This week the Institute of Directors kindly invited me to their annual dinner. They’re a fantastic organisation who represent the interests of British business with great insight and vigour. They’re also great hosts – dinner was delicious and the speeches most interesting – so writing this article is pretty bad form as I must reward their hospitality with a mildly critical response to Dan Lewis’s article on smart meters, published a week ago on ConHome.
Managing energy demand is the much less glamorous side of energy policy. Generation, supply and price will take the headlines but the real advance in the way this nation uses energy will be achieved through digitising our grid. As digital TV signals have paved the way for greater interaction, choice and competition for viewers, the digitisation of our energy system will do the same for consumers. Smart meters are the first important step in making that happen.
Dan Lewis is not wrong in some of his main observations. It is important that Ofgem ensure that energy providers pass on the savings that they achieve. DECC have already said that they must.
The In Home Displays (IHDs) might be the best option for those who haven’t yet got a smart phone, tablet or computer, but for everyone else, a well designed app will be much preferred and cheaper too. Some of the energy companies are already steaming ahead on this giving their customers fantastic information on their usage, its cost and therefore the appropriateness of their tariff. IHDs alone don’t do that analysis.
He was also right to point out the wastefulness in rolling out a first wave of smart meters that generally only work with the supplier that installed them when their raison d’etre is to encourage switching. Although, again, the second generation has that cracked.
Where we disagree, however, is Dan’s suggestion that we should “ride rather than drive the innovation wave.” I’m all for early adoption of new technologies and I like that we’re driving smart grid technologies here in the UK.
When Amber Rudd came to the Select Committee last, I asked her straight up whether every home would have a smart meter by 2020. She was equally unequivocal in her answer – Yes.
Smart meters will empower the consumer by giving them a firm grip of their energy usage allowing them to manage their consumption and, in theory, encourage them to switch suppliers more frequently too. Energy companies will be able better to understand consumption patterns meaning there is the opportunity for more innovative (and thus cheaper) tariffs. These meters will also make a real difference to those on pay-as-you-go energy contracts, many of whom have the lowest household incomes.
Yet there is so much more.
Our energy future is about distributed generation with consumers able to buy from either their local energy co-operative or a distant power station depending on who was offering it cheapest in any 30 minute period. That sort of dynamism only comes with a digitised energy system.
When the wind is blowing, the sun is shining, the tides are moving and the waves are roaring, the renewables sector will be pumping out loads of energy. Similarly, in the dead of night, our one speed nuclear power stations will be generating whether we need it or not. At the moment, we either pay the renewables companies to stop generating or we dump cheap energy into Ireland or continental Europe through our interconnectors.
The smart energy system with smart meters at their heart will allow consumers to take advantage of that over-supply. Our white goods will all speak to the smart meter so the dishwasher, washing machine or tumble drier could all be waiting to spring to life when cheap energy becomes available. Our electric cars will be listening in to spot the moment to refuel. So too storage batteries not just in homes but businesses, our transport network and at Grid level as well. And our immersion heaters will warm the water for the morning’s showers when the price is right in the middle of the night.
On the Energy and Climate Change Select Committee we’ve decided to evaluate the things we hear and see through the prism of reducing the energy trilemma: Will this make energy cheaper? Will this make energy greener? Will this improve our security of supply?
Smart meters achieve all three. Consumers will save, we will become much more energy efficient and in so doing, we will achieve greater energy security simply by needing less. A state backed, centralised scheme does not suit my ideological instincts but it is the very necessary first step to unlock some really exciting innovation and highly competitive new markets thereafter.
