Marlon Cohen gives a detailed update on progress and raises some of the questions that surround the smart metering project
The UK government has set itself the ambitious goal of installing smart electricity and gas meters in every home, and smart or advanced meters for smaller non-domestic customers, by the end of 2020. This large-scale hybrid IT and PFI project involves an estimated 53 million devices being installed in 30 million homes and small businesses across Great Britain. It is argued that the benefits of smart meters are that 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 obliged only to take all reasonable steps to install a smart meter: if a consumer does not want one, the consumer cannot be forced to have one.
What is the implementation plan for smart meters?
A number of implementation milestones have been put in place as part of the Government's plans to meet the 2020 roll-out deadline. The programme has crossed-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, Smart Metering Equipment Technical Specification 1 (SMETS 2). The mass roll-out stage was due to begin at the end of 2015 but was put back to 2016.
Key to the overall implementation of the project is the establishment and go-live of the 'Data Communications Company' (DCC). The DCC is an independent company (operated by Capita Plc) that was awarded a licence for 12 years from September 2013 to connect smart meters to the business systems of energy suppliers, network operators and other authorised service users of the network. The DCC is required to integrate with communication service providers (Telefonica for the south of the UK, Arqiva for the north), data service providers (CGI IT UK), energy suppliers, electricity and gas network operators and other authorised third parties. The DCC is therefore key to the success of the implementation as it will be responsible for the collection and end-to-end management of data through the overall network.
The dates for DCC Live have changed a number of times. The current working assumption the DECC has is that there will be two expected dates for DCC Live. On 20 July 2016, the DCC's core functionality will go-live to enable energy suppliers to start installing and enrolling SMETS2 meters for credit customers. A second release of DCC functionality (including prepaid services for customers) is to be delivered on 26 September 2016.
How does the smart meter work at home?
The intended configuration of smart meters is that they are connected to the customer's utilities supply, and talk to the customer's IHD - the customer's consumption data is then displayed on the IHD. The IHD and the smart meter communicate through a secure home area network, using Zigbee (a wireless technology similar to Bluetooth or Wi-Fi but which is growingly used as the standard for the Internet of Things). The home area network therefore connects smart devices or smart appliances in the home or connects to the customer's mobile devices (eg for energy control apps) with the IHD and the smart meter itself.
The smart meter and the communications hub connected to the meter then connect the home area network to Telefonica or Arqiva's managed wide area network, which in turn is connected to the DCC.
Key challenges for suppliers
Suppliers face a number of associated challenges as part of their implementation obligations:
· One of the major challenges to date has been the formulation of the smart meter technical specifications. Suppliers had commenced the installation of smart meters using the SMETS1 specification, while plans for full implementation of the project rely on implementation of SMETS2 meters. During the foundation stage of implementation, a number of technical issues with SMETS 1 arose and the SMETS expert advisory group deferred those changes to SMETS 2. The functionality of SMETS1 and SMETS2 differ fundamentally, with full smart functionality and operability between operators only sitting with SMETS2 meters. Until SMETS2 meters have been fully installed interoperability will remain an issue - especially as each different energy suppliers could use different smart SMETS1 meters to provide services.
· 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 this year as the programme begins to enter 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 with which energy suppliers will be able to use that personal data. In late 2015 Ofgem 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. Suppliers' engagement with customers 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.
· Suppliers wishing to use customer's data will also have to sign up to the Smart Energy Code which will entitle them to use data collected. 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.
· All aspects of suppliers' roll-outs and use of smart meters will need to be compliant with the Data Protection Act, and would need to take a 'privacy by design' approach to implementation. Suppliers would also need to ensure that their implementation complies with DECC's 'Data Access and Privacy Framework' published in December 2012 and which is due for further review in 2018.
· Ensuring that IT systems are able to integrate with the DCC and associated communications and IT suppliers will remain a key issue for suppliers. In addition the move to a fully integrated digital environment means that utilities suppliers will need to upgrade and future proof their IT systems to handle a large influx of customer usage data.
How successful has the implementation been?
DECC carries out a measurement every quarter of how the installation of smart meters has been progressing. The latest measurements, which measured progression to the end of September 2015, show that an estimated 1,663,400 domestic smart meters have been installed by the largest energy suppliers and an estimated total of 644,200 smart and advanced meters have been installed in smaller non-domestic sites. Despite the advances in installation of the meters, for a number of reasons not all of these are operating in 'smart mode' and operational smart meters make up only 1.6% of all domestic meters and 20.6% of all smaller non-domestic site meters operated by the larger energy suppliers.
The Energy and Climate Change Committee has raised some doubts as to whether the smart meter roll-out programme is realistic. In a report published in March 2015, 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 DCC's 'communications infrastructure programme'. With the 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.
The next two years
The next two years will be material for the successful introduction and development of smart metering in the UK, especially as the programme moves from the foundation stage to mass roll-out stage. 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 it. 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'.
Marlon Cohen is a Managing Associate in the Technology and Communications Group at Addleshaw Goddard LLP (www.addleshawgoddard.com) specialising in digital and technology matters.