Analysis: Smart policy?

The race is on to install 'smart meters' in 245 million households throughout Europe to meet a 2020 mandate imposed by the European Union. But is this target feasible and, more importantly, will installing smart meters deliver the hoped-for energy benefits? The energy companies say it will, but as the market is predicted to be worth some $40bn, they would hardly say otherwise.

In the UK, the government wants to see all household electricity and gas meters replaced by 2020, as well as those in smaller non-domestic premises. In Europe, the roll-out is required by separate Directives for electricity and gas. The Electricity Directive calls for full deployment of smart meters by 2022, with 80 per cent coverage by 2020.

But what are the true benefits of smart meters? They perform the traditional meter function of measuring energy consumption, but they also provide a direct communications link between energy suppliers and their customers. That removes the need for meter readings at the premises and ensures accurate bills based on actual, not estimated, consumption.

Domestic customers will be able to see information about their energy use through an integrated in-home display. More important than the real-time billing information, that will also give consumers more control over their energy use and carbon emissions, and create new opportunities for energy retail services, infrastructure management and renewable energy generation.

Smart metering is crucial in the effort to make future energy savings and to tackle climate change. According to the Energy Saving Trust, smart meters can help consumers reduce their carbon emissions by 5-10 per cent. If the UK as a whole adopted smart meters and reduced energy usage by 5 per cent, this would save £1.2bn a year on bills and 7.4 million tonnes of CO₂ emissions.

The technology is ready to roll, although whether the fledgling supply chain is robust enough to withstand the rapid deployment required is open to question. However, the regulatory framework that will underpin such systems is still lagging behind.

Take the UK as an example. Successive governments have spent decades removing monopolies and deregulating the metering market so that now each energy supplier is responsible for the meter that it uses. So what incentive does an electricity supplier now have to invest the huge capital cost of fitting millions of smart meters to customers that can move suppliers at the drop of a hat? The answer appears to be to roll back the legislation, something that regulators are traditionally loath to do.

Another stumbling block is communications. The European Commission's 2020 targets require an aggressive schedule for rolling out smart metering technology, but the deployment of these energy-saving devices is currently delayed by an ongoing debate about which communication standards should be adopted.

The UK government consulted on its plans, and will soon publish its response, but the EC is keen to avoid a standards free-for-all. In a document issued this month and aimed at the information and communications technology (ICT) sector, it states: "Concerted action by Member States to set minimum functional specifications for smart meters would help avoid technical barriers, ensure interoperability and enable the introduction of innovative ICT-based applications for managing energy end-use."

The document calls on the appropriate national authorities to agree, by the end of 2010, on "a common minimum functional specification for smart metering that focuses on providing consumers with improved information on, and improved capabilities to manage, their energy consumption". It also demands that a timetable for implementation should be in place by the end of 2012.

Several companies have developed technologies that would allow meter manufacturers and energy suppliers to move ahead without waiting for a decision. An example is Cambridge Consultants, which is offering its UMI universal metering interface as an open standard, available under licence, to the metering and home automation industries. By standardising the connection of communications and control modules inside the meter, UMI would allow smart metering capabilities to be upgraded during the operating life of the meter.

One reason for the push towards smart meters is that they are an essential prerequisite for more advanced grid management, enabling operators to accommodate widely dispersed inputs from small-scale renewable-energy generators, and to manage demand through 'smart appliances' that can tolerate being switched off for short periods and powered up again when key parameters move outside defined limits.

GE Energy is one company that is active in this area. On a website aimed as US users, it points out that most consumers pay the same price for electricity throughout the day without realising that it costs much more to produce the energy during peak hours, typically between 2pm and 7pm. With a smart meter, it becomes possible to communicate time-of-use pricing via home energy panels to help consumers make informed energy choices throughout the day. People would then be more likely to use high-consuming devices during off-peak pricing periods.

"With smart meters, buying electricity is like buying other consumer goods, with price impacting purchase decision," the company says. A year-long study by the US Department of Energy showed that real-time pricing information provided by the smart meter helped consumers reduce their electricity costs 10 per cent on average and their peak consumption by 15 per cent.

However, the true benefits will only arrive with the advent and adoption of smart appliances. These work with the smart meters to avoid peak-hour energy use and top-tier pricing without any negative impact on the consumer, by adapting to price signals from the utility. A dryer might automatically switch from high heat to low if electricity hits a certain per-kilowatt-hour rate. Or the automatic defrost on a refrigerator could delay itself until after peak energy hours, so consumers could benefit from lower energy costs without needing to obsessively watch a monitor.

Smart meters coupled with advanced metering infrastructure (AMI) can also help utilities pinpoint problems on the grid, enabling them to better detect and manage outages.

The technology is ready, science and engineering has done its job and it's now time for government and regulators to step up to the plate and provide the required framework for deployment. If not, we risk the very real prospect of further delays resulting in unnecessary carbon emissions and large scale power station construction based on faulty use predictions.