Nobody who has any understanding of the Smart meter roll out programme was surprised by yesterday’s announcement that the deadline for completion was being moved back four years. Indeed the commentary was largely irreverent along the lines of ‘quelle surprise’!
It has been obvious for some time that despite threatening letters to suppliers from the Regulator, the 2020 deadline was unachievable. This was not through lack of effort or investment from suppliers, but a reflection of delays to delivery of the central systems, lack of solutions for ‘black spots’ across the UK, challenges in supply chain delivery and the big one- lack of interest from consumers. You can take a horse to water….
You can almost hear the collective sigh of relief going around the market but there is a bigger issue here around delivery of transformational change in UK energy markets. If we are going to get better at delivering market changing programmes, we need to get better at how we go about them. Smart meter roll out is one such programme, but to achieve the UK’s carbon reduction targets we are going to need similar programmes to bring our housing stock up to standard in both energy efficiency and heat production.
What lessons can be learned?
1) Don’t underestimate the power of disinterest: Smart meter roll out, like the Green Deal before it, has had the underlying assumption that consumers, if told it’s a good thing, will believe it is a good thing. Without a doubt, some will, but for the vast majority, as demonstrated by the challenge of getting consumers to switch supplier, anything to do with energy in the home is a second order priority. The basic utility is what people tend to be interested in, and as long as the lights continue to turn on and the house is warm, interest in enduring disruption, even if for a few hours, is enough of a disincentive to not take action. Consumers need a reason, or at least need to believe there is something in it for them, in order to engage- and relying on repeated media campaigns does not do it.
2) Mandate and incentivise the end consumer: It’s interesting to compare the roll out of Electric Vehicles (EVs) against the roll out of Smart meters. Whilst both are hugely challenging, it appears that EV growth is gaining momentum, despite the apparent backwards step in convenience imposed by charging vs fuel pumps. Why so? Arguably the availability of grants, putting in place the 2040 combustion engine ban and most importantly the development and launch of ‘new and shiny’ cars with added gizmos is working to tip the consumer towards EVs. Compare that to Smart meters, where the meter is merely an enabler to an exciting future and it is no surprise that there is apathy from consumers. New and exciting technologies are rapidly being developed for consumer markets, for which smart meters are the enabler. Engaging effectively with these businesses rather than the traditional supplier could have resulted in a very different result. Alternatively, the well trodden argument of mandated change delivered street by street by distribution companies, could also have ultimately proven more effective and cheaper.
3) Act quickly when it’s clearly not working: Blaming suppliers for delays to the roll out and sending increasingly stroppy letters confirming the 2020 deadline has not been helpful. Suppliers have control over their marketing campaigns and their installation agents and in the main have stepped up to the plate- They do not however have control over delivery of central systems, the supply chain and telecommunications coverage. With assumptions made on smart meter roll out built into the price cap, increasingly tight margins and the impact of unbudgeted costs imposed by the failure of other suppliers, there has been little headspace for suppliers to do anything other than survive. It has been obvious for a long time that the 2020 deadline was not achievable, but waiting until now to acknowledge it, has probably contributed to increasing costs of the roll out- and for what purpose?
Time and again, the UK energy market has used economic modelled arguments for choosing a course of action with inadequate consideration of ‘customer pull’. Where things have worked (eg growth of solar generation) it is usually where the consumer has an incentive (usually financial) to engage. Pushing change, even if for the greater good, will never get mainstream traction if there’s nothing obviously in it for the householder in the form of carrot or stick. We need to learn the lessons.
EnergyBridge helps businesses and investors navigate the complexity of the UK market with a combination of market and operational expertise and experience. www.energybridge.co.uk