged to support the device for one year, and the fact that not all consumers will have equal access to a device (ie blind or disabled consumers) means it may not deliver the benefits required. We therefore believe that the marketplace and the consumer should dictate the most appropriate method of delivery of data. An IHD should be one of the offerings, not the only one, and not the one the consumer has to have!
The recently announced delay of 12 months gives an ideal opportunity for reflection and to undertake a full review of the current proposals. I would therefore respectfully urge your Committee to make the following recommendations:
A full, bottom up, review of the Impact Assessment, identifying the costs and benefits associated with each level of functionality proposed within the SMETS2 specification. This would ensure that the programme delivers only what benefits the consumer, or saves the industry significant cost.
An additional assessment should be undertaken, to calculate the cost benefit of existing, simpler technology utilising existing industry systems and business processes.
Review the current specification in the light of what the programme is meant to deliver—ie actual meter readings, facilitation of smart grid technology, and better consumption information to the consumer. Is the current programme at risk of over-egging the pudding and leaving a rather sour taste?
I would reiterate that the introduction of smart metering is a necessary and beneficial step for the energy industry—benefitting consumers and suppliers alike, and preparing the way for smart grids, but I am concerned that the current proposals are a step too far. I am hopeful that your inquiry has led you to a similar conclusion, and that you can urge the government to reconsider their current plans to enable a more cost effective and timely rollout to take place.
May 2013