(The author is a Reuters market analyst. The views expressed are his own.)
By Gerard Wynn
LONDON (Reuters) - The reluctance of utilities and makers of appliances and intelligent meters to develop demand response systems undermines a core motive in a massive smart meter rollout in Europe.
It is a great idea: when everyone rushes to turn on the kettle at half-time in a football final the utility can remotely turn off non-urgent services like air conditioning to avoid a demand surge and so save firing up another power plant.
Demand response is one of the most obvious examples of a system which helps avoid building new power plants and boosts energy efficiency.
At the household level, the user agrees to pay a reduced tariff (called dynamic pricing) in exchange for allowing the utility remotely to control more energy-intensive appliances, including, in future, charging of electric vehicle batteries.
Such a system depends on the rollout of smart meters which allow two-way communication between the appliance and utility.
It was part of the motive for an EU mandate to roll out smart meters to most energy consumers by 2020.
But smart, wireless-enabled home appliances barely exist, except as additional features in the most expensive products, meaning the meters will have nothing to communicate with.
As the smart appliance internet page of U.S.-based GE says: "Smart Appliances / Demand Response info coming soon." (here)
As it happens there are enough benefits of smart meters, but demand response will not be one of them for a decade or so.
That raises questions over the value for money of a massive rollout programme whose costs will be passed to consumers, and means putting back in the box one of the few energy efficiency measures to grab the public imagination.
Unlike legacy analogue meters, smart meters automatically send electronic readings through the power cable or by wireless to the energy supplier.
One important benefit is to allow utilities to read meters remotely, avoiding costly home visits and making readings more accurate, avoiding a subsequent true-up of estimated bills.
Another is to give utilities for the first time information about energy use in real time at the household level, allowing grid optimization where energy companies can more accurately tailor supply to demand at any time.
Both of these largely benefit energy generators and distributors.
A third advantage, for households, is that the smart meters will display regularly updated data on power consumption.
In addition, the data can be processed to give users for the first time detailed, granular information showing patterns in energy consumption, comparisons with their peer groups and so on - but that means spending more on an extra console.
The idea is that once consumers can see their energy use they will be more aware of waste and potential savings.
And there is the demand response benefit, if the smart meter can communicate with individual appliances where these are wireless-enabled - allowing the utility to remotely switch these off to shed load during peak demand and for the consumer to access cheaper tariffs.
But demand response services barely exist yet on the market.
The ability to shift load to off-peak hours makes demand response so tempting to policymakers staring at the alternative of public investment in power generation.
The EU expected demand response benefits in its mandated rollout of smart meters to at least 80 percent of consumers by 2020, compared with about 10 percent now.
In March this year the European Commission detailed “minimum functional requirements” in its recommendations on the smart meter rollout.
”Smart metering systems should include advance tariff structures, time-of-use registers and remote tariff control. This should help consumers and network operators to achieve energy efficiencies and save costs by reducing the peaks in energy demand. This functionality ... is a key driving force for empowering the consumer and for improving the energy efficiency of the supply system.
“There is a significant consensus on provision of standardized interfaces which would enable energy management solutions in ‘real time’, such as home automation, and different demand response schemes.”
The European Regulators Group for Electricity and Gas last year identified a “load shedding” benefit.
“Load shedding schemes driven by the meter could allow customers to fully and easily benefit from new tariffs. Through customer information and settlement of incentive tariffs, peak load could be reduced.”
What went wrong?
For one thing, the benefits may have been overstated: as home appliances become more efficient, and so use less energy, there is less benefit from controlling these in real time, unless on a large scale.
Second, the low replacement rate of appliances is a drag on adoption.
Third, many actors are needed to cooperate, including utilities (to develop new tariffs), appliance manufacturers (to make and retail wireless-enabled units), smart meter companies (to ensure compatibility), regulators (to design standards) and software companies (to develop the back office).
A similar problem has been seen in the roll out of electric vehicle (EV) charging infrastructure, where the manufacturers of street-side charging stations have to work with utilities to identify and bill motorists.
Also similarly to EVs, there is a chicken and egg problem where there is no point developing sophisticated systems before retailers are selling large numbers of smart appliances, or electric cars.
On balance a smart meter rollout is a good thing, but it will not deliver for a while the futuristic intelligent home that was on the packaging.
Editing by Keiron Henderson