Written evidence submitted by Smart Energy GB (SME0019)

1. Executive summary

• Smart meters are bringing about a revolution in Great Britain’s national energy system, with huge benefits for consumers and our national infrastructure. The upgrade will empower consumers and is an essential technology to manage our energy needs and transition to a low carbon economy.

• There is a growing body of evidence from households who already have smart meters of the positive impact this technology is having. Smart meter users have a better idea of what they are spending on energy, are more confident in the accuracy of their bills and many are already taking steps to use less energy.

• Bringing about sustained consumer behaviour change is a real opportunity to provide a lasting legacy from the rollout.

2. Introduction: about Smart Energy GB

2.1.                       Smart Energy GB is the national campaign for the smart meter rollout. We are here to make sure everyone in Great Britain understands smart meters, the rollout and how to use their meters to get their gas and electricity under control.

2.2.                       Smart Energy GB was established by government as a fully independent, not-for-profit company. Our objectives are set out in energy suppliers’ license conditions.

2.3.                       Working closely with other organisations involved in Great Britain’s smart meter rollout, including the Department of Energy and Climate Change (DECC) and the energy suppliers, we share a commitment to ensure a legacy for the smart meter rollout in the form of a population empowered to change the way we consume energy.

2.4.                       In our response to the Committee’s inquiry, we have focused particularly on issues relating to behaviour change, a core part of our mandate, set out in law.

3. Smart meters are creating a more dynamic consumer energy market

3.1.             The smart meter rollout has the potential to revolutionise the consumer energy market. The installation of more than 53 million meters in 30 million homes and microbusinesses by 2020 will digitise one of the last remaining analogue industries.

3.2.             Smart meters will enable households to see exactly how much gas and electricity they are using in real time and how much they are spending on energy in pounds and pence. They will bring an end to estimated bills and lay the foundations for a smart energy grid.

3.3.             The Competition and Markets Authority recognised the potential of smart meter technology in its recently published ‘Energy market investigation: Summary of provisional decisions on remedies’. It cited smart meters as having the potential to improve consumer engagement in the energy market by making the relationship between prices and consumption more visible and improving the accuracy of bills[1].

3.4.             Over three million meters are now installed[2]. More than half of people with a smart meter say that their new meter is already helping them save money and 85% of those using smart meters say they have a better understanding of what they are spending on energy, and 81% said they are more confident in the accuracy of their bills[3].

3.5.             Smart meters will bring particular benefits to the experience of pre-payment customers with ‘smart pay as you go’. There will be new, more convenient ways to top up, easier switching between payment methods and cheaper tariffs.

3.6.             Smart meter data also allows for better-targeted support to those who are struggling to manage their energy costs and in the future provide a basis for more sophisticated services for vulnerable people.

4. Evidence — from existing smart meters and behavioural science — on how smart meters can be expected to affect consumer behaviour, including in terms of reducing energy consumption and buying more energy efficient products, and how levels of engagement with In-Home Displays change over time

4.1.             Smart meters are driving consumer behaviour change and reducing energy consumption

4.1.1.        The Smart Energy GB campaign has already seen significant results, not just in consumer engagement with our advertising but also in both energy behaviour change and in demonstrating the scale of opportunity we have as the campaign progresses.

4.1.2.        Smart Energy GB publishes a twice-yearly survey, ‘Smart Energy Outlook’ (Outlook). Produced by Populus, this survey of over 10,000 people is the largest barometer of national public opinion on energy and smart meters.

4.1.3.        The latest edition of Outlook showed 80% of people with smart meters report that they are taking steps to use less energy and 74% agreed that they are more conscious about the energy they use[4]. The full report can be downloaded here.

4.1.4.        Smart Energy GB research also found that those with a smart meter are far more likely to be monitoring the energy that they use. 53% of those with a smart meter are monitoring their energy use compared to just 23% of those who know what a smart meter is but don’t yet have one, and only 15% of those who don’t know what a smart meter is. This engagement is important because those who monitor their energy are undertaking twice as many energy saving behaviours.

4.1.5.        Our research has also shown that consumer interest in energy saving increases as people become more familiar with smart meters. Amongst those interested in getting a smart meter, 33% report that they intend to look into ways to make their home more energy efficient (against 20% for those not interested in smart meters). This intention increases to 49% once a smart meter has been installed.

4.1.6.        DECC’s most recent impact assessment for the rollout refers to a 2.8% saving in electricity consumption and a 2% reduction amongst gas credit customers (0.5% for gas pre-payment customers)[5].

