Will smart meters pay off in Australia?

Adoption of smart meters is increasing across the Australian energy sector, but issues with the rollout and the experience in the UK suggests that the smart meter revolution may not bring the kind of economic benefits expected.

According to the Australian Energy Market Commission (AEMC), as of August more than 500,000 smart meters had been installed across the National Electricity Market.

South Australia has been leading the way in terms of adoption, with 10% of households having already received smart meters as of August.

Energy businesses have been deploying the smart meters in light of the AEMC’s new competition in metering rules, which commenced in December last year. The new rules provide a framework for the competitive provision of smart meters for residential and small business consumers.

Under the new rules, a customer’s chosen retailer is responsible for managing installation and maintenance of new meters. There is also no upfront charge when customers receive smart meters, in contrast to the old rules that typically saw customers charged an upfront cost of around $300 to $500 for a meter.

But the AEMC said due to the rapid pace of smart meter rollouts, there have been a number of customer complaints related to the installation process, including instances where energy retailers and metering businesses have failed to turn up at an agreed-upon time to complete the process.

Some electricians and builders have also reported difficulties dealing with retailers as they work out their processes for the installation process.

Despite these hurdles, the rapid pace of adoption and the regulatory backing means it is likely just a matter of time before smart meters are installed in all or the vast majority of premises connected to the national grid.

But what this will mean for consumers and the economy remains unclear, as contrasting evidence from the UK indicates.

Last week, the UK’s Minister of State for Business, Energy and Industrial Strategy, Claire Perry, gave a speech detailing the progress with the government’s Smart Metering Implementation Programme.

Perry said customers across Great Britain have chosen to install more than 12 million smart meters in their premises to date, and that the smart meters are already delivering significant cost and efficiency savings.

“When you consider there are up to £40 billion ($51.2 million) of benefits a smarter system will deliver between now and 2050, you can see why we remain determined to meet our commitment of everyone being offered a smart meter by the end of 2020,” she said.

But on the same day, the UK National Audit Office released a report indicating that these projected benefits may be overblown.

According to the audit, the Department has estimated that the program could provide £17.7 billion in savings by reducing energy consumption and operational costs by the industry. But this is offset by an expected £11 billion of required investment in installations, equipment and systems. The government has already reduced the forecast net benefits of the program from £6.7 billion to £5.7 billion, and the audit found that there is already some evidence that the costs were underestimated.

“The facts are that the programme is late, the costs are escalating, and in 2017 the cost of installing smart meters was 50% higher than the Department assumed,” the audit said. It concluded that while these issues are not guaranteed to impact the viability and value for money of the program, “there are serious issues that need to be addressed if Smart Meters is to progress successfully and deliver value for money”.

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