Utility Week

UTILITY Week 25th November 2016

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22 | 25TH NOVEMBER - 1ST DECEMBER 2016 | UTILITY WEEK Operations & Assets Market view T he smart meter rollout to every home in Britain has been hotly debated by industry and in the media since its inception. The programme has now pro- gressed through design, procurement of key contracts, the establishment of the Data Communications Company (DCC), ratifica- tion of specifications, and the foundation rollout. With the risks, issues and implica- tions examined at every turn, it is easy to lose sight of the bigger picture and keep ploughing on ahead, making up for lost time. Getting smart metering right is hugely important to the future of our energy sys- tem. However, with so many moving parts in the project, is there an argument for reas- sessing where we are to ensure that the programme is maximising benefits and mini- mising costs? Despite the bumps in the road that the smart metering implementation programme (SMIP) has and will inevitably encounter, the promised benefits will need to be realised, and the measure of value for money for all categories of consumer will be paramount. In conjunction with this, the strategic objec- tive of modernising a significant proportion of our energy assets is one that we cannot overlook. The national business case for smart metering in the UK showed an overwhelm- ingly positive case for smart meters, with the mid-case identified as a net national finan- cial benefit of more than £6.2 billion over 18 years. This figure is before less tangible ben- efits such as the development of the energy services market and ease of customer switch- ing are monetised. The impact assessment, however, was last revisited in 2014. This autumn the House of Commons Science and Technol- ogy Committee called for a reassessment of the business case, and the department for Business, Industry and Industrial Strategy (BEIS) is working on a 2016 update to the original case. The progress made since the original business case provides us with a far richer data set, a more accurate estimation of the financial benefit, and a more realistic timeline. By taking stock of how the programme has progressed to date, the assumptions made at the time the case was last assessed can be refined, with a possible view to adjusting the targets accordingly. Rich veins of insight to inform this decision include: • With 4.2 million advanced and smart meters now in operation in Great Britain, some having been in place for several years, there is a rich data set available. We have an evidence base of the real changes in behav- iour seen from consumers, and the actual energy savings being achieved. • The estimated cost of installation in the original impact assessment was significant at £68 per dual fuel installation (£1.65 million in total). Many suppliers now have real expe- rience of installation, and the agreed rules around dual versus single fuel installations, and the Smart Metering Installation Code of Practice mean that a measured view can be taken of real costs and how many installa- tions are likely to be "right first time". • We know more about the operational sav- ings suppliers can expect to achieve, particu- larly relating to reduced billing enquiries, and incoming contact centre contact. • More information is available about the granular production costs for all devices con- firming to "smart meter equipment technical specification", or Smets. Over the past few years, specific issues have been identified, and "exceptions" to the standard approach agreed in order to resolve them, and the addition of those costs are worthy of consideration. There is a known issue with a proportion of property catego- ries that cannot be reached with the stand- ard DCC infrastructure. An estimated 30 per cent of properties are considered "hard to reach", according to BEIS figures, and there- fore cannot be served by the standard com- munications solution. The cost-benefit of servicing every hard- to-reach property needs to be considered, to understand their collective impact on the national business case, and one result of such scrutiny could be a re-evaluation of the target to deliver a smart meter to every home and small business in Great Britain by 2020. It is imperative, though, that cost is not the only consideration, to ensure that some consumer groups are not excluded from the benefits of smart meters on the basis of cost alone. We must not create the equivalent of the "digital divide" in energy. Before any possible future reconsideration of targets on a cost-to-serve basis, suppliers and industry need to turn their attention to what alternatives could be offered to those customers who would be excluded from the rollout. There is not an abundance of easy alternatives, but exploring options for allow- ing some customers to operate partly outside of the DCC infrastructure would count among those worthy of assessment. The task of getting a smart meter to every- one in the country may not be simple, but the principle is: we must always have one eye on costs, the other on benefits, but both on the prize of recreating the energy system for a digital age. Amy Marshall, power and utilities director, KPMG Smart meter update The cost-benefit analysis for the smart meter rollout should be updated with the experience gained over the past two years, and if necessary targets changed accordingly. By Amy Marshall. NUMBER OF SMART AND ADVANCED ELECTRICITY METERS INSTALLED BY LARGE ENERGY SUPPLIERS IN SMALLER NON-DOMESTIC SITES 40,000 30,000 20,000 10,000 0 Numbers of meters installed 2012 2013 2014 2015 2016 Advanced electricity meters Smart electricity meters Source: BEIS Q2 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

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