The government has opted for a centralised communications network to control information flows to and from 47 million smart meters that will replace the UK's gas and electricity meters over the next 10 years at a cost of £10bn.
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Announcing the roll-out plan, energy minister Lord Hunt also published a paper setting out the case for developing smart grids. "Globally, the business of developing smart grids has been estimated at £27bn over the next five years, and the UK has the know-how to be part of that," he said.
He said the government would give energy firms £6m to develop technology to store electricity.
Hunt said energy suppliers will install smart meters in every home by the end of 2020. The home meters would have displays to make it easy for consumers to see and understand their energy use and carbon emissions in real time.
"Smart meters will put the power in people's hands, enabling us all to control how much energy we use, cut emissions and cut bills.
"Smart grids will help manage the massive shift to low-carbon electricity from wind, nuclear and clean fossil fuels," he said.
A central communications network between smart meters and the utility companies would make it easier for consumers to switch between suppliers and would provide a platform for the development of smarter grids in the future, he said.
Hunt said smart grids would deliver electricity more efficiently and reliably, reducing the costs and emissions from electricity generation and transmission. They would also make it easier to use low carbon electricity generation sources such as wind, he said.