Evidence Check: Smart metering of electricity and gas Contents

4The balance between consumer and national benefits

53.Smart Energy GB told us that smart meters were bringing about a “revolution in Great Britain’s national energy system”, that would bring “huge benefits for consumers and our national infrastructure”.85 Similarly, DECC believes that the rollout will “bring major benefits to consumers and the nation”.86 This chapter explores the balance between the benefits of smart metering to the individual and to the network and the country.87

54.The most recent of DECC’s Smart metering Impact Assessments (IA), published in January 2014 and running to some 140 pages, estimates an overall positive net present benefit of £6.2 billion over the period to 2030 (comprising benefits of around £17 billion and costs of around £10.9 billion).88 The Department intends to publish an updated impact assessment later in 2016.89

Benefits to the individual and the supplier

55.The 2014 IA for the rollout refers to a 2.8% saving in electricity consumption and a 2% reduction amongst gas (credit) customers. The IA predicts that by 2020 an average household could make an annual saving on their dual fuel energy bill of £26, rising to £43 in 2030. The average dual-fuel non-domestic premise could be expected to save £200 per year in 2020.

56.Nick Hunn was sceptical of the extent to which consumers will change their behaviour for a relatively modest financial reward, arguing that “£26 a year or 7p a day is not a big incentive”, and that “there are far cheaper ways of achieving savings”.90 Pam Conway argued that “the savings come almost as a result of the data insight, rather than necessarily from people thinking of it as 50p a week”.91

57.Other benefits to the consumer referred to in DECC’s Impact Assessment include:

58.Although not a benefit to the consumer, other than through savings being passed on to customers, the Impact Assessment also describes benefits to suppliers:

Benefits of optimising electricity generation and network management

59.DECC’s December 2015 publication Towards a smart energy system explains that smart meters are a “critical building block” in delivering a smart energy system, alongside the development of better energy storage solutions.92 The document explains that a smart energy system as a whole could:

60.DECC’s current Impact Assessment refers to network benefits including:

61.Other national benefits referred to include reduction in carbon emissions,94 air quality benefits, and of course the enablement of a future smart grid.

Future benefits: smart grids, electric vehicles and smart charging

62.DECC’s report suggests that the significance of the demand side response can be expected to grow with electrification of heating and transport, and predicts that in the future “consumers could choose to set up smart appliances (e.g. heat pumps, dishwashers and washing machines) to respond automatically to price signals from smart meters and use energy when it is cheapest”.95 It also suggests that electric vehicles could automatically charge in this way when demand is low, and function as a means of storing electricity for managing times of peak demand.

63.BEAMA told us that the electrification of transport will “create challenges for network management”, given that “future EV [Electric Vehicle] fleets could add c.28GW peak demand in 2050 if no charging management solutions are in place”.96 BEAMA points to smart meters as a way of meeting the challenges of increased pressures on grid infrastructure, explaining that they would enable a “smart charging system”:

In a smart charging system, the charging cycle can be altered by external events and the EV effectively integrates with the whole power system in a grid. This means that, when permitted by the consumer, the charging of an EV can be paused or the rate of charge increased or decreased in response to commands received from energy network operators […] the system will provide an optimal charging profile to deliver lowest cost while ensuring the vehicle is ready when needed.97

Consequences of the electrification of transport for the grid were also considered in a recent report by the Energy and Climate Change Committee.98

The balance of benefits

64.In DECC’s impact assessment, the benefits are divided between those for consumers (from energy saving), suppliers (such as avoided site visits), and everyone (such as improved air quality).99 Table 5 summarises DECC’s figures.

Table 5: Overall (domestic and non-domestic) benefits of smart metering

Domestic (£m)

Non-domestic (£m)

Total (£m)

Consumer benefits (from energy saving and microgeneration)

4,295

1,437

5,732

Supplier benefits (including avoided site visits, reduced inquiries etc)

7,970

295

8,265

Network benefits (reduced losses, reduced outage notification calls, fault fixing, avoided investment from ToU (distribution/transmission) etc)

877

112

947

Generation benefits (avoided investment in generation from peak shifting through ToU)

803

49

852

UK-wide benefits (including CO2 reduction, air quality)

867

440

1,307

Source: DECC, Smart meter roll-out for the domestic and small and medium non-domestic sectors (GB): Impact assessment (January 2014) (summarised), “central case” scenario, pp 75 & 116

65.DECC’s analysis gives a significant gross benefit to consumers, which is much larger than the benefits to the network. However, this is less substantial at an individual or household level: if the gross consumer benefits are divided equally between the 30 million households and small businesses the benefit appears much smaller, at £191 each up to 2030.

66.Professor Christine Liddell of the University of Ulster noted that “a comparison of DECC’s [Impact Assessments] in 2011 and 2014 indicates that the benefits accruing to consumers have been downsized. At the same time, benefits accruing to networks and generators have increased”.100 This arises from a range of updates to the cost-benefit analysis. Nick Hunn argued that customer savings were being promoted as a key benefit of the rollout when the emphasis should instead be on supporting a smart grid:

We have made up the concept that this is all being led by customer savings, when there are probably better ways of getting customers to save money […] Yes, it is good to save energy, but the main reason for smart metering should be getting the data to control the grid and that seems to have been lost as the primary reason.101

Similarly, Dr Sarah Darby told us that:

smart metering was introduced as a means of improving system efficiency in the electricity network as a whole […] The smart metering programme is fundamentally about that. Having said that, I believe that it can be used in such a way as to help customers save money. We now have quite a body of evidence to show that that happens and is being sustained.102

67.It is unclear whether the Government’s primary aim of the smart meter rollout is the establishment of a smart energy system (and the realisation of the corresponding benefits of this for efficient energy generation, both now and in the future), or to save individuals money on their energy bills. The Government needs to do more to communicate the national benefits of smart metering alongside the potential cost savings and efficiencies for individual consumers. This was a weakness of the Government’s evidence check statement, and relates to a lack of clarity over the ‘problem’ that smart meters aim to address. In its response to this report, the Government should provide further information on how it expects smart metering to affect the required energy generation capacity of the network and the mix of energy generation sources.


85 Smart Energy GB (SME 19) para 1

86 DECC (SME 31) para 3

87 Others have explored the costs of the smart meter rollout, such as the Public Accounts Committee, and the National Audit Office published reports in 2011 and 2014 on this topic.

89 Department of Energy and Climate Change (SME 42) para 16

90 Q6

91 Q5

92 Department of Energy and Climate Change, Towards a smart energy system (17 December 2015) para 5

93 Department of Energy and Climate Change, Towards a smart energy system (17 December 2015) para 15

94 One witness (Hugh Smeaton (SME 43)) was concerned that the design of the smart meter rollout would not tackle avoidable network losses—the power lost through heating transmission wires—as another route to achieving carbon reductions.

95 Department of Energy and Climate Change, Towards a smart energy system (17 December 2015) para 23

96 BEAMA (SME 18) para 6.2

97 BEAMA (SME 18) paras 6.4–6.5

98 Energy and Climate Change Committee, 2020 renewable heat and transport targets, Second report of Session 2016–17, HC 173, Chapter 4

100 Professor Christine Liddell (SME 11) para 5

101 Q2

102 Q3




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16 September 2016