Smart meters. Do you need one? Do you have a choice?

Smart meters are coming, whether you live in California, Camden or Canberra, but who will they benefit?

As ever, it depends who you ask, and opinions range widely; here are a couple to look at: Stop Smart Meters!   Smart Meters Explained. If you like conspiracy theories read the first and if you’re looking for something more measured the latter, and if you can’t be bothered reading either then I think the best summary comes from the latter:

The big advantage of smart meters is accurate billing – no more estimates, and no need for you or anyone else to physically read the meter (so no more letting the meter reader into your house).

But consumers should benefit in other ways, too. It should, for example, be simpler to make accurate price comparisons and switch to a cheaper tariff.

The first paragraph is the reason they are being installed.  The technology now exists to remove the need for people to read meters and to provide accurate bills.  It would be stupid to carry on with the present system now that a better one exists.

The second paragraph hides a number of issues and we think is more interesting.  Eventually we, the consumers, will have to pay for the new meters, in the same way that somewhere buried in our energy bills we are paying for the power stations, reservoirs, wires and pipes that deliver our water, gas and electricity.  The government are keen to persuade us that we’re getting something for our money, but they are struggling and the best they can do is suggest that shiny monitors and apps telling us how much energy we are using will nudge us into using a bit less.  That’s probably true, but we’ve had energy displays for years and they while they help they are not changing the game.

But the last sentence might point to a real opportunity for change.  Smart meters can make more accurate price comparisons and with the right tool you could more easily switch to a cheaper tariff.  For example an app that uses your data from your smart meters for your benefit and switches for you so you’re always on the best tariff!

Don’t put all your ergs into one basket!

Is anyone else concerned that the Hinkley Point debate illustrates how far behind the UK has fallen in terms of managing our own energy generation? Will we soon outsource the maintenance of our armed forces or the NHS to international suppliers?

I’m all for assured access to carbon free power, but it seems short-sited not to seriously consider alternatives to nuclear power when the stakes are so huge.

Can you appreciate the massive impact that £18 billion would have if invested in Renewable Energy and Distributed Energy? It would completely revolutionise our energy ecosystem.

Distributed Energy (sometimes called DEG for Distributed Energy Generation or OSG – On-site Generation) and Renewable Energy offer some very attractive benefits based on current and available technologies. Unlike centralised conventional power plants, Distributed Energy offers modular, decentralised and technologically innovative generation capacity. Advances in storage technology and efficiency will be more easily applied to Distributed Energy systems than upgrades to a conventional power plant and at a fraction of the cost.

Thomas Watson, CEO of IBM is quoted as saying, “I think there is a world market for maybe five computers.” Later generations will judge us for how we create energy. Did we evolve and decentralise our energy generation, so that every home has a power-plant, like every home has a computer? Or did we stick with massive conventional power-plants and put all of our ergs into one basket?

– Simon Mehlman

Should we be regulating energy prices?

It’s all over the morning news again – energy prices and people not switching to better tariffs.  Now the 2 year investigation by the Competition and Markets Authority (CMA) is published and they have a number of proposals to protect the consumer from the energy companies.

They have proposed a price cap for those on pre-payment meters, which would certainly help that minority.  For the rest, for those who never switch to a better tariff, they want a database that will be made available so that competitors can target them.  More cold calling, that should do it, people are always pleased to get sales calls.

The CMA also proposed other things designed to encourage competition and to make it easier for consumers to get the best deal:

  • Ending the restriction on suppliers to offer just four tariffs;
  • Strengthening the ability of price comparison services to help consumers find the best deal;
  • Tackling so-called rollover contracts, where customers are automatically put on less favourable terms.
  • It also wants to end termination fees that discourage switching.

An alternative would be to give people a free tool that is easy to use and that would automatically ensure that they were always on the optimum tariff.  But that’s the stuff of dreams!

Save it for later?

There is a lot of talk in the renewable energy world, and beyond, about battery storage.  Given that the domestic solar PV industry has been decimated by the recent (some would say) savage cut to the feed-in-tariff, the industry certainly needs something to talk about.

There are several reasons why battery storage is interesting. One strategic reason is that the national grid in the UK is under pressure.  And this is true all around the world where substantial local electricity generation has been installed.  Grids were designed for a few large generators, power stations, and millions of small users.  Now there are millions of small generators.  In the SW of England it’s almost impossible to get a large solar PV system built because the grid’s capacity for local generation has hit a limit.  Battery storage can help.  Imagine if everyone with a PV system also had a battery storage system.  Rather than send half of the generated power back into the grid (and rather more than half on sunny days) a proportion would be stored on site and used later that evening.  The grid is less stressed and the home owner saves money because they can ‘self-consume’ more of the energy they generate.

Even if you don’t have solar panels on your roof there may be a reason to consider battery storage – for energy price arbitrage.  If you have energy priced differently at different times of the day, which in the UK means an Economy 7 tariff, then you can store it when it’s cheap and use it when it’s not.

Sounds like a win-win, so it should be a no-brainer… and at the right price it will be.  However it’s time for the early adopters to step up while the rest of us wait for the commercial case to be made.  A typical battery storage system available today, if added to a solar PV system will still never pay for itself.  For most properties adding storage to even a relatively large array of 4 kW (16 panels) is likely to pay for itself in about 15-20 years – unfortunately the battery systems currently have a lifetime of around 10 years.

