Smart work

Ask a politician about reducing carbon emissions and it is not long before smart meters are mentioned. Even the gloomiest economic news did not deflect David Cameron from making the opening environmental salvo of the year by promising advanced metering for every British household.

But as a number of other countries have demonstrated, the drive to adopt smart metering is not always the environment.

The US, for example, has a very large installed base of meters, but smart metering has generally been driven by the desire to reduce peak load, enhance security of supply and reduce the costs associated with manual meter reading.

On the other hand, de-coupling supply and transmission in certain European markets has led to a search for competitive differentiation of what is now a commodity proposition. Smart metering will probably be deployed in this context to strengthen long-term customer relationships. In Italy, which has more than 30 million installed meters, one of the key drivers was tackling energy theft and the cost of managing meters.

Of course, the environmental rhetoric does play well with certain consumers and suppliers are more than happy to exploit growing eco-awareness among the general population. And even if the green messages fail to engage the consumer base, the cost-saving benefits of smart meters are likely to prove attractive.

In other words, most companies and governments have a mixed bag of market-driven rationales. However, if smart meters have the potential to address a number of issues, that potential can only be realised by appropriate system design and deployment.

First of all, although some degree of standardisation can be helpful, excessive rigidity in system design and inflexible specification is not appropriate. One size most certainly does not fit all.

Standards can be stipulated for various elements of the system. The hardware at each stage in the network, the communication protocols and infrastructure, the data interfaces, the format and the level of interoperability can all be subject to strict specification. With the supplier requirements for smart metering (SRSM) being drawn up by the Energy Retail Association nearing completion and the UK government poised to announce plans for a nationwide roll-out, the basic structure of the UK programme is all but in place. But between them, these two pillars of the system's architecture appear to have created a number of potential problems. Put bluntly, current plans may well be taking us down the wrong path by forcing a standard that is not necessarily the right one.

A quick look across the Atlantic provides ample evidence of what works and what does not. The extensive smart metering schemes in the US show, categorically, that there is no universally applicable solution and that the most cost-effective system for a metropolitan area can prove to be far more expensive and less effectual in the sparsely populated rural heartlands. The most successful implementations are completely bespoke up to the point of interface with the rest of the system.

The SRSM does not appear to have taken this into account, however. Instead, it proposes to fix precisely what data comes out of the meter and how it needs to be processed, rather than allowing the utilities to translate and standardise it once it reaches the back office. This loads unnecessary functionality, and therefore cost, into the high-volume elements of the system — the meters — rather than into the much smaller number of back-office interfaces.

Excessive standardisation also diminishes competition and inhibits innovation. In Italy, the regulator mandated both the type of meter to be used and the extra cost that can be charged. The result? No incentive to design a future-proof system and the country is now facing the possibility of a highly disruptive replacement of its smart-metering infrastructure, rather than a series of staggered upgrades.

If the UK is to avoid similar problems, we need to consider smart meters as the gateway to a number of future functions. They have the potential to fundamentally alter the relationship between utility and customer in ways that we do not, as yet, fully understand. Meters are already capable of spotting faulty appliances or personalising energy-efficiency advice. It is not a great leap of imagination to see them taking a far more active role in household energy management.

Nor is it unreasonable to assume that the communications infrastructure will be subject to technological developments.

Smart metering cannot be treated as a one-off implementation that will survive 20 years before old age takes its toll. What's more, smart metering — and particularly energy displays — is set to enter the fast-paced world of consumer electronics, where iPod users expect a new device every 18 months. Smart-metering functionality that is aimed at consumers needs to tune into this kind of expectation, even if the features aimed at utilities have a much longer life cycle. The in-home display and home area network interface will have to be updated far more regularly than the meter and the infrastructure.

Most utilities are yet to take on board the fact that smart metering is the end of business as usual. But they need to, otherwise they will be locked into a continual pattern of expensive replacements and will fail to secure competitive differentiation. The evidence from existing deployments is there for all to see. As we plan for the next generation of smart metering, we would be wise to learn the lessons from abroad.