Wednesday, 13 November 2013

£1bn benefit from smart metering, say ministers


[This article  appears on the Sustainable Building web site on 13 November.]

Benefits to electricity networks of around £1bn will arise "directly from functionality or information delivered by the smart metering system," ministers claim in response to a report on smart meters by the Energy and Climate Change Select Committee.
In a response released on 9 October, prepared by DECC with input from the Central Delivery Body (the organisation set-up and funded by suppliers to undertake consumer engagement), ministers agree with the ECCSC that there needs to be some "flexibility" in the new roll-out timetable, which should be "driven by engineering and infrastructure requirements and the need to avoid artificial deadlines acting to push up programme costs."
Ministers say they recognise that completing the national roll-out will be an "enormous logistical and technical challenge" and they want consumers to have "a good experience of smart metering from day one."  Consumer groups have been clear, ministers acknowledge, that getting it right for consumers is more important than delivering the roll-out quickly.
There is a wide consensus that the amended timetable is deliverable and all parties are committed to working towards commencing mass roll-out in autumn 2015 and completion by the end of 2020, ministers insist. But they note that  "progress will be closely monitored for the duration of the Programme, and DECC will continue to listen to all stakeholders and learn from early installation experiences to "allow the necessary time for testing of smart metering systems before the mass roll-out starts and to ensure successful completion."
DECC repeats it is its "ambition is for all domestic and small business premises to have smart metering,"  and  to support this ambition, there is a licence obligation on the Data and Communications Company (DCC) to strive for 100% Wide Area Network (WAN) coverage. This requires that the DCC must justify on an annual basis what steps it is taking to secure 100% WAN coverage in a manner that is technically practicable and cost proportionate. The procurement of the DCC communications service providers identified some areas where, on the basis of current technology and costs, "it would be very difficult to deliver 100% WAN coverage at an acceptable price by the end of 2020."  Nevertheless, DECC says, all of the appointed communication service providers have "committed to very high WAN coverage levels - 99.25% of premises by 2020."
Individual energy suppliers are responsible for delivering the roll-out of smart meters to their customers, while the Data and Communications Company (DCC) is responsible for providing the WAN that all suppliers will use.
Because they are in competition with each other, DECC argues that "suppliers are motivated to deliver the roll-out in the most efficient way. Subject both to energy regulation and wider competition law, suppliers may however identify opportunities for achieving efficiency savings and operating in the best interests of customers through co-operation with some or all other energy suppliers." Energy suppliers themselves will take a view on the "desirability of co-operation in particular circumstances and its compatibility with the legal framework governing the competitive energy market."
The smart meter programme has been designed to support smart grid capability in two main ways:
  • The minimum specification for the metering equipment includes the physical functionality required, e.g. voltage registers, load control capability and time-of-use tariffs, so the technical capability of smart meters is compatible with the anticipated demands of a smart grid. This will improve distribution network companies' understanding of and control over the use of their networks and help them better target investment in network infrastructure.
  • Flexible and scalable communications services will provide consumers, energy suppliers and network companies with data to help enable significant demand-side response capability.
The smart meter Impact Assessment (IA) identifies two broad categories of smart grid-related benefits:
  • Benefits to networks of around £1 billion, which arise directly from functionality or information delivered by the smart metering system.
  • Approximately £900 million of benefits from load shifting, as consumers take up time-of-use tariffs and change their energy consumption patterns.
In addition to these specific benefits, the IA recognises further potential benefits that a smart grid could deliver. But these are not explicitly quantified in the assessment as they are dependent on additional investment in the energy sector or market developments, which are outside of the scope of the smart metering programme.
In relation to this, DECC has worked with Ofgem and industry through the Smart Grid Forum to evaluate the wider costs and benefits of smart developments of the electricity distribution system. Their analysis suggests that smart grid technologies can deliver significant savings over the period to 2050 relative to using conventional approaches only. The overarching conclusion of this work is that savings in grid investment in the order of 25-30% of total investment costs] to 2050 are achievable.
The smart meter roll-out will enable energy suppliers to realise a number of operational efficiency savings but they will also face the costs arising from the installation and operation of smart meters, DECC warns. We expect suppliers to minimise the costs and maximise the efficiency savings from the roll-out and to reflect these costs and savings in their charges to customers.
