1 Introduction
1. Smart meters have the potential to bring great
benefits to consumers and suppliers as well as improve the UK
energy infrastructure. Smart meters allow energy suppliers to
get remote electricity and gas readings from households and businesses
using mobile phone-type signals and wireless technologies. The
potential consumer benefits from smart meters include reduced
energy bills through reduced energy consumption alongside energy
efficiency. The roll-out of smart meters in the UK is due to take
place between 2015 and 2020 with an estimated 53 million devices
to be installed by energy suppliers in 30 million homes and businesses.[1]
DECC estimates that the roll-out of smart meters will cost around
£10.9 billion and these costs will be passed onto consumers.[2]
Concerns have been raised about the lack of a budget cap for this
programme.[3] However,
the Government expects the cost to be offset by expected savings
of £17.1 billion, in part from energy efficiency.[4]
The roll-out of smart meters must be managed carefully if these
benefits are to be achieved and costs are to be kept under control.
The Government has chosen to have energy suppliers lead the roll-out
of smart meters.[5] There
are two phases to the roll-out.
Phase 1: the foundation phase
2013-2015
2. Between 2013 and 2015, energy providers are undertaking
installation trials to build and test business processes, and
to establish what works best for consumers. The foundation phase
uses a smart meter called SMETS 1 (Smart Metering Equipment Technical
Specification). SMETS 1 was designated by the Secretary of State
in December 2012, with minor amendments made to the specification
in March 2014. Equipment installed in this phase must be compliant
with SMETS 1 if it is to count towards suppliers' roll-out obligations.[6]
The Government is working with industry and consumer groups to
prepare for the mass roll-out. This includes establishing a code
of practice to ensure householder protection and setting up the
data and communications infrastructure needed to read meters remotely
and securely. At the end of September 2014 the Government reported
that there were 543,900 domestic smart meters (328,800 electricity
and 215,100 gas) operating in smart mode, which represents 1.2
per cent of all domestic meters operated by the larger suppliers.[7]
Phase 2: the mass roll-out phase
2015-2020
3. Following the foundation phase, energy providers
will be obliged to complete the mass roll-out between 2015 and
2020. Energy companies will contact their customers to install
smart meters. The mass roll-out phase will use a SMETS 2 meter,
which has technical differences to SMETS 1.
4. The Data Communications Company (DCC) and Smart
Energy GB have been appointed as key enablers of the mass roll-out.
The role of Smart Energy GB, which is funded by suppliers and
was launched in 2014, is to engage consumers on smart meters on
behalf of suppliers. The DCC was appointed by DECC in September
2013 and its role is to provide the national communications structure
that links the smart meters in homes and businesses to energy
suppliers. The DCC aims to ensure that the same smart meters can
be used with different energy suppliers, thereby resolving concerns
about interoperability and retaining customers' freedom to switch
suppliers. The mass roll-out was due to start at the end of 2015,
however, in November 2014, the DCC launched a consultation 'Resetting
the DCC Delivery Programme" whose purpose is to seek an extension
of the start date to 2016.[8]
5. In June 2014, the National Audit Office issued
a report called "Update on preparations for Smart Metering".[9]
The Public Accounts Committee (PAC) then held a short inquiry
into preparations for smart metering.[10]
The PAC received written evidence from DECC and Opower, held a
one-off oral evidence session in June 2014 with DECC, and published
their report on 10 September 2014.
Our inquiries
6. In our 2013 report, we investigated the potential
costs and benefits of the smart meter roll-out, as well as progress
towards the 2015 launch.[11]
We were broadly supportive of DECC's efforts but highlighted five
areas where more clarity was needed:
· Keeping
the overall costs under control
· The relationship
between smart meters, demand-side response and a smart grid
· Consumer engagement
· Consumer savings
· Smart meter
coverage and interoperability (i.e. enabling one meter to be compatible
with all energy suppliers)
We also noted that DECC had not published the Major
Projects Authority's review of the smart meter project on grounds
of commercial sensitivity. We stated that given the concerns that
have been raised about the risk of cost escalation, the Government
should "make this information available as soon as possible".[12]
The Government has yet to publish any of the three MPA assessments.
7. Given the national importance of the smart meter
programme and the concerns that we raised in our first inquiry
on the subject, we followed up our earlier inquiry by inviting
responses on the following issues:
· What
progress has been made on smart meter roll-out since our last
report on this subject?
· To what
extent has the Government addressed the concerns we raised about
smart-meter roll-out, and the concerns raised by other interested
parties since we published our last report?
· What
problems have emerged during the foundation stage and how are
they being addressed?
· What
are the remaining challenges (technical, communication or other)
associated with launching the mass roll-out of smart meters in
2015, and completing it by 2020?
· How
can these challenges be overcome?
· What
are the best approaches to monitoring the mass roll-out of smart
meters?
· What
contribution can smart meters make to expand the use of demand-side
response as a means of addressing possible capacity shortages?
· To realise
the full potential benefits of smart meters, is it necessary to
introduce time of use pricing for electricity?
8. We received 35 submissions of written evidence
and held two oral evidence sessions in December 2014. A full list
of witnesses can be found at the back of this report. We are grateful
to all those who took the time to contribute to this inquiry.
1 Helping Households to cut their energy bills 12 October
2012 Back
2
Helping Households to cut their energy bills 12 October 2012 Back
3
Which? (PSM0016) Back
4
Helping Households to cut their energy bills 12 October 2012 Back
5
Smart Meters: A guide
8 October 2013 Back
6
Smart Meters: information for industry and other stakeholders
(22 January 2013) Back
7
Smart Meters, Great Britain, Quarterly Report to end, September 2014 Back
8
Resetting the DCC Delivery Programme,
accessed 6 February 2015 Back
9
National Audit Office Update on preparations for smart metering,
5 June 2014 Back
10
Public Accounts Committee Update on preparations for smart metering
10 Sept 2014 Back
11
Energy and Climate Change Committee Smart meter roll-out 16 July
2013 Back
12
Energy and Climate Change Committee 16 July 2013 Back
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