New UK IHD Policy- Supporting A Smarter Smart Meter Rollout

The UK’s new in-home display policy could deliver energy efficiency in an affordable and measurable way.
Published: Fri 18 Mar 2016

It is true that the smart meter can deliver operational savings, energy efficiency and improved customer engagement but the true value will come from making an actual impact on consumer behaviour and getting them to use less electricity. If this level of impact can be attained, a smart meter rollout can expect to experience more success, both from a financial and political perspective.  [Building Customer Relations through Behavioural Energy Efficiency Programmes.][Changing the Customer’s Mindset]

We have written several articles around Opower’s research into the importance of personalised customer engagement and how it can be highly effective in improving smart meter awareness and acceptance. [A Successful Smart Meter Deployment Relies on Effective Customer Engagement.] [Utilities - Don’t Leave Your Customers Behind].

Customer engagement around the smart meter deployment should start before the actual rollout.  This is an ideal opportunity for utilities to highlight the benefits that customers can expect from their smart meters before they even receive them. For instance, smart meter data enables energy companies to replace estimated bills with more up to date and accurate ones. Additionally, the data can provide more transparency and simplicity around consumption which helps customers to understand and manage their consumption better. Since the billing experience is a key part of the customer lifecycle and is a major influencer on satisfaction and churn, according to Opower, it’s important to highlight these benefits to the customer and to follow through with them. [Customer Shock and the Billing Experience.]

The secret to unlocking smart meter potential

But, smart meter data alone can’t be relied upon to automatically reduce energy consumption and energy bills. There has to be more engagement with the customer, something to prompt them to reduce their energy consumption in a sustainable way.

Enter, In-Home Displays (IHD).

While it’s true that the IHD expands on the usefulness of smart meters and can become the voice of smart meters [Electronic Picture Frame Becomes the Voice of Smart Meters]   to help reduce consumption,it is critical that the smart meter data is made interesting enough to grab the consumer’s attention. Without the consumer’s interest, IHDs cannot be expected to have an impact on consumer behaviour.

This problem was highlighted recently in the UK where the DECC mandated that all energy suppliers offer residential customers an in-home display (IHD) when their smart meters are installed. This was to ensure that consumers enjoy easy access to real-time consumption and tariff information for improved energy management.

However, the mandate has come up against significant criticism after several studies showed that the vast majority of consumers dump their IHD’s in a drawer, never to be used again.

Focusing on customer benefits

The reason for this is that not enough focus has been placed on consumer benefits when it comes to the smart meter and IHD’s.

When it comes to smart meter data, far too much focus has been placed on operational benefits such as  the facilitation of remote connections, improvement of meter-to-bill processing, outage detection, and the reduction of technical losses. Not enough focus has been placed on the benefits for end-consumers. [ What Is The Engaged Customer Worth To You?].

So, to harness the real potential of smart meters and create an impact amongst consumers, energy providers should focus on making smart meter interesting and relevant for consumers. Solutions should give consumers clear, actionable insights so that they can better manage their energy use.

In addition to this, by highlighting customer benefits of smart meters into investment planning projects, energy providers can explore new value streams, meet regulatory requirements, improve the investment business case, and improve customer engagement. Smart meters should be an  opportunity for utilities to enhance the customer experience. For instance, personalised communication will help utilities deliver relevant information to various customer segments.

Other sectors are doing this already and the customer expects it from all service providers today. [The New Energy Consumer Demands Innovation.] The personalisation and relevance of customer engagements could make or break the future utility’s business model. [Data-A Serious Market Differentiator.]

Research from Accenture highlights the fact that customers want this innovative interaction. Their research reveals that 93% of consumers they interviewed want to learn more about smart meter functionalities and benefits and added value products and services-anything to help them reduce their energy bill.

It is for this reason that the new rules pertaining to the provision of IHDs published by the Government in February are very significant for the smart meter rollout.[Alternatives to In-Home Displays Could Further UK Smart Meter Cause.]

Mandating the energy efficient outcome

The Government has introduced a different licence condition which established a “derogation” mechanism which gives energy suppliers the freedom to trial alternatives to IHDs.  This could cut at least £200 million from the cost of the smart meter rollout for all of the larger energy suppliers. [Alternatives to In-Home Displays Could Further UK Smart Meter Cause]. This figure is based on a cost of £15 per IHD and 30 minutes of engineer time setting it up and explaining it to every customer.

There is no limit on the scale of the trials so this allows options such as software to be a big part of the trials - typically at a tiny fraction of the cost of an IHD.

The change of rules means that the UK government is no longer mandating the technology, but is actually mandating the energy efficient outcome and enabling utilities and their chosen technologies to compete so that consumers get the best and most cost effective solutions.

DECC’s new policy is good news for British energy consumers, suppliers, and the Government as it provides an opportunity for the UK to deliver energy efficiency in an affordable and measurable way.

The option for utilities to trial alternative technologies to IHDs  opens an opportunity for utilities to innovate and improve customer engagement, and for the Government to de-risk the whole smart meter rollout going forward.

Driving behavioural change

In essence, the smart meter rollout is a behavioural change programme. [Quantifying the Potential of Behavioural Energy Efficiency in Europe] and [Unlocking the $3B residential DR opportunity through behaviour]. But only actionable insight will bring value to customers.

Only “behavioural energy efficiency” (BEE) will ensure that smart meter investments deliver what they are supposed to and that is, help consumers manage and reduce their consumption levels.  

Opower’s behaviour-based energy efficiency programmes has already seen huge success amongst 98 utilities and 52 million households  across the world.

Home energy reports have resulted in 1.5-3% savings on energy bills, thanks to these behaviour change programmes.To learn more, view Opower’s study, ‘Unlocking the Potential of Behavioural Energy Efficiency in Europe’. Our webinar with Opower, Quantifying the Potential of Behavioural Energy Efficiency in Europe, discusses the topic and opens the floor to answer attendees’ questions.

Simon Hill, Vice President of Opower, says “Opower has also observed reductions of up to 5% in peak demand when implementing BEE programmes to consumers in conjunction with their utility partner’s smart meter programmes. This IHD derogation means the UK can continue benefitting from such an approach, and well-structured legislation means trials will run in parallel with the smart meter rollout, meaning no delay to the programme.”

IHD alternatives include home energy reports to consumer access devices but the new ruling stipulates that trials should not disenfranchise specific groups.  

A smarter meter rollout

Applications can be submitted by the end of this March and suppliers will be given six months (until 30 September 2016) to make their applications. They will also receive an additional year to gather evidence on a sufficient scale.

Within derogations, energy suppliers will need to explain how they intend to measure the savings; DECC point towards Randomized Control Trials (RCTs) being the likely requirement. In the RCT, a randomly selected user group with IHDs (i.e. the ‘control’) will have their energy savings measured against all the other customers.

Not surprisingly, DECC’s focus will be on the difference and trend in energy savings.

At a cost of £11 billion, the UK smart meter rollout is one of the DECC’s largest capital investments. The rollout programme and its management has faced a great deal of criticism [UK Smart Meter Rollout Delays Are Costly-DECC Report] and [GB Smart Meters Delayed Again and Again…]

But, perhaps the IHD policy announcement may lead to a somewhat smarter smart meter rollout. Only time will tell.