Smart, fair and flexible: lessons from the smart meter rollouts in Great Britain

The cost of living crisis in Great Britain, as well as in the EU, has heightened the adverse effects of energy poverty, bringing acute awareness among stakeholders about the injustices faced by diverse energy consumers. Leveraging this evidence and assimilating key insights, this article presents recommendations for policymakers in both the UK and EU, aiming to ensure an equitable transition to a smart, flexible energy system. The article delves into the inclusiveness of the smart energy technologies rollout in Great Britain, examining ways to enhance the fairness of this transition.

The research, comprising desk research and 11 semi-structured interviews with energy experts, took place in November–December 2022. The interviewees represented the energy industry, energy policy sector, academia and think tanks based in Great Britain (with one based in the EU). They are all engaged in the transition to a digital, decarbonized and decentralized energy system and agreed that both risks and opportunities are unevenly distributed across different kinds of European households. As the smart energy transition carries forward with increasing digitalization and electrification of energy systems, households still continue to experience unprecedented rises in their energy bills, with warnings of a public health crisis resulting from the poor living conditions of a cold home. The insights from this article provide food for thought for policy makers, researchers and industry alike, in order to ensure the transition shifts away from top-down techno-solutionist approaches, which have led to unfair distribution of costs and risks for consumers, to one where system-wide benefits for all stakeholders can be realized using the ongoing datafication of the energy system. The term datafication here signifies the use of more internet-enabled technologies in the energy system – such as smart meters – which help capture accurate supply and demand data at various time intervals that can be used for system optimisation.

What constitutes a smart, flexible energy system?

The ongoing energy transition to a net-zero emissions future needs to be supported by novel technologies, upgrades in energy efficiency, changes in energy consumption patterns, innovative policies and many other social, technical and policy interventions. Smart energy technologies can be considered an umbrella term for many Internet and Communications Technology (ICT)–enabled technologies which monitor energy production and consumption, as well as communicating the findings in pre-determined automated intervals to a range of different stakeholders. They include smart meters, smart energy storage devices such as batteries, home energy management systems, grid-to-vehicle solutions and so on.

Smart energy technologies are a crucial step in realizing decarbonization goals as they allow for a greater integration of low-carbon technologies such as solar and wind, thus enabling small-scale energy production, greater flexibility in demand, better balance of demand and supply, reliable billing for consumers, and decentralization of energy production. They could empower consumers to become prosumers. Prosumers are energy consumers, such as households or businesses, that can install on-site renewable energy technologies such as solar panels to produce energy and sell back to the grid during times of excess production. They could benefit energy suppliers with reduced costs and increased consumer trust, and enhance efficiency for network operators, enabling sustainable, economic and secure electricity supplies through intelligent integration, driven by digitalization and automation.

Smart meters are the initial step towards a digitally enabled energy future. As internet-connected devices, they enable households to monitor their energy consumption and offer real-time, accurate data, facilitating bidirectional communication between households and energy companies. This includes remotely updating tariff information and facilitating easier changes in payment methods. These meters may link to an in-home display, presenting energy usage and issuing alerts during high-price periods. Additionally, they could integrate with automated or semi-automated energy management systems. These systems have the capability to regulate household loads, such as laundry appliances, and switch between various heating sources, like gas and heat pumps, contingent on grid production and energy prices.

Smart meter rollouts in Europe so far: concerns and risks

The potential of smart meters has been hailed by several policymakers across the globe; for example, the EU mandated that at least 80% of electricity meters need to be replaced with smart meters by 2020 ‘wherever it is cost-effective to do so’, citing estimates that the smart meter rollout can reduce both total EU emissions and annual household energy consumption by up to 9%. The EU has missed this target, with only 54% of households’ electricity meters replaced by 2022. The UK-wide rollout campaign is called the Smart Meter Implementation Programme (SMIP) and aims to place a smart meter for electricity and for natural gas in every home and small business by 2020. Similar to the figures in the EU, the UK Smart Meter Rollout had reached 59% of all households by September 2023 (due to a slump in meter installations during the COVID19 pandemic), and this digital transformation of the energy sector has also been a cornerstone of the UK’s Net Zero targets. Also noteworthy is that the anticipated household energy savings have been estimated at only 3% by a recent government study, and given that this mission is the largest government-run information technology project in history, with over £100 million allocated on advertising campaigns alone for the first five years of the programme, the social and economic costs of smart meter rollouts must be questioned.

Given the significance and scale of the transition to a digital energy system, the opportunities that smart energy technologies present to consumers in terms of reduction in energy consumption and lower electricity bills, and the large-scale top-down implementation of smart technologies, it becomes crucial to investigate their social impacts. The specific needs of vulnerable households may not be considered adequately, and there might be unintended consequences on the control and autonomy within their homes – this is particularly important for low-income households, the elderly, people with disabilities, young children and those living in private tenancies.

A study in the Netherlands and the UK examined justice implications of smart energy systems, revealing distributive and procedural issues. Energy vulnerable populations, particularly low-income groups, face challenges accessing and benefiting from smart technology pilots that focus on high income neighbourhoods. During the recent cost-of-living crisis in the UK, forced remote switching to prepayment meters by some energy suppliers using smart meters caused financial strain, exacerbated health vulnerabilities and increased mistrust, particularly in the elderly, highlighted transparency challenges due to proprietary business models around future smart energy solutions – which makes it harder to ensure accountability in these pilot projects. As smart meters become prevalent, concerns arise over fine-grained consumer data collection and limited access to benefits for lower-income households due to capital requirements for associated technologies like renewable energy production and battery storage. Without addressing equity concerns, future energy systems may unintentionally harbour biases, especially when influenced by the powerful private players funding their research and implementation.

