Government will miss its own smart meter rollout target – NAO

The National Audit Office (NAO) has found that the government’s ambition to install smart meters in every UK home by 2020 is not feasible, and the cost of the rollout will significantly exceed initial expectations.

In 2016, the Department for Business, Energy and Industrial Strategy (BEIS) estimated that the smart meter programme would cost £11bn and bring economic benefits of £16.7bn. However, the NAO has found that the initial cost projection has since increased by at least £0.5bn – adding an extra £17 to the estimated one-off cost of £374 per household.

The scheduling problem has been made worse by a technology upgrade. According to a new report by the NAO: Rolling out smart meters, the government underestimated how long it would take to implement the standards and infrastructure for the second generation of smart meters (SMETS2). Technical delays had already resulted in the first SMETS2 meters being installed in July 2017, over three years later than originally scheduled.

In the absence of second-generation meters, energy suppliers have installed 12.5mn SMETS1 meters, 7.1mn more than planned. This mass rollout has only added to the complexity and overall cost of the smart meter scheme. Roughly 70% of SMETS1 devices ‘go dumb’ when consumers switch suppliers because new suppliers cannot communicate with the meter, says the report. This means consumers must choose to remain on their existing tariff or lose the benefits of a smart meter.

Currently, 943,000 SMETS1 meters are operating in dumb mode. BEIS has indicated that it will resolve this issue by connecting first-generation devices to the communications infrastructure that has been built for SMETS2 meters. However, this project has been delayed by six months and the NAO is not certain it will work for all SMETS1 devices.

It is currently uncertain whether the industry cost savings forecast by the government will materialise, in part because of the extra SMETS1 meters already on the system. The NAO says that network companies doubt that first-generation meters can be used to provide the full range of functions that SMETS2 meters offer for managing electricity networks more efficiently.

Even if industry costs are cut, no one is monitoring whether these savings are passed on to consumers, claims the report. While BEIS has said that competition between suppliers will ensure these companies pass on cost savings, there is no way to gauge whether this is happening in practice.

‘BEIS has taken most of the decisions that matter on the programme so far,’ says Amyas Morse, the Head of the NAO. ‘They now need to take responsibility for getting it back on track and protecting the interests of consumers who will ultimately meet the bills.’