4.1.7.        DECC acknowledges that these are conservative estimates and the findings of our own research suggest significant potential for behaviour change as the rollout progresses.

4.1.8.        A study carried out by Vassa ETT, a research firm specialising in consumer behaviour in energy markets, suggested a saving of 9% on electricity over three years[6].

4.2. Consumers are already buying more energy efficient products

4.2.1.        Of course, for many consumers greater engagement with their energy use will be a stepping stone to buying products and services that allow them to save energy and money without having to make everyday decisions about their energy use.

4.2.2.        In the first instance, this may mean purchasing a more energy efficient product. Smart Energy GB research found that 21% of people with smart meters say they have already purchased a large energy efficient appliance, and 15% have purchased a small energy efficient appliance since their smart meter was installed.

4.2.3.        Energy saving and purchasing activities also appear to become more prominent the longer a consumer has had their smart meter. The same survey found that of those who had a smart meter for seven months or more, 36% said they had looked at more energy efficient appliances (versus 19% for those with their smart meter for less six months). Propensity to make changes to the home, such as installing energy efficient lighting, insulation or double glazing also increases significantly once a smart meter has been installed for seven months or more.

4.2.4.        These conscious behaviour change activities also form part of a progression towards smarter homes, whereby consumers may choose to adopt technologies that can make energy efficiency decisions on their behalf. In GfK’s Smart Home study, 68% of British respondents found the concept of a smart home appealing, suggesting that once people have understood the opportunity to get their energy use under control, they will be motivated to take up devices that help them do this[7].

4.3 Engagement with In Home Displays (IHDs)

4.3.1.        The In Home Display (IHD), also referred to as Smart Meter Display, is proven to positively effect behaviour and provides universally accessible data for consumers, with research having shown energy savings to be greater when a display is present[8]. The visual display in the home not only allows consumers to engage with their energy use once the smart meter has been installed but allows them to understand how this data empowers them as consumers.

4.3.2.        Behaviour change best practice has shown the important role of visual cues in other policy areas, most notably in public health and fitness campaigns.

4.3.3.        An IHD is an example of a ‘push’ feedback mechanism (as opposed to web based solutions which are ‘pull’ mechanisms). Research has found that ‘push’ feedback mechanisms are more effective when it comes to changing behaviour around energy. For instance, being able to view your consumption data via a website (‘pull’) means the user has to actively look for the data on their energy use. Research by Vassa ETT found lower reductions in energy use when the information was just given through a webpage or a more informative bill[9].

4.3.4.        DECC’s Early Learning Project report found that 61% of households with smart meters installed still had their IHD plugged in. This figure rose to 70% for those who had proactively requested their smart meter[10]. This suggests an important link between engaging consumers in the smart meter rollout and on going engagement with their energy use. Households in the survey with children aged 15 and under were also more likely to continue to use their IHD, which has been borne out anecdotally in interviews we have conducted with case studies.

4.3.5.        The research also showed that among smart meter customers who personally looked at their IHD and still had it plugged in, the majority (73%) looked at it at least once a week while 42% looked at it at least once a day[11].

4.3.6.        We must ensure that everyone is able to fully access the data on their energy use. Relying only on smart phone apps to display this data would exclude over a third of the population (34%) who do not have a smart phone[12].

5. Evidence on the extent to which Time of Use Tariffs (which smart meters enable) can be expected to alter patterns of energy usage during the day.

5.1.             Research by University College London for Smart Energy GB has shown that one third of people in Great Britain would be interested in a Time of Use Tariff (TOU)[13]. There is evidence that time of use tariffs will enable consumers to spend less, reducing their consumption or shifting peaks in demand.

5.2.             A number of trials have been undertaken into TOU tariffs and a study by CLNR (Customer-Led Network Revolution) showed that the majority saved money on their energy bill and achieved levels of demand that were 10% below those in the test group. Promisingly no new peaks in demand were created although in general terms the trial showed a displacement in demand rather than an overall drop in consumption (overall consumption was 0.8% lower). Homeowners without dependents were shown as most likely to engage with a TOU[14].

5.3.             A trial in Ireland found that providing customers with a TOU alongside additional information on their bills and an IHD created a 2.5% reduction in overall electricity use and 8.8% at peak times[15].

5.4.             Around the world countries are turning to TOU pricing to help manage demand. In Texas, where there is a great abundance of wind power at night, customers are being offered a free energy at night tariff. In peak summer season consumers said that shifting their behaviour was resulting in savings of $40 - $50 a month[16]. A trial in Western Australia found that by using smart meters and a TOU tariff ‘super peak’ consumption decreased by an average of 10.9%[17].

