John Peters, MD of Engage Consulting, advises suppliers on how to get their smart meters from China's factories to the box under the stairs.
From now until 2020, the majority of energy suppliers will be rolling out smart meters to customers.
This journey - starting at the factory production line in China and finishing with a meter fixed onto a wall under the stairs in a home in Britain - is a complex one.
Many are at different stages of their journeys - addressing a range of challenges. It is unchartered territory for suppliers and involves many tough strategic and commercial decisions.
Suppliers need to identify and select the right third party suppliers – the meter manufacturer and meter asset providers and installers - ensure the right commercial framework agreements, finance the rollout, ensure robust logistical arrangements are in place, have a strategy for SMETS 2 and ensure the business is ready.
Let’s consider the steps of the journey:
Selecting the manufacturer
Most big manufacturers are located in China and Korea and not all meters are made equally. Selecting a manufacturer that produces meters compliant with DCC specifications, adheres to rigorous testing and quality assurance standards and has the capacity to meet production demands and a tight roll out schedule can be a challenge.
Going it alone/direct
Depending on budget, suppliers can choose to go it alone and deal with the manufacturer directly or appoint a meter service provider to handle the process.
Using a meter asset management company with in-depth market knowledge, contacts on the ground and a track record of success in selecting partners and negotiating favourable deals has its obvious advantages.
Those going it alone, need to consider many factors including the manufacturer’s track record and the sustainability of the business, the quality of the products and their compliance with UK regulations, the testing processes and the time needed for this, whether the factory can meet production demands, how the products are shipped and how much will it cost. How much will the warranties cost and what is the returns policy for faulty goods? If the meters go wrong, who foots the bill – the supplier or the manufacturer?
Financing the rollout
Financing the rollout is a major decision. There are many deals to be struck and significant upfront investment is needed. All the commercial risks lie with the supplier and selecting the right financier; evaluating the finance options available and getting the right contracts in place is a complex and meaty challenge to overcome.
It is not just the meters that need financing, but the associated equipment such as in-home displays, the installation process and any fixing required on site. Engineers need to be trained and the marketing costs and consumer engagement programme need funding.
It is imperative suppliers make the right strategic decisions and Engage Consulting is working with several companies right now to help them evaluate these commercial deals.
Deciding on the SMETS 2 strategy
Whilst SMETS 2 technical specifications are still being agreed, decisions still need to be made about which meters to order now and in what volumes. SMETS 1 meters may not currently be considered as ‘compliant’ and there is much debate about this changing – but no one is certain.
Suppliers face the dilemma of whether to limit their SMETS 1 meter orders in view of future supply chain developments or opt for meters that can be upgraded when new specifications are confirmed. These decisions will be influenced by finance and strategy – and again this is tricky.
Meter fitters need to be selected and considerations here involve looking at their track record, their training, the quality of service they provide and the regions they cover across the UK. Some fitters will be stronger in some regions compared to others which will impact the quality of customer service they can provide.
How do they work and how do they handle any potential customer issues? How willing are they to help engage the customers? Are they willing for instance to carry iPads with them on customer visits and show supplier marketing videos on how to use smart meters - essentially acting as a company ambassador?
Suppliers also need to ensure they can configure the meters, connect with the DCC and ensure they not only work but that the customer also understands how it works too.
From getting the meters made, shipped to the UK, into the hands of the right meter fitters and on to the customer’s wall will involve suppliers going through many hoops. But they don’t need to be on their own. We are working with several suppliers in the foundation stage advising them on strategy, finance and strategic decision making at every step of their smart meter journeys.