Written evidence submitted by British Gas (SME0032)
British Gas has over 2.7 million smart meters in homes and businesses across Britain and our ambition is that by 2020 everyone will be able to benefit from this technology.
We have invested heavily in our smart meter operation with over 2,000 Smart Energy Experts installing meters at a rate of one every 60 seconds. We also have six academies across Britain training our apprentice smart engineers, and a number of customer service teams who provide dedicated support to our smart meter customers.
Smart meters are a transformational technology, bringing considerable benefits to British households. Smart meters bring energy into the digital age, giving customers visibility and control of their energy usage.
The benefits of smart meters are wide-ranging. Estimated bills will be a thing of the past and faster switching will become a reality. Importantly, they will also transform the experience of the 20% of British households who use prepayment meters.
These benefits are happening right now – smart meters have delivered measurable improvements in customer satisfaction and customers are also saving on average around 3% on their dual fuel bills, a figure we expect to increase to around 5% when we measure the impact of additional feedback tools, like apps. We have also found that smart consumption savings are largely sustained. When we analysed our customers’ usage the second year we found that the savings remained at around 3%.
British Gas is also trialling smart prepayment meters with over 60,000 customers, allowing them to top-up their meters at a pay point, over the phone and online, or by using a smart phone or tablet. Smart prepayment meters will better enable suppliers to monitor vulnerable customers’ energy usage and clarify if they are vending, particularly over the winter months. As the roll-out of these meters scales up, we also expect to see a fall in end-to-end costs, which we would look to pass on to customers.
As smart meters are installed into more and more homes, further innovation will also become possible, from batteries to store locally-generated energy, demand side response, and products to help consumers automate their homes. This will have a wider positive impact by helping to remove pressure from the grid and create a flexible and responsive energy system.
British Gas response
Questions
- 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
Smart meters give customers the data and insights into their energy usage to enable them to change their behaviour and nine out of ten of our smart meter customers say they have taken steps to reduce their energy usage. Some of the steps customers say they have taken include fitting energy saving lightbulbs, only filling the kettle with the water they need, turning down the thermostat and unplugging devices when they are not in use.
To help give customers further insight and control into their energy usage, British Gas also provides smart meter customers with an interactive online report which gives tailored information and insight into energy spend, compares energy usage with similar households, and breaks down the usage by day, week and month, and by different appliance types. The online report also provides advice on how customers can reduce their energy usage.
We also have anecdotal evidence from our customer research to suggest that smart meters encourage consumers to think about wider energy efficient behaviour (see case studies below).
- 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
Consumption savings
British Gas has developed a robust analysis methodology for measuring the impact of smart meters on our customers’ consumption and we have been monitoring consumption changes for the last two years.
Our results show that, on average, customers reduced their energy usage by around 3% per year on the average British Gas dual fuel bill. This data has been tested with over 40,000 gas smart meter customers and 60,000 electricity smart meter customers since 2014 and is compared to a control sample of 100,000 customers with standard meters. Anecdotally, we also believe that customers who actively request a smart meter tend to save more – around 4% across both fuels.
We have also found that smart consumption savings are largely sustained. When we analysed our customers’ usage into the second year, we found that the savings remained at around 3%.
It should also be remembered that consumption savings are just one of the benefits of the smart meter roll-out. Importantly, smart meters give customers visibility and control of their energy usage and bring energy into the digital age, so we can meet the expectations of customers who increasingly demand digital products and services. They also remove estimated billing and will enable faster switching to become a reality. As a result, our smart meter customers are more satisfied than standard meter customers.
Smart meters will also transform the experience of the 20% of British households who use prepayment meters. British Gas is currently trialling smart prepayment meter technology with around 60,000 customers who have told us that smart prepayment meters have had a considerable impact on their lifestyle (see case studies below).
Smart meters are not the only way homes and businesses can reduce their energy usage. Energy efficiency measures, low-carbon technology, such as heat pumps and solar panels and smart heating controls, like British Gas’ Hive Active Heating all have the ability to help customers reduce their energy of usage. Smart metering should be seen as an important aspect of a whole range of different measures that help customers reduce their bills. For many people, smart meters will be the first step to encourage greater behavioural change and investment in additional measures to reduce energy usage.
Smart meter technical capability
Smart meters have all the technical capability required to bring energy into the digital age and the technology allows for software upgrades to be made as the roll-out progresses.
As part of the smart meter roll-out, energy suppliers are also installing an in-home display (IHD), which plays an important role in helping customers realise the benefits of smart. This monitor allows customers to see near real-time information about their energy usage in pounds and pence, giving them the tools to reduce their energy consumption.
