(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON Feb 26 Smart grids and reformed
electricity pricing are essential to decarbonising Britain's
electricity system at lowest cost while maintaining secure and
reliable supply, but the public remains "ambivalent" about them,
according to researchers.
Smart meters are due to be rolled out to every household in
Britain between 2016 and 2019, under plans backed by the
government, replacing the simple accumulation meters fitted in
most homes for the last century.
Much of the public discussion has focused on the potential
to cut meter-reading costs and eliminate estimated quarterly
But smart meters would also enable customers to be charged
different prices depending on the time of day they use
electricity, encouraging them to shift demand away from peak
And smart meters could even allow appliances like electric
heaters and refrigerators to be switched off for short periods
to offset intermittent output from wind farms.
Most electricity experts and climate campaigners are excited
about the transformative potential of smart metering.
The public, however, appears much more sceptical, according
a report published on Monday by the UK Energy Research Centre
(UKERC) ("Scenarios for the development of smart grids in the
UK" Feb 25).
SMART POWER PRICING
If smart meters are used to implement smart pricing and
other demand-management programmes it would mark the biggest
shake up in the electricity industry since the 1930s.
For the first time, the price residential consumers pay for
electricity would be directly related to the costs of generating
and distributing it, rather than being averaged across all
Big electricity consumers already have meters which measure
their consumption in half-hourly periods and are subject to a
tariff that charges more for generation and transmission at peak
But smart meters could, potentially, extend the same
disciplines to households.
Electricity experts believe involving residential customers
will be essential to integrating more wind power onto the
network without having to build lots of expensive gas-fired
power stations and power lines to provide back-up supplies on
In the longer term, Britain's government wants more cars to
be run on electricity and more homes to be heated with it, which
will enormously increase pressure on the grid.
Rather than unlimited amounts of power being available at
"the flick of a switch", electricity experts want customers to
think more about the best time to use power-hungry appliances.
In the future, they want electric cars to be recharged when
the wind is blowing, and for some heating and cooling appliances
to be turned down or switched off altogether when power supplies
In contrast to the professional enthusiasm of the experts,
consumers remain much more wary about how smart meters will
Customer concerns range from privacy and the use of their
data to worries about how much power would cost at peak times
and the impact on customers who cannot shift their consumption
Particular fears have been expressed about the impact on
families with young children or containing elderly and disabled
people, who might face difficulty shifting their demand to
cheaper times of day, as well as poorer households unable to
afford smart appliances.
The UK Energy Research Centre's workshops with customers
found "speculation that smart metering would lead to family
members obsessively monitoring consumption, causing tension in
Participants thought real-time tariffs would be too
complicated for customers to understand, but a simpler system
that charged less for off-peak use, such as the "Economy-7"
night-time tariff used by some households since the late 1970s,
might be acceptable.
Some participants questioned whether smart metering would
really benefit the consumer as opposed to energy suppliers.
"Most people just want to know what they're paying for is
efficient and they are getting good value for money," the report
quotes one saying. "The energy companies are making billions out
of us, it doesn't matter how energy efficient you are, they're
all creaming off and making a fortune."
Such sentiments reflect widespread cynicism about the price
of energy and profits made by Britain's power and gas companies
following a steep increase in bills over the last decade.
BENEFITS AND CONTROL
Customers are not hostile to smart metering per se,
according to UKERC, though my own experience from speaking with
friends and family is that there is little enthusiasm and much
hostility towards the idea.
But customers want to know how it would benefit them and
they want to remain in control. For example, the researchers
found a "particular concern around fridges being automated, a
fault occurring and food being spoiled".
If smart meters are eventually coupled with smart appliances
that can turn off or turn down in response to signals from the
grid, customers want the ability to override the commands. "An
override function would be essential, allowing customers to take
control if needed," the report concluded.
And some workshop participants worried about how much all
this would cost and whether families on low incomes would be
able to afford smart appliances. If not, they could be at a
TRUST AND MESSAGING
Customer acceptance of smart metering was identified by
UKERC as one of the critical factors which could accelerate or
hamper the transformation of the power system.
"Securing public commitment, although challenging, is
perceived by virtually all stakeholders (in the electricity
industry) as essential ... to respond to a future system with
substantial intermittent generation and increasingly volatile
load," the report concluded.
Rather than power at the flick of a switch, customers will
be "able to choose from more differentiated and dynamic tariffs"
according to UKERC - which is an interesting use of the verb "to
The problem is that most customers don't want to think about
the cost of the electricity they are using and want power
available anytime on demand for a simple and low price.
Persuading customers that change is both necessary and
desirable is likely to prove difficult, for all the UKERC's
The report emphasises the importance of building public
trust so customers do not feel they bear all the risks of smart
metering (including the threat of higher peak-time prices)
without reaping the rewards.
Poor public perceptions about Britain's utilities could
complicate the task, so UKERC floats the idea of partnerships
with more trusted suppliers like mobile phone companies and
smart phone suppliers.
But smart metering will create losers as well as winners.
Not every household will be able successfully to shift power
consumption away from peak periods.
The question of how far to cushion the impact on the losers
is critical to both the acceptability of smart meters and their
ability to deliver real load-shifting.
The report speculates that the distribution of costs and
benefits is likely to be uneven, between households and even
between regions, according to "differences in lifestyles,
socio-economic characteristics, education levels (as well as)
consumers' ability and willingness to accept smart technology".
Peak pricing is already widely accepted as reasonable in
some circumstances, such as rail and airfares, and the telephone
system. Customers expect more to call or travel at peak times.
But residential power users have never faced similar
charging schemes for electricity, and shifting from one system
to another is bound to prove intensely controversial.
How well customer perceptions are managed will determine how
far and how quickly the electricity industry can go in shifting
to a new model.
(Editing by William Hardy)