The UK Government has enlisted two cartoon characters – FATZ and DECCY to explain the need for smart meters to a sceptical public. FATZ – the corpulent blue one, represents the cold, uncaring fat cat executives of the energy industry, eager to take still more of your money, while the manic yellow DECCY represents the seriously scary civil servants of the Department of Energy and Climate Change who have been tasked with dreaming up the world’s most complicated and unworkable smart metering specification. Their bulging eyes and demented smiles tell the average consumer all they need to know about the UK smart metering plan and the mentality of the people behind it.
Claire Maugham, director of communications at Smart Energy GB, who’s responsible for the campaign said: “FATZ and DECCY are embodiments of what we’ve heard about consumers’ experiences about buying gas and electricity. We heard time and time again that people are anxious because they don’t know what they’re spending, they don’t know if they are on the right tariff or with the right supplier. It’s almost like they are out of control, causing chaos around the house like two naughtily children.” So it’s fitting that they’ve chosen utility bosses and DECC employees as models for their chaos and out of control metering specification.
The aim of the campaign is two-fold. Firstly to try and persuade consumers to allow a smart meter to be fitted, secondly to try to convince them they that might save money, not least because if they don’t it exposes the alleged consumer savings trumpeted by DECC as pure fiction, relegating the whole project into another expensive Government IT fiasco. Achieving either of Smart Energy GB’s aims looks increasingly difficult.
Last Sunday the Mail on Sunday ran a two page article on the UK smart metering plan, in the run-up to the Smart Energy GB launch. It wasn’t anti-smart metering, but pointed out the technical issues with the GB approach which are making it the most expensive system in the world, with a high potential of failure. A surprising number of readers have already commented on it, most to confirm that they would not allow a smart meter to be fitted, largely because of a growing distrust of both Government and energy suppliers. So aim number one looks increasingly difficult.
Smart Energy UK’s second aim, of proving that smart meters will save money for consumers is far more difficult to achieve. According to the Mail on Sunday, Smart Energy GB have said that a smart meter will cut the average electricity bill by 2.0% and the gas bill by 2.8%. DECC have just updated their estimates for average annual domestic energy bills, which are £768 for Gas and £566 for electricity. So the savings per household would be £21.50 and £11.32 per year.
That assumes that smart meters provide these savings. A recent report from smart meter installations in Holland reported that their expected savings of 6.4% on electricity and 5.1% on gas turned out to be fiction – the actual savings were 0.6% and 0.9%. The report also stated that given the results, it was not possible to conclude that there were any significant savings in electricity usage as a result of having a smart meter. If we go back to DECC’s research, UK domestic energy usage peaked in 2005 and has been falling by around 1.3% each year. Over the same period gas consumption has fallen by an average of 1.6% each year. That’s largely due to more efficient products in the home. It has nothing to do with smart meters. If we assume DECC’s projections are as over-egged as the Dutch ones, then the real savings will be no more than a few pounds per years for the average household, which makes the smart metering deployment uneconomic.
But if we really do want to save consumers money on their energy bills, it may be possible. It’s just that smart meters are not the best way to do it. However, DECC is less than happy to talk about this, because it’s based its whole business case for smart meters on these fictional savings. A lot of civil servants are getting their mortgages paid for wearing smart metering blinkers. Other countries like Germany have been more honest. They haven’t included made-up figures in their analyses of smart metering benefits. As a result they’ve concluded that it is not economically viable to deploy smart meters and they’ve dropped their programs. Incidentally, if anyone tells you there’s an EU mandate to roll out smart meters, they haven’t read the legislation, The EU recommends them, but only if they are economically viable. The GB mandate is entirely the brain-child of successive Government ministers who are using it to flaunt their green credentials at the cost of their constituents.
To see how technology can save energy in the home, I’ve had a look at some numbers from British Gas, as I have more faith in their numbers than most of the others involved in smart metering, not least because they’ve installed enough to have some actual experience, although I suspect these are marketing numbers, not ground-truth data. They’ve been promoting two ways of saving money – smart meters and smart thermostats. (Incidentally, it would be nice if British Gas published some of their data on both of these – they’ve probably got more evidence of smart meter effectiveness than anyone else in the world, which could prove whether smart metering works.)
First smart meters. British Gas’ website quotes estimates from the Energy Saving Trust which claim that if smart meters are supplied with an In Home Display they will save the average household £105 a year. According to DECC’s estimates it will cost British Gas around £256 to supply and install these meters in each home, which will inevitably get added to bills.
After their initial flush of enthusiasm for installing smart meters, British Gas turned their attention to a different energy saving device – the smart thermostat. These learn your preferred comfort levels, when you’re at home and when you’re not and adjust your heating accordingly. Nest is the poster child of smart thermostats, but British Gas were so impressed by their potential that they set up a separate company to produce their own Hive Smart thermostat. They claim this will save the average home up to £150 per year. British Gas charge £199 to have it installed, with quite a few discounts available on top of that. Assuming there’s an element of profit in that charge, it probably only costs them around £125 to make and install it, so it’s a profitable business and a lot cheaper than a smart meter.
