Has the Government followed S.M.A.R.T. objectives when designing the smart meter roll-out programme?
Most people are probably familiar with the concept of S.M.A.R.T. objectives. Often used in setting personal development or performance management objectives, the initials can stand for a number of things but usually mean Specific, Measurable, Agreed, Realistic and Time-bound. In looking at where the Government's smart meter implementation programme has got to, we thought it would be interesting to see how well it fits with these objectives and what is set to happen next.
On the face of it, the ultimate goal is pretty specific: to install smart electricity and gas meters in every home, and smart or advanced meters to smaller non-domestic customers, by the end of 2020. This involves an estimated 53 million devices being installed in 30 million homes and small businesses across Great Britain. Consumers will benefit from reduced energy bills and increased energy efficiency as the In-Home Device (IHD) – a display showing real-time information about energy use and cost – communicates with smart communication hubs and networks and energy suppliers, enabling consumers to use energy more efficiently. The government's vision is that the development of smart metering will also make it easier for consumers to switch between energy suppliers to get the best deal.
However, implementing this goal has not proved easy, not least because the Government has adopted an industry-led approach, with the Department of Energy and Climate Change (DECC) putting in place the regulatory, commercial and technical framework and Ofgem carrying out regulatory oversight. Energy suppliers are free to plan their own installation strategy and they are only obliged to take all reasonable steps to install a smart meter: if a consumer does not want one, they cannot be forced to have one.
It is easy to measure how many smart meters have been installed to date. DECC carries out a measurement every quarter and publishes the latest figures here. As at the end of March 2015, an estimated 1,054,800 domestic smart meters have been installed by the largest energy suppliers and an estimated total of 602,700 smart and advanced meters have been installed in smaller non-domestic sites. Not all of these are operating in "smart mode", for a number of reasons, but operational smart meters now make up 2% of all domestic meters and 19.8% of all smaller non-domestic site meters operated by the larger energy suppliers.
What is less measurable is the amount of savings the smart meters programme will generate. DECC expects the savings to be £17.1 billion against a cost of £10.9 billion but recent estimates already put the current cost at £11 billion and there is no budget cap.
An industry-led programme such as this clearly needs to have agreement from the industry, and also from consumers and small businesses, as in the end it is their choice as to whether to have a smart meter or not. There is a "stick" on electricity and gas suppliers, in that it is now a licence condition that they have to take all reasonable steps to install smart meters, but there also needs to be a "carrot", given that the point of a smart meter is to reduce energy consumption, which goes against the interests of the energy suppliers. Presumably being able to see detailed energy use data for each individual domestic and small business customer will be some incentive, as the DECC factsheet suggests. Suppliers will have to sign up to the Smart Energy Code (SEC) which will mean they can use this data. However, having to sign up to a (currently) 900 page Smart Energy Code in order to use this data – and pay for the privilege – might put some energy efficiency and energy service companies off, so one might query how effective the data may be in reducing energy consumption if the companies that could do this are not prepared to sign up.
So far, consumers seem to have been wary of smart meters and the use and privacy of their data. As part of the roll-out, there is a national consumer awareness campaign led by Smart Energy GB, which will ramp up next year once the programme enters the mass roll-out phase. The campaign to date has focussed on creating awareness around use of personal data collected through smart meters and the manner and frequency that energy suppliers will be able to use that personal data. Ofgem has also recently issued a consultation on smart billing as part of its consumer and empowerment project in order to address consumer wariness around the use of smart meters. Consumer engagement will be critical to the programme's success, as suppliers only have to take all reasonable steps, they cannot force people to have a smart meter, unless their meter was due to be replaced anyway.
The Energy and Climate Change Committee have raised some doubts as to whether the smart meter roll-out programme is realistic. In a report published in March, they said "we do not believe that near universal smart meter roll-out will be achieved by 2020" and warned that "without significant and immediate change 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". The report also highlights the "lack of smart meter interoperability" between the different version of devices being installed by energy suppliers, and delays to the start of the Data and Communications Company's (DCC's) "communications infrastructure programme". With the recent withdrawal of funding for the Green Deal, another industry-led energy efficiency initiative, there must be some real concern as to the future of the smart meter programme.
It has been criticised as being "mind-bogglingly complex, anti-competitive and needlessly expensive" (by Dan Lewis, senior infrastructure adviser, Institute of Directors in Utility Week), who argues that much cheaper alternatives are available and that the DCC should not have a monopoly over the data.
In order to reach the 2020 roll-out deadline, there are a number of interim milestones. At the moment the programme is at the cross-over from the foundation stage (2011-15) using Smart Metering Equipment Technical Specification 1 (SMETS 1), an early form of smart meter, to the mass roll-out stage (2015-20) using a more sophisticated specification of smart meter, SMETS 2. The mass roll-out was due to begin at the end of 2015 but has been put back to 2016.
The key date is DCC Live, which the DCC managed to get put back to 1 April 2016 at the earliest, with a 6 month contingency. DCC Live is the date when the DCC's communication service connecting suppliers, customers and network operators is switched on and the mass roll-out of SMETS 2 smart meters can begin in earnest. DECC now seems to be working on a DCC Live date of 1 August 2016 in its latest response on the Smart Metering Consultation Programme. These are some key dates coming out of that consultation response:
- 1 February 2017 (DCC Live plus 6 months) – obligation on large suppliers to take all reasonable steps to install, commission and enrol 1,500 SMETS 2 meters or 0.025% of total meter points (whichever is lower)
- 1 February 2017 (DCC Live plus 6 months) – all DNOs (except Independent DNOs) to become DCC Users (i.e. sign up to the Smart Energy Code (SEC))
- 1 August 2017 (DCC Live plus 12 months) – all domestic energy suppliers to become DCC Users
- 1 August 2017 (DCC Live plus 12 months) – SMETS 1 end date, i.e. all new meters installed after that date must meet SMETS 2
- Mid-2018 – New and Replacement Obligation introduced, i.e. suppliers must take all reasonable steps to install a compliant smart meter when a meter is replaced or installed for the first time.
2015 and 2016 will be material for the smart meter roll-out
The next two years will be material for the successful introduction and development of smart metering in Great Britain, especially as the programme moves from the foundation to mass roll-out stage over the next year. To achieve the goals set by the government there are however suggestions that the roll-out of smart meters needs to be run by someone outside of government. Baroness McDonagh, former Chair of Smart Energy GB has publicly stated that the government's timetable could slip and end up costing consumers more than the budgeted £10.9 billion if the private sector is not more closely involved in implementation. These risks also seem to be echoed by Tim Yeo, chair of the House of Commons Energy and Climate Change Committee, who has also warned that "…time is running out on the government’s plan to install smart meters in each of the UK’s 30m homes and businesses by 2020 [as] a series of technical and other issues have resulted in delays. The programme runs the risk of falling far short of expectations. At worst, it could prove to be a costly failure".