But watch this space, there is a serious amount of money going into battery development, ‘driven’ by companies like Tesla!  Prices will fall and the technology will become mainstream.  And if you think it all sounds a little ‘industrial’ then take a look at this: Living Room Storage  Just one of many new products for a market we didn’t even know we existed.

ergoe – how did we get here

A renewable energy projects I was involved in a couple of years ago resulted in a householder generating significantly more electricity than they could use each year.  Our client was keen to find a way to sell the excess generation to a neighbour rather than back to the grid and so we looked at the practicality of doing so.  That’s where we started up a steep learning curve about the UK electricity grid (a wonder of engineering) and the participants in the UK energy market.

We all take completely for granted that when we press a switch electricity flows and there is light, or our kettle boils.  In the background, unseen, lots of very smart people are constantly juggling our ever changing demand with electricity generation.  Balancing wind turbines, solar panels, power stations and other generators all over the UK as well as the connections to and from Europe.  They know that at certain times demand will rise – at the end of popular TV soaps millions of put their kettles on.  If there wasn’t a power station spinning and ready to go when we do that the lights would dim.

We also learned that the electricity we used yesterday will not be fully ‘settled’ for more than a year.  The problem is that our suppliers don’t know how much power we used yesterday.  They find out how much we used over a period of a few months when they get our electricity meter reading and by the time they get all of the readings for all of their customers a year or more will have passed.  And they still don’t actually know what we used on a given day, it’s just a calculated value to allow the billing process to work.

On the supply side energy companies have to estimate what their customers will use and buy that power in the wholesale market from the generators.  Every day is split into 30 minute chunks (48 of them, obviously) and every supplier must purchase the generation they think they will need for each chunk.  Of course it’s only an estimate and in practice they sometimes buy too much and sometimes too little.  A year later the sums are complete and the last of the money changes hands to reflect what was actually used against what was bought at the time.

We finally understood why people in the energy industry were getting so excited about smart meters.  Instead of finding out how much electricity and gas was used months after the fact, they will find out every 30 minutes in close to real-time.  In a world where everyone has smart meters all of the estimating and balancing that now takes a year or more to resolve just disappears.

Would any of this affect us, the customers, buying our electricity and gas from suppliers?  We’re ‘in the business’ so we swap suppliers and tariffs as often as we can to stay on something close to the best tariff but about 2/3 of people had never changed suppliers or tariffs and most of us are paying much more than we need to for electricity and gas.  A bit of digging unearthed the estimate of about 13 billion Euros across the EU as the amount by which the energy companies benefit because of our inertia. Why don’t people switch tariffs – we’re not talking about a few pounds, the average savings are hundreds of pounds each year for relatively little effort – £200 for 10 minutes of your time anyone?

A little more gentle digging unearthed the commissions that some of the energy companies pay when they get a customer switching to them.  It’s obviously worth paying up to £50 for a new customer who will be too lazy to move for a year or two.  Meanwhile the UK government has been getting very agitated about the unfair way they believe the energy companies are treating their customers.  Government is driving change so that the process of switching tariffs that now typically takes a few weeks will be reduced to a few days and with the ambition to reduce it to 24 hours.  The industry and government also have the problem of how to sell the benefits of the smart meter roll-out to us.  It’s a cost to the whole industry, and of course in the end that means it’s a cost to us, the customers.  Providing people with an in-home energy display is as far as they have got so far.  Based on the (well documented) principle that when people become aware of their energy use it reduces by around 10% that’s a benefit, but they are struggling to identify a ‘killer app’ that they can link to smart meters.

Today, we have a dysfunctional energy market where people don’t switch suppliers despite the obvious financial benefit in doing so.  The big suppliers are expert at appearing to help consumers get better deals.  But of course it’s directly against their shareholders interest for them to do so.   There is frequent publicity about switching along with the bad press that the energy companies receive, for example when falling oil and gas prices always take too long to reach the consumer.  This has resulted in more people switching tariffs, but progress is very slow slow.  For many reasons in practice it seems that we’ve all got better things to do than to keep checking for a better energy tariff.

So we imagined a better world for the consumer, where an application that knows how much energy you use would automatically keep track of all the new tariffs and work out whether there was a better deal for you.  If you trusted it to do so it could also switch you to the better tariff when it appeared, all within whatever parameters you set it.  If you only wanted to buy from ‘green’ suppliers or wanted to exclude certain suppliers it would handle that for you.  The first app of this kind is already available from uSwitch, who have an iPhone app that will alert you to better tariffs.

It’s a start, but we believe something much more profound is going to happen to energy markets around the world in the next few years.  In the UK consumers will one day be able to switch energy tariffs easily and quickly and then the commission based model can’t survive.  As the energy market becomes more of a true market more and more small companies will start to challenge the dominant incumbents by providing targeted products.  Smart meters will provide the data about actual use so that people won’t have to work out from complicated bills how much gas and electricity they really use.  How will they attract new customers?

And then there is battery storage and electric cars… How will this affect the electricity market?  Will we be able to buy and store power when it’s cheaper and use it when it’s more expensive?  One thing is certain, consumers will find it more complicated than ever to work out the best supplier and tariff.  So here we are, building an app that is specifically designed to identify for every consumer the best energy tariff available for them.  It will run in the cloud and will allow consumers to forget about their energy supplier.  This is a global market that is going to be radically changed in the next few years, and with any paradigm change there is always opportunity.