Let’s have a closer look at those figures. Using British Gas’ own numbers, the smart meter will cost the consumer £256 (as it will end up on their bill) and save them £105 a year. The smart thermostat will cost the consumer £199 and save £150 each year. As a consumer that wants to save energy, which would you have?
If we believe Smart Energy UK, the £105 saving from a smart meter is exaggerated – they reckon it’s only around £33 a year and most of that depends on the effect of the In Home Display. (Smart Energy UK’s website doesn’t appear to know how In Home Display’s work – they claim they only update electricity data every six minutes rather than every ten seconds. If that’s the case, they’ll have virtually no effect on savings. Note to Smart Energy GB – read the technical specifications.) Nobody within the industry believes that users will keep the in-home display for more than a year – most expect it will only be for a few weeks, so the £105 saving every year diminishes to a one-off saving in the first year, which we’ll optimistically assume is the full £33.
Assuming both smart meter and smart thermostat have the same 10 year life, the deal looks like this:
Costs £256. Total saving over ten years £33. Consumer Loss – £223
Costs £199. Total saving over ten years – £1,050. Consumer Gain – £851.
The savings from a smart thermostat are probably also over-inflated, but even if they’re a third of British Gas’ figures, it leaves the user almost £400 better off than the smart meter option.
So if Smart Energy UK and DECC are telling the truth when they say that they want to save consumers money, they’ll stop promoting smart meters and start installing smart thermostats. Except they’re not telling the whole truth.
The reason FATZ and DECCY aren’t going to tell you this is because smart thermostats only tackle gas consumption. Whilst that provides massively better savings for consumers, utilities have an ulterior motive which is not about customer savings, but managing peak electricity demand. Hence they pick and choose “energy” savings to suit their vested interest.
Peak electricity demand is an interesting subject in its own right. Because you can’t store electricity you need flexible generation, but that’s expensive as it means you have to build power stations which are idle for most of their life. And the more renewable generation you build, the more back-up power stations you need to cope with the times when the wind isn’t blowing. What utilities would love is for consumers to reduce their usage to match supply, so that they don’t need to do any work other than take your money.
To achieve this they’d like to emulate the demand response programs in the US, where utilities can either turn off users’ appliances directly, or hike the price of electricity at peak times to discourage use. Neither has been very successful, but they’ve received a lot of high-level hype and lobbying from companies supporting them. But they have little relevance to the UK.
The graph below shows why. In states like Texas, where demand response is popular with utilities, a significant number of households have pool pumps and air conditioners which consume massive amounts of electricity. The red line shows typical power use for a home during a summer day. The blue is the markedly lower consumption for a winter day. Texan utilities would love to make the summer use look more like the winter. It still gives them an enormous challenge in demand change during each 24 hours, but it would be a great improvement.
In contrast the green line shows the average UK domestic demand on the same scale. It doesn’t change much from winter to summer, unless you have storage heaters. Compared with the US, the calming effect of the Gulf Stream gives us one of the smallest peak problems of any country. That doesn’t mean peak demand isn’t still a problem, but it is such a different problem that you can’t apply the same solutions that are being tried in the US.
It’s questionable whether anyone knows exactly what is responsible for UK domestic peaks – the old story of kettles being boiled after Coronation Street still dominates reports, although the Sky+ button has probably dome more to smooth these out than anything that utilities will offer. As is so often the case, there is precious little real evidence or data behind what is being proposed – our energy industry and mandarins prefers folklore to fact. But that hasn’t stopped them buying into the US hype and overdesigning our meters to try and support ever more complex demand response models and time of use tariffs than any that have been rolled out in the US. Incidentally, OFGEM has refused to allow most of the tariff proposals that the utilities have suggested for the UK, which means that most of the expensive features that have built into our smart meters can’t be used and are a further waste of money.
Going back to energy savings, smart thermostat vendors like Nest and Hive have probably already done more for consumer engagement and energy savings than the entire UK smart metering deployment will manage. As a further irony, I just noticed that nPower will give me a Nest smart Thermostat and install it for £99 as long as I sign up to their Intelligent Fix tariff Terms and Conditions where I agree to provide them with my own online meter readings. So it seems they’re offering me energy savings for not having a smart meter!
It’s just another case of the energy industry getting consumer engagement spectacularly wrong in. A further cock-up is that most of the advertising material for the smart metering launch has been misprinted, so that FATZ and DECCY are incorrectly labelled GAZ and LECCY, as if it isn’t obvious to everybody what the cartoon characters really represent. But then the industry’s never been brilliant at advertising and customer engagement. I leave you with a promotional poster from the Willesden Electricity Company from the middle of last century to illustrate how little progress has been made.
The Willesden Electricity Dept is now part of EDF.