Consumers and business in UK were promised a £19.5bn benefit from smart meters but costs involved are £13bn and rising.
The UK Department for Energy Security and Net Zero (DESNZ) forecast total costs of the rollout at £13.5 billion but it is likely that the cost per smart meter will be higher because average installation costs are higher than expected due to, for example, a shortage of engineers. These costs are initially borne by suppliers and fed through to households via energy bills. Both costs and benefits have been delayed by the slower-than-planned rollout.
The UK National Audit Office has highlighted the challenges in achieving the department’s current targets, including a shortage of installation engineers and disagreements with suppliers (who argue that they have exhausted the ‘low hanging fruit’ of customers who want devices and therefore call for new policies to support the roll out – such as mandating that any new homes built have a smart meter installed by default). DESNZ has called on suppliers to improve their performance against installation targets and invest more in rolling out devices.
UK regulation required energy suppliers to complete rollout of smart meters to their customers by the end of 2019. Government required suppliers to take ‘all reasonable steps’ to install smart meters in all homes and small businesses in UK but did not set out what percentage of premises would need to have a smart meter for it to consider the rollout complete.
On three occasions the government delayed the deadline for the completion of the rollout, first to the end of 2020, then 2024, and then 2025. In February 2023, the government launched a consultation on plans to have smart meters installed in 80 per cent of homes and 73 per cent of small businesses by the end of 2025.
According to the latest data, 57 per cent – more than 32 million – of all meters in Great Britain are now smart, although around nine per cent of smart meters – around 3 million – were not working as intended in March 2023.
The Infrastructure and Projects Authority has previously rated the smart meter programme amber – where successful delivery of a programme appears feasible but significant issues already exist, requiring management attention.
To ensure the programme maximises value for money, the NAO recommends the government updates data on programme costs and benefits. DESNZ and suppliers also need to work together to overcome disagreements and address the reasons that installation rates are slower than planned.
Gareth Davies, head of the UK National Audit Office, said: “The rollout is now at a crucial point – and the department should ensure it has robust information on both the total costs and benefits of smart meters to make decisions from an informed position to maximise value for money.
“DESNZ must now work with suppliers to get the programme on track, for the benefit of millions of consumers and small businesses and government’s wider environmental goals.”