Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/786843
22 | 10TH - 16TH FEBRUARY 2017 | UTILITY WEEK Operations & Assets Market view O ver the past year there has been a steady trickle of articles, even a whole TV programme, questioning the value of the UK's smart meter rollout – so much so that you could be forgiven for thinking that there is no smoke without fire. So, what is the issue? It depends on your standpoint: do you have an established or a future perspec- tive? Those with an established perspective look at the programme primarily as a meter replacement activity, those with a future per- spective are looking at enabling the smart, flexible energy system and the energy pillar of the UK industrial strategy, both of which the government is currently consulting on. There is little doubt that a meter replace- ment programme could be done more cheaply. In fact, most countries have taken the "meter replacement" approach possibly for this reason and because it is simpler. The value is in operational savings such as reduced meter reading costs and optimising the planning and operation of distribution networks, all supply-side benefits. However, there are important consumer issues to be managed as well, and where these have not been handled adequately, sig- nificant backlashes have been seen, such as in California and Australia. Those with a longer perspective look at smart metering as a key enabler for the future energy infrastructure – an infrastruc- ture that places consumers at its heart and does not treat consumers as just that – con- sumers. In this case the argument is about potential and what confidence people have that this potential will be met. It also means the programme needs to be led by organisa- tions that hold the consumer relationship: energy retailers. This is where the two approaches differ. A network-led programme is all about assured supply-side operational savings. The retailer- led programme is about consumers, inno- vation and generating consumer as well as operational savings. The UK approach The UK government has chosen a retailer-led rollout because retailers hold the consumer relationship. This makes it more complex, which is what the meter replacement lobby is concerned about. But motivations are aligned and the potential to deliver sig- nificant consumer, industry and govern- ment savings over and above the simple operational savings is paramount. Given the energy trilemma, this is surely a critical consideration. Almost everyone agrees we need to be smarter in the way we use energy. Data is central to this – accurate, timely and local data – that can then be used to automate energy management. For example, the Nor- dic countries have introduced spot energy pricing. This means that on-premises energy management systems can make decisions about what appliances to run and when. This is especially valuable when coupled with energy storage systems, which can then run houses on the lowest spot tariffs available. A switching service that adds £400 million a year to energy costs is not needed – the energy management system does it for you. What is more, consumers who have stored energy are able to sell that energy to the grid through an aggregator. So, consum- ers can start to earn money from their energy resources, further reducing their bills and providing a valuable commodity to the grid at the same time. This is just one example of consumer empowerment that smart metering is central to unlocking. The importance of demand management This process is called "demand manage- ment", and it is set to become increasingly important as the impact of new technology starts to be felt. Electric vehicles (EVs), for example, are an essential element of our energy future, particularly given the revelations about the impact diesel engines are having on the air quality in our cities. Each EV, on average, consumes the same amount of electricity on a daily basis as a home: the cost of strength- ening the local electricity distribution net- work to support this growing demand will make the cost of smart meters pale into insignificance. The alternative, manag- ing this demand, requires both consumer engagement – it is our demand that is being managed – and local live data. The UK smart meter programme provides both. The accusation from critics is that it is just an expensive white elephant. They may have a point, if all you want to enable is more efficient metering. But not if you are looking for a smart enabler. Not if you are looking to tackle the challenges of the next genera- tion and the energy trilemma. The rollout is complex, and is taking longer, but it is an essential element of a modern, smart, flex- ible energy system – and the benefits will be far greater. In a few years' time other countries will look at the UK and wish they had followed our lead. Why? Because they will be start- ing a second smart meter programme, this time one that puts demand management and therefore consumers at its heart. Simon Anderson, chief strategy officer and co-founder of Geo An elephant in the room? Critics are already labelling the UK's smart metering programme an expensive white elephant, but Simon Anderson says a supplier-led rollout is essential to enable the smart energy system we need. Key points There are two ways of looking at the smart meter rollout: as a simple meter replacement programme or as an enabler for a smart grid revolution. The UK is pioneering a supplier-led rollout, which is more expensive but will yield greater benefits. Suppliers own the consumer relationship, and consumers are at the heart of the rollout. Demand management is one of the biggest drivers behind the rollout. The electrification of transport with EVs will require advanced energy management to avoid very expensive grid reinforcement.