6. Evidence on the expected net savings for the consumer over time, including in the context of the longevity and technical capability of the smart meter technology being rolled out, and whether similar savings could be achieved by other means

6.1.             Smart meters will give consumers accurate bills and enable them to better manage their energy consumption through real time feedback. These will allow households to save money and also budget more effectively.

6.2.             DECC’s most recent Impact Assessment on the smart meter rollout sets out expected savings as a result of consumers using energy more efficiently and suppliers passing on net cost savings. By 2020 an average household could be making an annual saving on their energy bill of £26, rising by 2030 to £43. The average dual-fuel non-domestic premise is expected to realise bill savings of approximately £200 in 2020 and £174 in 2030, providing a total benefit of some £6.2bn to Great Britain[18].

6.3.             Consumer savings will also be delivered via the smart grid system, which is enabled by the installation of smart meters. The ability to harness usage data is vital to the creation of a competitive and dynamic energy market fit for the 21st century. A smarter grid, providing real-time information on demand, will not only enable Great Britain to reduce wasteful over generation of energy but will also mean we can better manage the strength at which voltage is supplied to the grid, enabling savings to be passed back to the consumer.

6.4.             Crucially the national rollout will provide a platform from which new consumer services can be developed in the future, acting as a foundation upon which further innovation can take place.

6.5.             In the current energy market switching supplier is at best an imprecise science, even when using one of the current services available which seek to help consumers find a cheaper tariff. The data from smart meters enables consumers to be certain that they are switching to a better deal for their energy needs. In future ever more sophisticated services may be offered to consumers, helping them to reduce their energy costs.

6.6.             Smart meters enable significant improvements to the experience of pre-payment meter customers. Smart pre-payment meters remove any need for a levy to be applied to pre-payment tariffs, owing to the standardised nature of these meters. This will deliver real benefits to the lives of those on pre-payment plans, with fairer bills and more convenient ways to ‘top up’ as they finally receive a modern service.

7. Evidence of how data from smart meters can be used to optimise national energy generation and storage

7.1.             In a white paper prepared for Smart Energy GB, Professor Dieter Helm of Oxford University noted that in the modern world all the key infrastructures have to rely on continuous, secure and reliable energy supply. The integration of the data from smart meters is going to be necessary for the smooth operation of smart cities and transport systems, which rely on sophisticated coordination to support increased electrification. Smart meters enable greater reliance on renewables and at a domestic level will sit at the centre of new household systems, making smart homes a reality[19].

7.2.             The Smart Grid Forum report, Smart Grid Vision and Routemap, explains that smart meters are an essential element of the notion of a smart grid and are therefore a critical source of fundamental grid management data.  With the geographical coverage of a smart grid, data from smart meters will improve electricity outage management and enable more efficient resolution of network failures[20]. DECC’s 2014 Impact Assessment identifies benefits around a reduction in unserved energy (customer minutes lost), a reduction in operational costs to fix faults and a reduction in calls to fault and emergency lines[21].

7.3.             Having more detailed information on location specific peak demand means bottlenecks in the network can be identified and network investment better directed. Cost benefit analysis from the DECC Impact Assessment indicates that the required network enforcement investments might be reduced by 5% amounting to network benefits of almost £1bn and carbon benefits of £1.46bn through the availability of better information from smart meters[22]. In its report on managing our energy supply, the government’s National Infrastructure Commission also found that a smart grid could save £8bn by 2030[23].

8. Evidence on the security of smart meters, and the ability of suppliers to maintain security levels in the future

8.1.             The smart metering system is secure and has been designed with cyber security experts, including the government’s security organisation, GCHQ.

8.2.             Smart electricity and gas meters do not store consumer information only data on how much energy is used. The data that is captured is stored and transmitted very safely. Smart meters do not use the internet, they use their own dedicated secure communication system.

8.3.             Consumer energy data belongs to the consumer and can only be shared with their expressed permission.

9. Smart Energy GB’s campaign

9.1.           Smart Energy GB’s campaign is already demonstrating strong consumer engagement results. Information on the impact of our campaign is contained in our recent 2015 annual report[24].

9.2.           The committee may also wish to view the full range of consumer engagement creative outputs on our YouTube channel here.

9.3.           In summer 2016 we will be publishing a white paper setting out the next stage of our consumer behaviour change campaign strategy. 

April 2016