National Audit Office casts doubt on smart meter roll-out cost

News Analysis

National Audit Office casts doubt on smart meter roll-out cost

Karl Flinders

The National Audit Office says it expects the cost of implementing smart meters across the UK to exceed the current budget and questions how a critical change in consumer behaviour will be stimulated, in a report.

Putting 50 million smart meters in domestic and non-domestic premises by 2019 is part of the government's plans for a smart energy grid. It is part of the UK's strategy to cut carbon emissions by helping consumers and businesses better control their energy usage.

Smart meters communicate with a central system at regular intervals. This can give consumers accurate information on their usage and enable them to make cuts.

Margaret Hodge MP, who chairs the Committee of Public Accounts, said the government's track record on delivering large programmes is patchy at best. "At the moment the estimated cost is £11.3bn, but all our experience suggests that this budget will be blown," she said.

She also described how energy consumers need to change their habits if there is to be any benefit from the investments: "For the money spent to provide value, we all have to change the way we behave. It is not clear how the department will stimulate this behaviour change. And, as technology changes, the department will have to be properly flexible to respond with up-to-date technology for the smart meters. These uncertainties can drive up costs more than planned."

Consumers concerned about rising energy bills

A recent survey of 1,000 consumers, commissioned by smart meter technology provider T-Systems and carried out by the Economist Intelligence unit, revealed fears of initial price rises and a lack of evidence on future savings associated with the government's plans. The government estimates that the smart metering programme will result in an increase in annual domestic energy and gas bills for the average dual-fuel customer of £6 by 2015, but by 2020 it will deliver a net annual saving of £23.

The survey revealed antipathy towards the government's plans to roll out smart meters to 30 million homes by 2020. Consumers are more concerned about the financial costs of using smart meters than the environmental costs of inefficient energy use.

Ambitious and costly smart grid plans

IT industry body Intellect has launched a project known as SmartGrid GB, which will bring together IT companies, environmental organisations, government, regulators and consumer groups. It will coordinate the multiple stakeholders and advise the government.

Robert McNamara, energy and environment programme manager at Intellect, is SmartGrid GB's manager. He says the government's smart grid plans are ambitious.

"Smart metering is seen as a stepping stone to a smart grid," he said. "Developing a smart grid is vital if the UK is to fully exploit the exciting developments in electric cars, micro generation, smart metering and meet our carbon reduction targets. Success in the smart grid will create new jobs and drive innovation."

McNamara said a smart grid will require involvement from suppliers across the IT sector, including communications, software and security companies.

"The opportunity for suppliers in the IT sector to get involved is vast. A year ago the companies interested in the smart grid were IT companies with a background in utilities, but over the course of the past year we have been engaging with many more," he added.

"We have engaged with the likes of McAfee about security, O2 about telecommunications, as well as online service providers such as AlertMe, which helps consumers manage energy bills," McNamara said.

Securing smart grid data

The smart grid will utilise high-speed networks to transport large volumes of data. As a result, security is an important priority. The planning will require a coordinated focus on cybersecurity as communication networks play a key role, according to a report from The Energy Networks Association (ENA).

The ENA published the report for the Department of Energy and Climate Change (DECC), which is responsible for the energy smart grid. The findings of the research, which was carried out by consultancy KEMA, revealed that the government and network providers need a more "coherent and joined-up approach" to secure the smart grid.

The report outlines how the smart grid will affect networks and describes how cybersecurity should be an important consideration when developing the smart grid's architecture, technology and management systems. "IT security, along with computing system reliability, safety and maintainability, are critical attributes for smart grid implementation and operation, and need to be considered as part of overall risk management for this critical national infrastructure."


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