When the Department of Energy and Climate Change (DECC) released its plans to roll out Smart Meters to 26 million UK households by 2020, it was following the green technology trend that’s been working its way across European Utility grids for some time.
An EU Directive endorsed in March 2007 emphasised the aim to limit the rise in global average temperature to no more than 2 degrees Celsius above pre-industrial levels. EU Member States agreed to reduce the EU’s greenhouse gas emissions by 20% in 2020 compared to 1990 levels and by up to 30% provided other developed countries committed themselves to comparable objectives. To meet these stringent objectives the EU intends to increase energy efficiency by 20%, increase the share of renewable energy to at least 20% and dependence on bio fuels to 10% by 2020.
While the UK is just starting to address the 2020 deadline, the Directive has already been taken very seriously on the Continent – by July last year the use of Smart Meters in households and businesses was a legal requirement in Sweden.
The Smart Meter rollout seems to be the UK’s main response to meet the EU requirements and energy providers have been given the responsibility for the roll-out, enabling them to read consumption levels remotely and put an end to the nightmare of estimated bills. By giving customers the ability to monitor their own energy usage so that they can economise how and where they choose, Smart Meters also offer significant budgeting ability in the current economic climate.
US research states that a customer’s energy use is expected to reduce by up to 20% per as a result of Smart Metering. British Gas anticipates creating 2,600 jobs across the UK by 2012 to manage its roll-out of Smart Meters, comprising 2,100 experts, 400 support staff and 100 managers.
DECC has said that it expects to save £14.5billion as energy companies reduce their administration costs and customers benefit from lower bills. The first phase of the DECC rollout was the recently published prospectus which gave the precise technical specifications and required functionality for the meters and outlined proposals for the regulatory and commercial framework to implement and install them.
In the meantime while the media and industry pundits swing between concern about the creation of a common technical standard which will let customers switch seamlessly between suppliers and the Orwellian horror of people being ‘spied upon’ in their own homes. However they are all missing the real issue. Just how will the energy suppliers manage to utilise the mountains of data they’ll receive?
And ‘mountain’ is no exaggeration in describing the volumes of rich information from Smart Meters that the operators will be inundated with. Traditional Utility bill processing was based on taking estimated or measured readings typically once a quarter, while Smart Meter technology means that the operators have the potential to process meter readings from households and businesses each and every half hour.
The sheer volumes associated with Smart Meter rollout are simply staggering. In its first two hours of operation, a Smart Meter will generate the same amount of usage data on a customer as would have been manually generated in the previous year. In just ten days, the Smart Meter will generate more data than would have been collected in the previous 100 years.
This resulting increase in data will put a massive strain on systems that were simply not designed for this purpose. What’s even more concerning is that no-one is seriously reviewing what they will actually do with this valuable information.
Energy operators seem focused on the hardware and communications aspects of their Smart Meter rollout, yet now is the time to consider how best to maximise the value of their investment and particularly the value of the data which will come streaming in from millions of new measuring devices. Turning this data into meaningful information and using it will offer greater operational intelligence and optimise the business itself. It is also the key to changing customer behaviour and meeting those EU goals.
The Smart Grid in itself isn’t the sole solution which will drive the necessary reductions in our energy consumption so we can all meet our Green targets. A Smart Grid can only address part of the problem – financial incentives which appeal to people’s self-interest are really the way to get customers to engage and change their behaviours. When over 80% of customers don’t actually understand their utility bills and have no real idea what they are paying, those incentives will have to be both personalised and work extremely hard to appeal to the bill-payer if we have any hope of smoothing out the demand for energy.
Switching discounts aren’t going to help change customer behaviour. What is required is analysis of the data to provide useful information that will encourage customers to understand the cause and effect of their energy use. For instance offering customers cheap night energy or cheap weekend energy will do much more to change their usage patterns and smooth out demand.
That’s why all this information will be redundant without real-time analysis which takes the data direct from any Smart Meter and translate it into a realistic commercial offer, tailored to the needs of that particular customer. The next generation of software analysis tools is urgently needed by energy operators to adapt their operational stack to take advantage, rather than drown, in the rich information delivered by Smart Meters.
The Smart World represents a real opportunity to everyone – customers, operators and the Government – but only if it provides customers with specific usage based bills that accurately reflect their energy consumption in a timely manner. We have just a few years to get this right so now is the time to focus on how Smart Meters can work to best serve us all – rather than missing out on a what truly is a once in a lifetime opportunity.