The UK Smart Meter Bubble is About to Burst

Pressure is growing to stop UK smart metering plans, says Engerati member Nick Hunn.
Published: Wed 01 Apr 2015

It’s taken a long time for the bubble to burst, but there are signs that reality is starting to break through the Panglossian fixed grins of the British smart metering establishment. I’ve always been critical of the UK smart metering programme. I have no issue with smart meters per se, but what is being proposed for deployment in Britain before 2020 is unlikely to offer any of the cited benefits. Instead it’s likely to add over £11 billion to the energy bills of English, Welsh and Scottish consumers.

UK smart meter programme could be abandoned

The Department of Energy and Climate (DECC) have spent much of the last five years fending off criticism and fighting Freedom of Information requests to explain how they came up with their figures justifying the British smart metering programme. Until recently they’ve managed to pull the wool over the eyes of ministers and the National Audit Office. However, that strategy finally unravelled with the recently released report from the House of Commons Energy and Climate Change Committee, “Smart meters: progress or delay?” which concludes that “without significant and immediate changes to the present policy, the programme runs the risk of falling far short of expectations. At worst it could prove to be a costly failure.”

A further nail in the coffin of DECC optimism has come with the highly respected Institute of Directors’ (IoD) Policy Unit issuing a scathing critique of the programme in “Not too clever: will Smart Meters be the next Government IT disaster?”, which suggests that the best course may be to abandon the programme altogether.

Further evidence suggests that the programme is considerably further behind than many of those involved realize. There is also a growing concern about its cost within utilities, many of whom would be happy to abandon some or all aspects of it. The first task of whoever is elected in May could be to make the decision to kill it.

Customer savings-flawed?

The IoD document lays out a cogent and powerful case for review. It frames the current deployment in the context of other previous government IT disasters, using input from their members to add the measure of experience about how these projects can go wrong. It also raises the important question of how any savings might be implemented.

This is an important point which has largely escaped the notice of most of the programme’s proponents. DECC refuses to reveal how they came up with the figures for customer savings, which many consider to be mythical. That is why they have been hauled up before the Freedom of Information commissioner. But there’s been little debate about the industry savings, which are generally taken for granted. The most cited of these are the savings from automating meter readings and getting rid of meter readers. But there are also considerable savings attached to grid management. However, there’s a flaw even in these savings, which the IoD highlights.

Smart meter data-a potential white elephant?

Implicit in the DECC justification is the assumption that if more data is available to a utility they would use it to improve their business process. It’s the mantra that more data is always better for a business and the corollary that if that data is available then the resulting benefits will flow automatically. Several years ago, McKinsey published a seminal report, “Big data: The next frontier for innovation, competition, and productivity”, on the effects of big data. The report estimates the immense potential value that big data could bring, but makes the important revelation that those savings were unlikely to be achieved. They would not be achieved, even across the limited number of sectors that they surveyed, because there is a global shortage of managers who understand the value of data analytics and of data scientists who can extract value from it.

That shortage is probably nowhere as acute as within energy utilities. Around the world, much of the grid is still run on Excel spreadsheets. The industry generally considers Big Data to be a spreadsheet that won’t fit on one monitor. By their nature, utilities are risk averse and that’s nowhere more apparent than in their IT departments. In the UK utilities these have been the most vocal internal opponents of smart metering programmes as they do not want more data. The IoD report makes the important point that as well as these internal nay-sayers, the companies within the energy ecosystem who could extract most benefit from smart metering data: Elexon – the wholesale clearing house for electricity, and Gemserv – its equivalent for gas, have largely been excluded from the process. Even if smart meters return data, most of it will never be used, because nobody knows what to do with it. That’s exactly what’s happening in the US, where utilities are getting worried about when they’ll be asked to provide evidence of the value of their smart meter deployments. So the ensuing benefit to the industry could be almost nil.