When the smart meter roll-out was first designed few could have envisaged that people would be managing so many aspects of their lives through their smart phones. We believe that allowing suppliers to innovate and also offer customers a ‘virtual IHD’, accessed by a tablet or smart phone, will boost the consumer benefits of smart and could make the offer more appealing to customers. British Gas is looking at alternative devices to the IHD and is already trialling a virtual IHD with 3,000 customers to understand the impact this has on consumer behaviour. We would be happy to share these findings with the committee when they are finalised.
- Evidence on the security of smart meters and the ability of suppliers to maintain security levels in the future
Smart meters are extremely secure and they meet robust security standards specified by Government.
There are a number of systems and settings in place that ensure our smart metering equipment is as secure as possible. Please see below a non-exhaustive list:
- Cryptography scrambles messages to make them unreadable to anyone other than the sender and intended recipient.
- Data sent by smart meters use an Advanced Encryption Standard which is more complex than that used for internet banking.
- Smart meters store data with methods widely used across industries such as banking and telecoms.
- Our smart meters are also designed to withstand and alert us to any physical tampering.
Security is an issue British Gas takes extremely seriously. We store smart meter readings in the same way we do all our customers’ personal information, which is all protected by the Data Protection Act. As the roll-out progresses we will continue to ensure that the smart meters we install meet the same high security standards.
British Gas now has over 2.7 million smart meters installed in our customers’ homes and businesses and we have not seen any security issues so far.
- Evidence of how data from smart meters can be used to optimise national energy generation and storage
Smart meters put customers in control of their energy and allow households to understand their usage and take steps to reduce their consumption. We believe that the next evolution in demand reduction will be via demand side response, which gives customers the ability to react to changes in electricity prices and decrease usage when there is a high demand for electricity.
We are transitioning from a world where generation is flexible and therefore capable of meeting demand needs, to one where renewable technologies have real environmental benefits, but lack this flexibility. To ensure that the grid can cost-effectively manage demand for energy, customers will need to be encouraged to move their peak time use to different times of the day through price incentives.
Examples of demand side response include smart washing machines that will run loads at off-peak times, yet also have an override function should customers wish to wash their clothing at peak times. It is important to ensure that customer choice is part of any offering, so that the customer remains in control of their energy usage, or that appliances are only automated with customer consent. British Gas successfully trialled these appliances as part of the Customer Led Network Revolution project in the North East, which worked with partners, such as Northern Powergrid, to understand the impact of smart grids on consumers.
As part of the same project, we also measured the impact of time of use tariffs and found the impact of the time of use tariff to be a 9.7% peak demand reduction. This highlights that in the future, demand side response may have a role to play on reducing our reliance on large, centralised generation. Scaling up the 9.7% peak demand reduction could mean that Britain avoids the need to build more than 2GW of generation capacity.[1]
For demand side response to be successful, the ability to remotely control appliances and monitor household energy use will be needed, as will the availability of granular (half-hourly) consumption data. The smart meter Data Access and Privacy Framework currently prohibits suppliers from collecting half-hourly consumption data unless a customer has given their explicit consent. We believe that this opt-in clause is a major barrier to the development of more dynamic time of use tariffs. Without access to this data suppliers will not know customers’ demand profiles and will not be able to accurately design and target tariffs that incentivise load shifting.
- 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
British Gas has been trialling a ‘Free Saturdays or Sundays’ time of use tariff since 2014. Over recent years, around 4,000 customers have been on the trial and they received free electricity between 9am-5pm on Saturday or Sunday.
The results from the trials were positive and nine out of ten customers on the tariff said they made changes that they believe will reduce their energy bills. On average, customers saved around £60 on their annual energy bill.
Customers have also told us how the trial has helped them change their consumption patterns (see case studies below).
In 2014 we also worked on trial in the North East to look at some of the benefits of time of use tariffs (as highlighted in question 4). As part of this project British Gas installed smart meters in 9,000 homes, and offered time of use tariffs to 600 customers. The rest of the customers formed a control group.
Our findings showed that customers on the time of use tariff had an average peak demand reduction of 13.7% (compared to a 4% reduction in the control group who had standard tariffs and smart metering). On average we calculated the impact of the time of use tariff to be a 9.7% peak demand reduction.
Our trial tariff had an overwhelming positive response from customers with 95% of customers saying they would chose a time of use tariff over a standard tariff if it were available after the trial.
April 2016