What Benefits Will Smart Meters Bring?
By Paul Homewood
The UK Government wants energy suppliers to spend £11bn on installing smart meters up and down the country.
According to their assessment, the benefits should outweigh the cost:
As Comms expert, Nick Hunn, showed last month, the government has underestimated costs by at least £1.6bn. But what about the supposed benefits?
This is the summary according to the BEIS study. These savings relate to the period 2013-2030.
Supplier Savings – £8250m
Let’s start with the biggest chunk, supplier savings.
Within the total of £8250m, the BEIS analysis identifies:
- Avoided site visits – £2.99bn
- Reduced inquiries and customer overheads – £1.21bn
Other benefits not costed include easier supplier switching, improved theft detection and debt management.
The smart meter programme has been in gestation for a number of years now. There was a time when everybody had their meters read, and substantial savings could be made by going digital.
Nowadays most people have access to the internet, and it is very simple to simply go on line to enter meter readings, which in turn generates automatic billing.
Rather like Tony Blair’s disastrous attempt to computerise the NHS, technology has passed the smart meter programme by.
The reality is that any savings accruing to energy suppliers are likely to be tiny.
Energy Savings – £5302m
This of course is, ostensibly, the main objective.
In BEIS’s words:
With near real-time information on energy use and costs, consumers are expected to make energy savings through enhanced energy efficiency behaviour.
I have long been dubious about this. If people really want to save money, they will do what they already do – turn down the thermostat, turn off the fire, and so on.
There may be a short period when people look at their newly installed smart meters and get a shock to find out how much that bath just cost.
But I suspect that most will quickly become disinterested.
There is actually a good analogy. Most cars these days have little computers telling you your mpg. But how many of us decide not to make a trip because of what that black box has told us?
Carbon Savings and Air Quality Benefits – £1392m
I think we can safely ignore carbon savings, which according to BEIS account for nearly all of this supposed saving, £1290m.
Consumers are not financially better off because there is less CO2 in the air.
Air quality savings are only estimated to be £98m, which over 18yrs is irrelevant. In any event, there is absolutely no evidence that emissions from a modern CCGT plant have any health effect.
And if there was, the government would not be encouraging biomethane, biomass plants or CCS technology.
Peak Load Shifting – £943m
The hope, of course, is to shift a proportion of electricity generation to cheaper off-peak times, thereby reducing the need for quite as much peak standby capacity.
Whether this can be done voluntarily via pricing mechanisms, or compulsorily by switching off supply remains to be seen.
Either way, spread over 18 yrs, the saving is only £52m a year. This is small change compared to the cost of providing standby capacity, already running at £1.2bn a year and likely to rise to over £2bn before 2030.
Put another way, it is like taking a sledgehammer to crack a walnut.
Network Related Benefits – £839m
According to the BEIS blurb:
Network operators will be able to improve electricity outage management and resolve any network failures more efficiently once a critical mass of smart meters has been rolled out; and they will be able to realise further savings from more targeted and informed investment decisions
Which all sounds rather woolly!
We are looking at a cost of at least £11bn, all of which will ultimately be passed onto consumers.
As with all such grandiose, government led projects, costs are likely to end up much higher than that.
As for savings, I’ll be generous and accept those quoted for peak load shifting and network, a total of £1.8bn. In my view, any other savings will be so small as to be irrelevant.
So we have a project that is likely to cost consumers at the very least £9bn, and quite likely much more.
And all for what?