Doubts cast over consumer benefits of smart meters

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SPECIAL REPORT / The European Commission has asked member states to present before September their cost-benefit analyses on the deployment of smart meters that could lead to 80% of consumers being equipped with intelligent metering systems by 2020. But a recent study casts doubts over their cost-effectiveness and the benefits they bring to consumers.

Smart meters record energy or water consumption, sending the readings back to the power or water suppliers for monitoring and billing. A cost-benefit analysis currently deployed in member states will be finalised by 3 September 2012.

In a recommendation paper, the European Commission says it is yet to be convinced that smarts meters are “economically justified”.

The EU executive's doubts are being raised despite an increased acceptance of smart meters across European countries. In Italy and Sweden, smart meters cover almost 100% of households while they have been rolled-out on a large scale in the UK and Spain.

Consumers 'underrepresented'

However, a recently published study of the Free University in Brussels (ULB) commissed by the European Consumers Organisation BEUC,  found that consumers are not the main beneficiaries of this technology, calling current efforts “a missed opportunity” for end-users.

“Smart meters might be beneficial to some consumers, but we certainly have doubts about whether they will be beneficial to all consumers,” Johannes Kleis of BEUC told EurActiv.

Smart meter are controlled by producers and sellers while consumers are underrepresented and “energy savings” is not a main objective, BEUC’s study says. It also says many energy users are not yet educated about how to benefit from smart meters.

But giant industry players are already one step ahead of the game, having pioneered different smart meter scenarios for users and energy retailers. Bastian Fischer of Oracle says technology means consumers have gone from being “victims” of meters to being more actively involved in their energy consumption and billing.

“From victims of the meters we are becoming active members of the supply chain and can influence what energy we can consume – the same goes for shirting the energy load and choosing our own energy mix,” Fischer told a recent conference on smart metering.

Policy is crucial in providing the right incentives for investors, Fischer agreed. “We need to marry business policy and technology to make it easier for consumers to adapt,” he said.

Conflicting savings estimates

Several national assessments of the impact of smart meters have so far showed conflicting savings predictions, which range from 2% to 40%.

Only around 10 % of EU households have some sort of smart meter installed, according to the European Commission, and these users have reduced their energy consumption by 10% or even more in some cases.

In Britain, the AlertMe project allows customers to turn off appliances by web interface or mobile; in eight months, residents have saved roughly 40 % electricity. In Spain, the forecasts by the GAD project show that a normal consumer could save 15% of total energy consumption, European Commission figures show.

The Dutch government has estimated that smart meters can conserve up to 10% of all energy used in a household.

But ULB researchers analysed six energy industry studies on the use of smart meters showing savings of between 2-4% in the best cases where consumers opted for their use. The six studies were undertaken by EDF (France), E.ON (Germany), Scottish Power, SSE (Scottish and Southern Energy), CER (Commission for Energy Regulation in Ireland) and Intelliekon (Germany).

Who benefits?

Consumers representatives worry that producers and energy suppliers “could be the ones taking all the benefits” from the EU-wide deployment of smart-metering systems.

If demand-response becomes compulsory there will be some low-income consumers who are already using very little energy for very basic activities and will not be able to reduce their consumption any further, Monika Stajnarova, an expert on smart meters for BEUC told EurActiv.

“We are against the mandatory roll out [of smart meters] for the whole population - some consumers will pay for the smart meter all the while not being  able to benefit from them. Consumers need to be given the choice,” Stajnarova said.

The BEUC report shows that the possible hypotheses the Commission has used to draw its conclusion on the consumers' need for smart meters is “too general with regards to the plurality of consumers, and the huge diversity of practices involved in households”. To present, there is no study that considers the diversity of consumers when assessing the energy savings potential, the report found.

However, the consulting firm Frontier Economics has developed a model based on 200 different types of households in order to assess for which consumers smart meters would be financially beneficial. In one case, just 15% of surveyed households in Germany benefited from the country’s compulsory roll-out of smart meters.

Who pays?

“Energy suppliers will, of course, try to push any cost they have on final customers,” Gierulski of the Commission's energy efficiency unit said at a recent smart-metering workshop.

“Companies need to be sure they will make a profit in order to invest,” said Gunnar Lorenz of Eurelectric. “We have to explain to customers what this box is and what it does so that they trust it and feel comfortable with it and do not feel like they are monitored by a big brother,” he added.

The European Data Protection Supervisor (EDPS) told EurActiv that it was worried about the fact the energy retailers will have access to energy consumption patters and will have a choice between being “generous” and helping the consumer to shift electricity loads and save money or not.

“The fact that a company knows a lot of personal information about us may make it easier to use this to its own advantage, which may mean, among other things, increasing the possibilities of price discrimination,” the EDPS said.

BEUC is critical about the socialisation of cost – in other words, power utilities spreading the costs implied by the roll-out of smart meters in 80% of households in an even manner amongst all of their clients. “There should be a  fair sharing of costs for all investments required, but also between all actors that could potentially benefit from the new meters: the different functionalities and benefits that they bring to different actors need to be analyzed and thus determine the distribution of costs amongst those actors,” Stajnarova said.

The Brattle Group consulting firm warned in 2009 about the major investments that the EU is poised to make in order to install smart meters in households EU-wide. They estimated that this would cost EU €51 billion by 2020, whilst the improvements would be between n €26 billion and 41 billion, leaving a gap of €10 billion to 25 billion between benefits and costs.

Timeline: 
  • 3 Sept. 2012: cost-benefit assessment shall take place by this date
  • end of 2012: the first deliverables for European standards for smart meters expected
  • by 2020: at least 80 % of consumers shall be equipped with intelligent meter­ing system, if cost-benefit analysis is positive
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