The Government will be monitoring progress in delivering the roll-out, including in each of the key areas of benefits and costs identified in the Programme's IA. DECC says it will be collecting information directly from energy suppliers throughout roll-out to allow the monitoring of  "expected efficiency savings in back office support functions and meter management, and the costs of delivery." The information collected on costs and benefits will allow the assessment of impacts on consumer bills. In addition, DECC says it is "already conducting surveys about consumer attitudes and experience of smart metering and measuring the initial consumer benefits being achieved as a result of Foundation installations through an early evaluation project, results of which will be published in 2014."
Following extensive consultation and careful consideration of alternative models, the Government concluded that the most effective approach to deliver the data and communications services efficiently, securely and affordably was to establish a single, central data and communications company. There were a number of reasons for establishing a single body to perform this role and support delivery of the Programme's benefits:
  • To protect and promote competition in the retail energy market by:
  • Putting in place shared infrastructure that facilitates consumers switching energy supplier without a change of meter or communication equipment
  • Streamlining industry processes to enable faster, more accurate switching
  • To facilitate new and emerging energy service markets, by ensuring ease of access to data to parties who have permission from consumers;
  • To support the development of a smart grid by ensuring communication service providers deliver smart energy network requirements across GB and facilitate access to data for the network operators;
  • To deliver efficiency and maximum coverage through economies of scale;
  • To provide the most robust security architecture for smart metering on a national scale.
The Government's IA quantifies some of the specific benefits of a centralised approach, where they can be estimated. In particular, it identifies benefits of £1.7 billion over the period to 2030 relating to an enhanced consumer switching process.
The Data and Communications Company (DCC) is the licenced organisation responsible for service development, service management and contract management of the smart meter data and communications system, while the data and communications services themselves will be delivered by companies who have a service contract with the DCC. The estimated value for the DCC itself is £175m over 12 years, which compares with the estimated service contract values of over £2bn. It will be regulated by Ofgem, to ensure compliance with the obligations set out in its licence and provision of an economic and efficient service, DECC says.
Since the Committee's inquiry finished, the licence to operate as the DCC has been awarded to Smart DCC Ltd, a wholly owned subsidiary of Capita PLC. The DCC has also signed contracts with three companies for the delivery of the fundamental data communications services. These are CGI IT UK Limited, Arqiva Limited and Telefónica UK Limited.
DCC Communication Service Providers have committed to wide area network coverage targets of 99.25% of GB premises by 2020 (the end of mass rollout) and will provide coverage to at least 80% of premises within each region by the end of 2015 (the start of the DCC's live service), DECC insists.
Meter choice
DECC also said that SMETS1 meters allow for any open communication standard to be used, whereas SMETS2 specifies a particular communication standard, which will facilitate communications with the DCC systems. SMETS 1 compliant meters will be capable of communicating with the DCC, but as they may employ different communication standards, "different arrangements may be required to communicate to the meter," DECC stresses.
SMETS 2 also include some additional requirements including:
  • Provision for registers in electricity meters to record the maximum demand over a period - this additional functionality can help inform networks in their grid planning;
  • Provision for variant electricity meters which reflect the non-standard arrangements currently used by nearly 5m premises (e.g. those with certain types of storage heating);
  • Randomisation offset capabilities, which allow meter switching times between tariffs to be randomised over a short period of time (c.f. switching all at once) to help avoid risks of power surges; and
  • A requirement that meters include role-based access control.
As smaller non-domestic sites form a market that is more varied and complex than the household sector, this market ranges from micro-businesses to the smaller sites of large public and private sector organisations. These customers will wish to access different levels of data, and to access it in different ways, DECC asserts.  Micro- and small businesses also can vary significantly from one another: e.g. a small shop, an office or light industrial premises are very different, and are likely to have individual needs in terms of access to, and use of, consumption data. The Central Delivery Body will have an important role in engaging this range of smaller businesses, when it is cost effective for it to do so "through extension of its consumer engagement activities."
DECC argues that although the in-hand device (IHD) is one means of obtaining information held by smart meters, the other main approaches are the use of web-based tools, which are already widely available in the larger non-domestic market, telephone applications, and consumer devices, which the Government expects to appear on the market in tandem with the smart meter roll-out.
DECC reports that "the evidence from early installations of smart-type metering is that large suppliers (who supply the great majority of micro- and small businesses), see competitive advantages in not charging for access to consumption information. "

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