Smart meters: an energy-saving revolution or just plain dumb?

By 2020, every home could have a hi-tech gas and electricity meter to cut bills and send readings wirelessly. But doubts are being cast on the £11bn scheme

Their introduction is set to cost consumers £11bn, but studies show they cut energy consumption by 3% or less – so why is the UK spending so much on rolling out “smart” electricity and gas meters?

That is the question some commentators are asking after it emerged that a key element of the behind-the-scenes infrastructure has been delayed again.

This week the government revealed that, so far, around 3.3m first-generation smart meters have been installed in UK homes. The plan, now looking increasingly ambitious, is that by the end of 2020 around 53m will be fitted in more than 30m homes and businesses. The predicted cost is around £200 for each meter replaced – ie, more than £400 for many households – a sum borne by consumers through increased bills.

For those of you who have so far missed this revolution, smart meters are set to replace every conventional gas and electricity meter in the country. They use wireless technology to allow the energy company to read the meter remotely, and the government has a manifesto commitment to ensure that every home and business is offered one – although you don’t have to say yes.

However, if you’ve already had a smart meter fitted, the bad news is that in many cases if you subsequently switch supplier it could lose all its “smartness” and become just like the perfectly good meter it replaced.

This is just one of the conclusions of a House of Commons science and technology committee report issued last month that expressed reservations about the way the meters and the necessary infrastructure are being implemented.

The report coincided with the Institute of Directors attacking the rollout for being too complex and costly. It called on the government to urgently review the benefits of going ahead with the roll-out, which looked “very unlikely” to meet its 2020 target.

Once installed, an energy supplier can read a meter remotely via the mobile phone network. Householders also receive a digital display that shows exactly how much power they are consuming – and its cost – in real time. The idea is that, when faced with their consumption, consumers will be more likely to switch off lights or electrical items that are on standby, or to adopt energy-saving measures. As a result they will be nudged into cutting their overall consumption – though early figures show cuts are surprisingly low.

Over the longer term they will also allow consumers on smart tariffs to take advantage of off-peak deals – cut-price electricity at night, or when there is a plentiful supply because wind turbines are working at full capacity – at which point it is expected that everyone would run their washing machine. They will also allow next-day switching from 2018, but only if you have a compatible meter that “talks” to the database.

The power firms love smart meters because, in theory at least, they do away with meter readers. They should also lead to fewer billing complaints – a huge problem for suppliers – which tend to be caused by human error. But in common with other big tech projects, all has not quite gone to plan. Some early adopters may have to have them replaced. Some of those with an industry standard “SMETS 1” meter – those currently being installed – have been left bemused after switching provider, only to be told by their new supplier that it can’t access data. As a result they have to provide a manual reading as before.

One Ovo customer recently told Guardian Money that his smart meter was no longer recognised even though he had only switched to another Ovo tariff. Other energy customers have found that their meter could not supply readings because the mobile signal in their area was not up to the job.

Tim Maiden, a partner at sustainability and climate change consultancy CAG Consultants, said he thought he was “doing the right thing” by getting his smart meter early. In a blog he wrote: “Little did I know that early adopters like me were actually receiving smart meters with far more limited functionality than those prepared to wait … mine worked fine until I tried to switch to a cheaper tariff.

“Smart meters are supposed to make switching a doddle but, at least for now, SMETS 1 meters can only operate between a limited number of suppliers (not something I was told when I accepted the offer of a smart meter). So my smart meter has now reverted to being a dumb meter, except it’s harder to read than my old dumb meter!” The good news is that all SMETS 1 meters will eventually be connected to the new communications network that is planned.

Professional manufacturer of asphalt machines. Our sales and R&D team have over 10 years’ experience to focus on asphalt distributor, synchronous pavement surface vehicles and other road machinery and equipment. Based on innovation

Once it is up and running, possibly before Christmas (although Capita declined to give a date this week), the energy suppliers are expected to start fitting second generation SMETS 2 meters, which will talk to the 40 or so energy providers that have signed up to the scheme.

At this point, it is hoped, consumers who have so far held off can go ahead and get a meter, knowing it should work seamlessly if they switch supplier.

No one involved in the project could tell Money this week when those who had a SMETS 1 meter will be able to switch to any supplier and retain their meter’s smart functionality. It looks as though it could take years rather than months, and in many regions will not be possible until 2020.

Dr Tania Mathias MP, interim chair of the science and technology select committee, says: “The government has known for years that early smart meters can lose their smartness if the customer switches. Ministers merely have an ‘ambition’ to fix this by 2020, but taxpayers will be unimpressed with this situation, and timely action is needed.”

Interestingly, her inquiry report found that most studies into the effects of having a smart meter showed that households reduced their energy consumption by just 2%-3% – worth around £33 a year for a typical customer at current prices. That will only fuel critics of the expensive project.

Peter Earl, head of energy at website comparethemarket, told Money that there remains a lot of mistrust around the meters, particularly as the millions of households with SMETS 1 meters are set to be “left in switching limbo”.

But Claire Maugham, director of policy at Smart Energy GB, played down the problems. “Many people with smart meters can already be switched seamlessly. But at this stage in the national roll-out some may find that if they switch supplier they temporarily lose some of their smart functionality and need to start sending in meter readings again in order to get an accurate bill,” she says. “Once the national communications network is up and running, and existing meters are enrolled into it, they will be able to deliver the full range of functionality: accurate bills and visibility of what we’re spending in near real-time in pounds and pence.”

Meanwhile, security experts at GCHQ have been involved in the design of the meters and the back-office system to prevent the possibility of hacking, the big fear being someone managing to take over the system and hold it to ransom.

Whether all this will eventually mean it’s been £11bn well spent, however, remains to be seen.