(John Kemp is a Reuters market analyst. The views expressed are his own)
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 bills.
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 periods.
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 customers.
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 times.
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 still days.
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 are stretched.
In contrast to the professional enthusiasm of the experts, consumers remain much more wary about how smart meters will affect them.
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 off-peak.
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 households".
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 further disadvantage.
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 choose".
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 professional optimism.
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)