The government's £10bn plan to replace almost 50 million gas and electricity meters over 20 years is a golden prize for information and communications services firms.
Not only will it put an "always-on" communications link into every house, flat and office, and require the collection and storage of petabytes of information, but it has the potential to allow energy suppliers to control consumers' energy consumption.
The government hopes information from smart meters will be enough to persuade consumers to use more off-peak energy. But if they do not, smart metering opens up the possibility for suppliers to ration consumption, by allowing them to switch off networked appliances at times of peak demand.
Key to this is the communications network. The government has proposed three possible scenarios. The option preferred by the government and energy suppliers is for a purpose-built independent third-party national network operator. This would allow energy suppliers to install and maintain the meters, without taking on the risks associated with running the communications and data storage network.
All homes with a telephone line already have a nominal 56kbps link. BT, the UK's biggest fixed wire network operator, is keen to explore how this project might integrate with its plans, including its possible obligation, to provide a 2mbps broadbank link to British homes.
Reliable broadband essential
But linking smart meters to the telephone system, particularly a broadband network, might not work, says Mark England, managing director of electronics design specialist Sentec. Sentec licenses its smart meter designs to manufacturers which build units for the US and Italian markets.
He says broadband may be okay for consumers because they can usually afford to wait for their information. But energy firms cannot, especially if they are trying to manage consumption on the fly. Even though data rates of 100k a day may be all they need, the connection must be up 24x7. Britain's broadband networks are not that reliable.
The government's department of business (BERR) said it had talked to the energy department about whether a smart meter roll-out would make a universal broadband roll-out more cost-effective.
"Currently we believe that this is unlikely because firstly, the meters do not need the bandwidth of broadband, and secondly, energy suppliers need 'always-on' communications that consumers cannot switch off," says a spokesman.
Smart meters offer the potential to introduce smart grids, which interconnect machines rather than people, says England. For example, the smart meter could become the portal to other networked devices such as home surveillance equipment, refrigerators or air-conditioning units. This would allow electricity suppliers (or owners) to switch devices on and off remotely to minimise peak loads.
It would also let suppliers offer innovative service packages, England says. One might be a consumer's commitment to keep peak consumption below say 3kW in return for a cheaper price, but to suffer a trip if consumption goes above the limit.
"This means there is a lot more information flowing up and down in real time, so network reliability and guaranteed quality of service are mandatory," he says.
England believes different physical networks will be optimised for the terrain. He says the cellular telephony network works fine in densely populated urban areas, but GSM modems presently cost more than the meter equipment. Rural areas may need cable and/or multiplexed wireless connections.
The key to cutting the UK's carbon emissions is to reduce peak load and raise base load. As James Forrest, vice-president of CapGemini's utilities consultancy, puts it, "The aim is to keep the beer just cold enough."
Petter Allison, director of smart metering at British Gas, told a recent conference that a 2% reduction in consumption would pay for the cost of smart meters. US experience suggests some consumers will change their behaviour. It shows cuts of 5% to 15% in energy consumption, says England.
It's that, or developing a taste for warm beer.