What do we know so far about the distributional impacts of the smart meter rollout in Great Britain?

Interviewees noted a prevalent focus on affluent consumers in the design of business models and technological solutions for energy flexibility schemes. While acknowledging that targeting affluent customers could initially help reduce costs and enhance accessibility in the future, concerns were raised about the potential exclusion of low-income households. Challenges in making smart technologies accessible to this demographic include market size limitations, insufficient digital energy technologies and a need for affordable, tailored products. Some interviewees emphasized the importance of inclusivity in demand-side response (DSR) initiatives, citing industry examples where trust and communication played key roles in success. Despite initial targeting of early adopters, it was emphasised that eventually, all consumers should benefit from the technology, avoiding the risk of leaving certain groups behind.

While interviewees found it challenging to definitively identify which stakeholders benefited most from the smart meter rollout, suppliers and energy technology companies were recognized for reaping benefits, primarily through improved information quality and enhanced value propositions. However, concerns were expressed about the disproportionate benefit to affluent households, especially those with electric vehicles, raising questions about accessibility and potential disparities in energy savings. The Data Communications Company (DCC) and distribution network operators were identified as other key beneficiaries, with potential power and agency over consumer data. Despite hopes that smart meter data could aid vulnerable consumers, interviewees highlighted a lack of prioritization for this demographic in the smart energy transition currently.

Market reforms

Interviewees emphasized the need for greater energy market regulation to prevent consumer overcharging and ensure fair cost distribution as we transition to a smart, flexible energy system. They suggested that it is crucial to recognise that this massive shift in the way energy is consumed and produced is an opportunity to radically rethink the way the market is structured, ensuring that the benefits are distributed fairly. Proposed measures include specific price caps, enhanced pricing transparency and diverse tariffs. Alternative models were discussed, such as advocating for a guaranteed basic energy level for all households at a subsidized price, with progressively higher costs for excess consumption. The consensus highlighted the necessity of nuanced approaches, from targeted support to broader regulatory reforms, to manage energy costs and ensure warmth for households.

Some interviewees, particularly those working with fuel-poor households, stressed the need for wider debates on energy as a consumer good and the design of the energy market. It was argued that it was the energy market that creates vulnerability rather than the presence or absence of smart technologies or energy efficiency measures such as insulation. The interviewees imagined a future in which smart energy technologies allow for the best use of the cheapest, greenest energy possible, and where the market is restructured to prioritize access to affordable energy for those most in need. This could involve creating diverse tariffs for diverse consumers based on consumption profiles, as well as block tariffs that consider individual circumstances such as building conditions.

Smart energy technologies: mere gadgets or potential game changers?

The Great Britain smart meter rollout has yet to realize anticipated system-wide benefits. Smart energy technologies, including electrical heating systems, battery storage and heat pumps, hold promise in mitigating fuel poverty by granting households access to cheaper electricity during low-price periods. Automation of these systems can alleviate energy management concerns and offer vulnerable households, less active in the energy market, automated access to cost-effective energy. Additionally, insights from smart meter data can inform personalized advice, household interventions and research on energy use, fuel poverty and efficiency. Despite the hype around smart technologies, interviewees emphasized the importance of diverse instruments, such as support schemes for building renovation, to achieve significant changes in the energy transition. Prioritizing energy efficiency measures and renewable heat sources for low-income households, and ensuring clear communication about technology benefits, are crucial considerations for effective intervention.

Recommendations

In this section, the key takeaways from the interviews are summarised as recommendations for a more inclusive smart energy transition. The recommendations underscore the imperative for more effective monitoring of energy efficiency interventions, and measuring the success of implemented measures. They also highlight the need – however obvious it might be – to move away from one-size-fits-all solutions and take a more nuanced approach to the energy transition. While they are based on the energy system in Great Britain, the hope is that they could help spark ideas for other European countries transitioning to smart, flexible energy.

1. Comprehensive understanding of household needs: Extend policies beyond universal approaches, acknowledging energy-reliant fundamental needs, and consider targeted support tailored to specific circumstances, including, but not limited to, income, type of housing, physical and mental capabilities, household size and so on.
2. Holistic approach: Recognize the interconnectedness of energy costs with broader financial challenges, advocating collaboration with organizations offering diverse support to address overall financial well-being.
3. Simplify market navigation: Alleviate the complexity of the energy market for consumers, especially those facing financial struggles, by increasing funding to frontline organizations for enhanced decarbonization advice and support tools.
4. Affordable access to technologies: Facilitate access to smart technology trials for low-income households through grants or low-cost financing, promoting inclusivity in the transition.
5. Accommodate specific needs: Ensure the design of smart, flexible solutions are user-friendly and accessible for a variety of different users, regardless of digital competencies. While encouraging energy reduction, ensure flexibility trials do not compromise the basic energy needs of individuals with specific requirements.
6. Nuanced benefits narrative: Develop a clear narrative explaining the benefits of smart technologies to vulnerable households, delivered by trusted local actors, to build customer trust and counter misinformation. The narrative must emphasise the nuanced benefits of smart technologies and be clear that other energy-saving measures are needed alongside as well, avoiding oversimplified messaging about the benefits of smart technologies.
7. Central coordination for collaboration: Establish a central coordinating role within government departments to facilitate collaboration among stakeholders involved in the smart energy transition, promoting shared insights and pragmatic applications, and encouraging the use of smart meter data in a careful way.

This research is funded by the European Commission under Horizon 2020 MSCA-ITN Grant Agreement No. 955422. For more information, please visit: https://gecko-project.eu