What is a smart meter and how does it work?
Smart meters are a type of meter that is installed to measure the consumption of electricity, gas, or water in a home or business. It is called a "smart" meter because it is able to communicate this information back to the utility company using a wireless connection.
This means that the utility company can get real-time data on the usage of these resources, rather than relying on manual readings taken by a meter reader.
For the power sector, the goal of smart meters is to improve the accuracy and efficiency of utility billing, as well as provide a better service to the customer. This is possible thanks to their advanced communication design which enables more granular information about resource usage, thereby raising customers’ awareness about how they can save energy and money.
Smart thermostats are becoming an increasingly familiar technology in European households as they contribute to tackling two of Europe’s key energy challenges. First, they can optimise households’ energy consumption - without reducing user comfort. Second, they can provide flexibility to the electricity grid by adjusting consumption during peak periods, thereby improving the overall resilience of Europe’s power network and infrastructure.
How do smart meters help utilities?
Smart meters have other features that can be useful for both the utility company and the customer. For example, they are able to record electricity usage at different times of the day, which enables a power company to better understand demand patterns and offer dynamic pricing tailored to customers.
Smart meters are also able to detect power outages or other problems with the supply system for electricity or gas. They then automatically notify the utility so that they can take appropriate and prompt action. This can ultimately lead to a more reliable and efficient energy system, which can benefit households and businesses alike.
Smart thermostats are a relatively easy to use and implement technology which helps households and enterprises of all sizes understand their energy demand and improve their energy efficiency. Though offering many benefits, this technology is still relatively unknown in the European market.
How can smart metering help customers?
Smart meters are also becoming more popular with customers for a number of reasons.
One reason is that they can enable them to better understand their energy usage and find ways to save money on their utility bills. By providing real-time data on resource consumption, smart meters guide customers on exactly how much energy they are consuming and when they are using it the most.
Such communications can also identify areas where customers might be able to cut back or shift their usage to another time when energy is cheaper or more readily available. Metering is particularly useful when trying to reduce energy consumption for environmental or financial reasons.
Smart meters can also help customers identify problems or inefficiencies with their energy usage. For example, if a customer notices that they are using a lot of energy at certain times but cannot identify the cause, they might have an appliance or device that is using more electricity than it should. By identifying and fixing these problems, customers can save money on their energy bills.
Moreover, some utility companies offer time-of-use pricing, which means that the price of energy varies depending on the time of day it is used. Smart meters let customers take advantage of this by allowing them to shift their energy demand to times when rates are lower.
In fact, our study has shown that smart meters can provide consumers with an average of 10-15% of energy savings when connected to climate control devices like electric heat pumps or air conditioning units.
Brought together, such opportunities for interaction allow all customers, and not just prosumers, to actively engaged in the energy transition by prioritising their energy use for when it is clean and cheap.
In addition, smart meters improve the reliability and accuracy of utility billing. They are highly accurate and can provide a more transparent billing process such as by providing customers with alerts or notifications when their electricity usage reaches a certain level. This improved exposure can help them keep track of their consumption and avoid unexpected bills.
What obstacles are slowing the uptake of smart meters?
There are several obstacles to the adoption of smart meters in Europe.
Privacy and data security
Some people are concerned that smart meters might collect and transmit sensitive data about their energy usage as well as other household data. This has led to concerns about this data being misused or inappropriately accessed.
Consumers’ awareness gap
The consumer awareness gap is limiting average consumers’ active participation in the energy transition. According to our Power2People report, 80% of consumers are not actively engaged in the energy transition and 26% of those surveyed were not even aware of any product or service their supplier offers to save energy or access financing.
Another barrier is low digital literacy which is contributing to the lack of knowledge of smart meters, and the connected services which can help manage them.
Only 44% of customers surveyed between the ages of 16 and 74 had a basic level of digital literacy, which signals that many consumers may need additional assistance to bring such technology into their home and become comfortable using it at will.
Beyond those barriers identified in the Power2People report, there are two more that are preventing a more exponential growth in the use of smart thermostats.
Lack of properly trained installers
Demand for smart meters is expected to rise from 1.9 million units purchased annually to over 4.5 million. But, without adequately skilled personnel not enough of these smart meters will be promptly installed. Their full potential will not be recognised, and people may revert to more traditional technologies.
Lack of market standardisation
There can also be issues with connecting thermostats effectively to a specific climate control system, be it a heat pump or air conditioner, due to a lack of standardisation in the market.
What is the future of smart metering?
It is likely that the use of smart meters will continue to grow in Europe in the coming years. Many countries have already implemented smart meter systems, and others are in the process of doing so. One of the main drivers of this adoption is the desire to improve the efficiency and reliability of energy systems, as well as to reduce energy demand and greenhouse gas emissions.
In the future, smart meters will increasingly play a key role beyond just measuring energy consumption. For example, smart meters will be used to monitor and control the operation of other household systems and appliances, such as electrified heating and cooling systems, hot water heaters, and smart appliances. This could allow customers to more effectively manage their energy usage and save money on their bills across a wider number of electrified devices.
Smart meters may also be used to enable the integration of renewable energy sources, such as solar panels or wind turbines, into the electricity grid. By providing real-time data on energy production and consumption, these devices can help utilities and customers optimise the use of these resources and so reduce reliance on fossil fuels.
Overall, the future of smart meters in Europe is likely to involve continued growth and increased integration with other technology systems and devices.
What policies can support the smart meter roll out?
Targeted Awareness Campaigns
Public authorities and suppliers can increase the uptake of smart meters by partnering to develop and implement communication campaigns which reach audiences through a variety of media. These should include print media, TV, social media, as well as brick-and-mortar locations such as in town halls, energy one-stop shops, and supplier shops.
Governments should develop public-private partnerships with energy suppliers and smart meter companies to provide technical assistance to those who may need help mapping out how to take advantage of smart metering in their home, including upgrading appliances and fixtures to be more efficient and connected with such systems, and to provide upskilling programs for technicians so that smart meters can be efficiently installed for customers.
Direct Funding for Vulnerable Consumers and those in Energy Poverty
Smart meters and their connected services can provide substantial energy savings when optimising the energy use of households, which vulnerable consumers and those experiencing energy poverty could benefit most from.
In addition to providing technical assistance, governments should allocate funding through grants to subsidise the purchase and installation of such meters in social housing and in private homes of those experiencing energy poverty.
Beyond the direct funding opportunities mentioned above, governments should work with financial institutions and suppliers to develop and implement a financial instrument to be available to all customers looking to fit their home with smart thermostats and connected climate control appliances. This could be achieved by providing publicly funded guarantees to secure low-interest loans or allow for bundled offers from suppliers where a customer can pay off the cost of the technology and installation in tandem with their regular energy bills.