Most of the GB deployment has been designed in this back to front manner, where decisions have been made not on the basis of what is needed and what is cost-effective, but rather on how complexity is always shifted away from where it should be implemented, because specific departments within utilities don’t want to have to change their working practices. This means that the UK now has the most expensive smart metering system of any country in the world, with the least likelihood of returning any lasting benefit to users, energy suppliers or the grid.

Smart meter programme overly complex

The IoD document takes no prisoners. It points out that the smart metering programme is the largest UK government-run IT project in history, and the most expensive and complex smart meter programme in the world. The risks of such a huge programme with so much complexity are staggering. As it is progressively delayed, the pace of technological innovation may well leave the current generation of meters behind and leave consumers in a cycle of installation, de-installation and re-installation. They conclude that it is imperative to move towards a cost-effective smart meter rollout by embracing one or all of the following cost saving and simplifying measures:

1. Halting the smart gas meter deployment

2. Removing the requirement for an in-home display

3. Reducing rollout to only those homes that have a high energy usage

4. Abandoning attempts to stretch the rollout to flats and tower blocks

5. Making the programme genuinely voluntary

6. Abandoning the programme altogether.

Debate on the programme has largely been silenced by a concerted PR message from DECC and utility CEOs that everything is fine. Despite numerous slips to the schedule they smile and assure ministers that it’s all still on track for completion in 2020. I’ve often wondered who briefs them and whether they understand what is actually happening.

Limited testing level reveals truth

DECC and the metering companies are still writing the specification for the smart meters, comms hubs and in-home displays. This set of documents, known as the SMETS2 requirements, are meant to guarantee interoperability, so that meters from one supplier will work seamlessly with those from any other. I recently received notification of a first test event being held by the DCC to test this interoperability, which will be held in April. The eventual aim of these tests is to “demonstrate a home area network that enables metering devices to be connected”. At this stage, all they feel confident of testing are electricity and gas meters, and even then limiting that to testing the presence of the meter, not to reading any data from it.

I’m not criticizing the event – you absolutely need to run these interoperability events both to test the specification and to check that different implementations from different manufacturers work together. I’ve been involved in this sort of testing for wireless specifications and product development for the last twenty years. What concerns me is the limited level of testing that’s being called for in this event, as it says everything about the real state of progress. This is very preliminary testing. It is a long path from this level of test to the point where you can be fairly confident that any meter will work with any other meter. But until you reach that point you really shouldn’t be deploying any great numbers of them. From my practical experience I would estimate the gap from what is being tested here to getting to reliable equipment which can be put on a wall is around four to five years. In other words, we will not be able to install the SMETS2 meters until 2019 or 2020.

It’s another example of the gap between the PR and the reality. Technically these SMETS2 meters are already obsolete – they use technology which is going nowhere, and have been architected the wrong way around in order to make life easy for utility IT departments which would rather load cost onto consumers than have to update their own technology. But it’s not just the technology which is wrong. The whole energy market has changed in the ten years. The basic tenets of ever increasing oil and gas prices have disappeared. The whole foundation upon which it was built and justified is no longer valid. It is more and more difficult to justify doing what we are doing and the time has come to be open about what the UK smart metering policy needs to be.

Faced with previous criticism, the mandarins at DECC have just reached for their lemming suits and put on a further pair of renewable rose-tinted spectacles, chanting their mantra of “all done by 2020” loudly enough to drown any other voices. The IoD and parliamentary report suggest that’s no longer an allowable defence.

Read the IoD report. And if a parliamentary candidate comes knocking on your door looking for your vote, ask them why, in this time of austerity and belt-tightening, any new government would be justified in adding the cost of a discredited smart meter to your bill.

Further reading

House of Commons Energy and Climate Change Committee-Smart meters : progress or delay? (2014-2015) [pdf]

IOD-Not too clever: will Smart Meters be the next Government IT disaster? [pdf]

McKinsey and Company-Big data: The next frontier for innovation, competition, and productivity