UK's smart meter plan must still resolve 'major risks'

Will British consumers set to receive smart gas or electricity meters cut their energy use as much as officials expect? That’s one of the questions that needs better answers before the government actually goes ahead with its planned nationwide smart meter deployment, according to a new report from the UK’s National Audit Office (NAO).

“The benefits of proceeding with this major technological and logistical undertaking are still uncertain,” said Amyas Morse, head of the NAO. “There is limited evidence of how much and for how long British consumers’ behaviour might change, and costs could escalate.”

The NAO report warns there are still “major risks” that the Department of Energy and Climate Change (DECC) needs to address before spending £11.3 billion ($18 billion) on a smart meter rollout, set to take place between 2014 and 2019.

While DECC has made progress with its smart meter strategy, its early planning and budgeting efforts weren’t enough to support clear monitoring and accountability, according to the NAO.

Energy suppliers are expected to cover the cost of installing smart meter systems, then pass both the cost and efficiency savings on to customers. Energy companies will be able to read meters remotely and offer time-of-use pricing incentives for off-peak power use. According to DECC, the meters will be an important step toward a smarter energy grid, which will be needed to better manage demand and new energy sources like wind and solar across the electricity system.

The department estimates smart meters will yield an economic benefit of £18.6 billion ($30 billion) through 2030. However, the NAO report finds it’s still uncertain how much meters will help consumers change their energy use over a sustained period. A better benefits realization plan and consumer engagement strategy are still needed from DECC, the report states.

The NAO report also notes there is very little contingency time to address the risk that design approvals, procurement and testing might take longer than planned; that the system will have to be flexible enough to minimize the risk of future obsolescence; and that DECC has more work to do on metering system security before the rollout starts.

“Large-scale projects of this kind can take on a momentum of their own and so, along the way, there should be clear decision points at which the department will need to review costs to consumers, benefits and risks and judge whether to carry on as originally planned or significantly change direction,” Morse said.