The 47-million smart meter rollout underway in the U.K. doesn’t look anything like the smart meter deployments we’ve seen in the United States. In fact, it doesn’t look much like any other smart meter rollout anywhere else, either.
That’s because, as one of the most heavily deregulated energy markets in the world, the U.K. is relying on its retail energy providers -- big companies like British Gas, EDF, E.On and other international competitors -- to take the lead on its advanced metering infrastructure (AMI) rollout. Unlike almost every other country, where distribution utilities own the meters, in the U.K., energy retailers own the actual metering hardware.
The other big difference between the U.K. and most other AMI markets is that in the U.K., the customer is the one who will be making the decision on whether or not they get a new smart meter. That means that the U.K.’s big electricity and natural gas retailers are in a race to figure out what combination of AMI technology and services are most attractive to customers.
All of these factors make the U.K. a fascinating test bed for consumer-driven AMI. I recently spoke to Rob Conant of U.S.-based AMI company Trilliant, which has been working with electricity and gas provider British Gas on its U.K. smart meter plans since 2010. This morning, Trilliant and British Gas announced they’re moving from their early trial phases to a new “foundational” phase of deployment, in which they’ll be actively marketing smart meters to existing customers.
So far, British Gas has deployed about 500,000 smart meters, half gas and half electric, Conant said. Right now, it’s using meters from Landis+Gyr and linking them all via cellular networks from partner Vodafone. Trilliant is providing the cellular communications hardware inside the meters, as well as the AMI communications and management software to connect them to the utility, and OSIsoft and SAP are providing the meter data management.
While British Gas hasn’t said how many millions of meters it hopes to install in its new phase of deployment, it is planning a slew of service offerings, rate plans and other sales pitches to go along with them, Conant said. While it’s the most active firm in terms of AMI deployments so far, competitors like E.ON, Scottish & Southern Energy, EDF Energy, GDF Suez and others are all getting things underway as well.
Getting, Keeping Customers: The Foundational Phase
While every U.K. retailer knows it will have to provide smart meters to all customers by 2020 under government mandate, the first priority for the foundation-phase deployments is to use the smart meters they’re being required to install anyway to attract and retain customers, Conant said.
“Churn is a big business driver for these folks, because customer acquisition is so expensive,” Conant said. While the U.K.’s “big six” energy firms hold about 70 percent of the country’s retail market share, they’re also in tight competition with one another, along with the 70 or so other active players in the market.
At the same time, deregulation allows each energy retailer to provide a host of home energy services, like boiler management and home maintenance, he said. Services like these actually make up a pretty significant chunk of British Gas’s residential customer profits, at about £312 million in 2012, compared to £600 million from residential energy supply sales.
The fact that U.K. meters go inside, not outside, each customer’s home also means that replacing a meter requires an appointment and house call by installation professionals, making it much more intrusive for homeowners and renters, he noted. In the United States, by contrast, installing a smart meter on the outside of a home takes about six minutes, and can be done without the homeowner even knowing it, he said.
That’s not necessarily a good thing, as we’ve seen from the U.S. consumer backlash against smart meters, driven in part by customers feeling like they have no choice in the matter. In the U.K., by contrast, each smart meter installation is a very personal, customer-driven experience, Conant said -- and that makes the smart meter a utility tool for customer engagement, not just energy metering.
British Gas’ smart meter deployment will support a ZigBee-connected home energy gateway that can talk to smart thermostats, smart appliances, remote-control power socket adapters and door locks, and other such in-home devices, he said. We’ve seen a lot of activity on the home energy management front in the U.K., with Scottish & Southern buying up HEM provider Onzo, and startups like AlertMe and Opower inking partnerships with retail energy providers.
Trilliant is supporting various functionalities to give British Gas customers more options, such as prepay metering, Conant said. The U.K. actually pioneered prepayment for power with coin-operated meters in the 1950s, and today, about 15 percent of electricity and 10 percent of gas customers use prepay (PDF), higher rates than in the United States.
Prepayment, home energy tracking and bill prediction tools that come with smart meters could also help mitigate one of the U.K.’s unusual energy billing problems that comes from its old-school metering past, he added. Because meters are inside homes in the U.K., meter readers only entered homes to get real data every six months or so. At the same time, customers tend to pay monthly bills based on estimates, which are subjected to biannual or end-of-year true-ups based on the meter readings.
Those true-ups can be pretty severe in terms of their impacts on household budgets, he said -- and that could make real-time energy data and customer control over payment more attractive options than they’ve proven so far in the United States.
Making It All Work Together: The Enduring Phase
Expect a lot of marketing and branding in the coming year as the U.K.’s retailers try to grab market share in their foundational phases. But at some point, all of these in-home meters, gateways and smart devices are going to have to deliver interoperability, connectivity and functionality in the home, as well as networking with multiple back-end systems. After all, in a market where customers can switch energy providers month to month, it would be wasteful to require a complete meter swap-out every time a customer switched.
That part of the U.K.’s AMI rollout is called its “enduring phase,” and it is scheduled to begin in the 2014-2015 timeframe. That’s when all of the AMI equipment, communications, networking and software vendors involved in the country’s multifarious smart meter deployments will have to start proving that they can both work together and transfer ownership between parties on a technical basis, Conant said.
“It’s a much more complex deployment than we’ve seen in the U.S., because you have to support this change of supplier function,” he said. That’s going to be a complicated task, and lots of smart grid, telecommunications and IT vendors are involved, including IT master integrators like Logica, Capgemini and IBM, as well as communications vendors like Sensus, Vodafone, Cable & Wireless and Telefonica.
As for making that interoperability work on the financial side, the U.K.’s energy retailers are working on a system by which they “rent” their own meters from a financing entity like a bank, Conant said. “Then, when a customer changes, the bank just starts renting that smart meter to another retailer,” he said, avoiding the complications of switching ownership of that interoperable hardware from utility to utility.
Building a system that can support competing companies using the same hardware also comes with its own unusual security requirements, he added. For example, “We support some homes where the electricity meter is the property of a different company than the gas meter, but they both go through the comms hub,” he said. Because the gas provider and electricity provider may be competitors that jealously guard their data from one another, “You have to partition information so that it doesn’t leak from the electric meter to the gas meter. That’s something in the North American market we’ve never had to consider.”
Eventually, of course, this competitive landscape is supposed to lead to energy efficiency and carbon reduction goals. The U.K.’s smart meter rollout is expected to cost about £8.5 billion, but it’s also hoped to yield £14 billion in net benefits in consumer energy savings and lower energy generation demand, according to the Oxford Economics report The Value of Smart Metering to Great Britain.