All homes in Britain will have smart meters installed by 2020 under plans published today by the Department of Energy and Climate Change.
The proposal to replace almost 50 million of the country's gas and electricity meters with networked meters will cost £10bn but deliver net savings of £2.5bn to £3.6bn and cut carbon emissions by 2.6mt/y by 2020, the government said.
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Smart meters employ a centralised national communications network that allows energy supplies to read them remotely. This will eliminate physical meter readings, estimated bills and the need for many call centre jobs, the government said.
Consumers can monitor and adjust their energy consumption directly by using off-peak rates more. Consumers who generate their own energy will be able to sell their surplus to the grid.
An earlier cost benefit analysis of the impact of smart meters on small and medium enterprises and the public sector by the department of business found that installing smart meters over 10 years would cost £552m but would create benefits of £1.44bn; doing nothing would save £533m.
An energy department spokesman said that study was a work in progress and has been refined since. The current impact assessment on domestic meters shows capital and operating costs of £9.3bn, which the government believes will lead to savings of £11.8bn.
Rolling out smart meters for business and the public sector would cost an extra £791m for savings of £2.54bn, the government said. "We assume that there are no additional IT and legal and contractual costs for the non-domestic sector as they have already been taken into account in the IA (impact assessment) for the domestic sector."
Left to themselves, energy suppliers would only install smart meters where it made economic sense, between 20% and 30% of some 47 million meters, the government said.
Energy and climate change secretary Ed Miliband said the move was in line with government efforts to fight climate change. He published a consultation paper to gather opinion on what is the best way forward.
The government's preferred option makes energy suppliers responsible for the installation and maintenance of the smart meter but communication to and from the device is coordinated by a third party across the country.
The other principal models considered are a competitive model, where energy suppliers manage all aspects of smart metering, including installation and communication, and a fully-centralised model where regional franchises are set up to manage the installation and operation of smart meters with the communications to and from the meters managed centrally and on a national level.
Another model proposed by management consulting firm Accenture is to roll out smart meters on a city-by-city basis, and to integrate the resulting network with other city-based services.
"The role cities can play has been 'underweighted' by policy makers," said Sander van 't Noordende head of the firms's resources division. He said they can provide the scale, scope and integration of utility services such as communications, energy, transport, waste, and water that are big enough to make a difference. They are crucial too because cities are the main generators of CO2. Without their buy-in, any national plan is doomed, he said.