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An industry approach to consumer engagement is essential to deliver smart meters

Utility Week

4 May 2011

In July 2010 the UK Government published its prospectus for the implementation of smart meters in Great Britain. This set out the approach for the installation of fifty million domestic gas and electricity smart meters by 2020, and sooner if possible. The smart meter programme is expected to deliver substantial benefits to the UK economy, with over 40 per cent of these directly attributable to consumers reducing their energy consumption.

The nature of the UK energy markets makes the rollout of smart meters unique. In other countries the distribution networks have taken responsibility for implementation. However, the UK market operates a "supplier hub" principle, with energy suppliers the first point of contact for consumers. The prospectus proposes that energy suppliers will be made responsible for driving the installation of smart meters through new licence obligations and the introduction of a Smart Energy Code.

This approach does create potential logistical challenges to the programme:  with six major suppliers across Great Britain it is possible that every street will be visited at least six times in six different ways, potentially creating inefficiencies and consumer confusion. However, competition law does not prevent suppliers co-operating when it is open and for the benefit of consumers. Each energy supplier will have to decide for themselves on whether it is better to coordinate installations with competitors to reduce cost or to focus on added value for their customers. The proposed rollout approach supports this by aiming to set milestone targets for installation, but not determining where or which consumers have installations.

Theoretically this enables suppliers to deliver the programme in an efficient way, choosing whether to co-ordinate or not. However, there is one area where a common industry approach will be essential - consumer engagement.

The majority of meter installations made in Great Britain today require access to the home. In most cases this is due to the location of the meter, but it is also necessary for safety purposes for example to relight appliances linked to gas meters. All smart meter installations will require access to the home and direct consumer contact - to ensure that the In-Home Display (IHD) is operating and to provide the consumer with information on its operation. If a consumer is not at home, or refuses access, such as can happen with the installation of prepayment meters, then an installer’s time may be wasted.

This means consumer attitudes are at the heart of success or failure of the programme. An enthusiastic consumer response will result in reduction in energy consumption and low installation costs due to high home access rates. An apathetic, or intransigent response will fail to deliver energy savings and create a high installation cost because of the need to make repeated attempts to gain access.

To make the programme a success it is vital to understand and address how consumers may engage with smart meters. Allowing a new piece of equipment to be installed and operated in the home is a significant decision for any consumer. For this to happen they must:

  • feel safe and secure

  • believe in the benefits

  • understand and trust the implications.

 If any of these are not achieved then the installation is very likely to be met with either active or passive resistance.  International implementations have already demonstrated how concerns over cost or security can result in a roll-out programme being stopped. Several implementations have been frozen due to security concerns, whilst in Victoria, Australia, time of use tariffs have resulted in increased energy bills for poor and vulnerable customers.

The only industry change programme of a similar nature in the UK in recent years is the Television Digital Switchover programme. All terrestrial broadcasters contributed to the programme to decommission analogue television broadcasting on an area-by-area basis across the UK. As a consequence, all consumers need to change to a form of digital television. The programme is informing all consumers of when they need to switch and controlling the switch-off of transmitters. It has addressed the three aspects of consumer confidence in specific ways:

  • creating a separate help scheme for vulnerable consumers and working with local trusted groups to provide support on installation of digital services

  • creating an imperative to change by switching off analogue signals by a specific date

  • using a strongly trusted body, the BBC, as one of the main sources of communication.

The programme also benefits from the strong existing take-up of digital TV services.  At the start of the programme in 2008 nearly 85 per cent of primary sets in homes already used digital television, this means that it has needed to focus on the late adopters. In comparison, the smart metering programme has a much more difficult change to deliver - it is at the early stages of technology adoption, with the solution and benefits poorly understood by consumers.

These three aspects of consumer confidence are hard to measure and, if undermined, difficult to recover. The information that consumers use to make their judgements on will come from many sources including: the media; friends and neighbours; and campaign groups or charities, to name a few. A particular change will arise from the way consumers will not necessarily distinguish between the implementation activity of different suppliers and the overall smart meter programme. For example, if a press article raises concerns on the health or privacy aspects of smart meters, consumers are likely to associate the problem with all smart meters. An event that affects consumer confidence is unlikely to impact just one supplier's implementation programme, but all suppliers. To address this, suppliers must take three fundamental actions together.

  1. Ensure that consumers feel safe. In particular that all staff that may enter homes are trained, accredited and checked to meet minimum standards of safety and security. For certain consumer groups they should apply a common approach to working with trusted local bodies, such as charities and local authorities. These standards will need to be clearly communicated to consumers.

  2. Convince consumers of their benefits. Media commentary has already criticised the potential level of benefit of £14 per annum per consumer, this saving is small in comparison with recent price increases and may be insufficient to engage consumers. Suppliers will therefore either need to demonstrate a larger benefit or emphasise the benefits of other service aspects, such as different payment models or better home management services.

  3. Build trust and understanding. Suppliers have already started the implementation of solutions that consumers could consider as smart meters, including the early rollout and the installation of energy monitors. Consumers are unlikely to understand the differences between these solutions and the common standard required by the Government. Energy monitors in particular are likely to be confused with consumers with the IHD.  Suppliers will need to ensure that there is clear understanding of what a smart meter is, so that consumers can understand why they need access to their homes.

Whilst it is possible to argue that each of these aspects should be left within the remit of each supplier, if the core messages from each supplier are different this is likely to create significant confusion for consumers. Further, when negative publicity occurs, as it inevitably will, the industry will need to be able to respond with a single voice and concerted action. Such responses would be most effective if delivered by a trusted independent body.

For the energy industry to make the programme a success it needs to address these three key aspects in a co-operative manner. In particular, it needs to have a clear common message on the core benefits of smart meters; ensure that there is a standard marketing definition of a smart meter; and fund an independent trusted body to manage common media communication. These core aspects would not preclude suppliers from differentiating and innovating on services and delivery, but would provide a consistent base to build consumer confidence.

Contact the energy and utilities team

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