Business

What's so smart about smart meters?

Gaz and Leccy cartoon characters Image copyright Smart Energy GB
Image caption Can the 'Gaz' and 'Leccy' cartoon characters help people to accept smart meters?

Replace your old gas and electricity meters with natty new digital ones and you could be helping to tackle "the biggest single challenge that humankind has ever faced" - global warming.

That's according to veteran environmental campaigner Jonathon Porritt anyway.

And you thought smart meters were just about saving a few quid on your gas and electricity bills? Think again.

These gadgets being rolled out in many developed nations around the world will not only save people money, they'll promote more competition, more innovation, and change the way the global energy industry works, proponents argue.

So here's all you need to know about the huge project to introduce digital meters into British homes.

What's this all about?

The UK government has told energy suppliers that they must offer to replace the old analogue gas and electricity meters in homes and small businesses with digital meters instead.

Image caption Old gas meters like this had to be read manually; digital meters can communicate wirelessly

The aim is to install 53 million of them by 2020 - a target Lord Bourne, the minister responsible for the smart meter roll-out programme, recently admitted was "an ambitious and challenging aim". It has also had plenty of critics.

Do I have to have one?

No, the scheme is voluntary - perhaps explaining why just 1.7 million have been installed so far. It's being paid for by the energy industry to the tune of £11bn.

What do smart meters do exactly?

The first thing to say about smart meters is that they're not all that smart - all they do is measure our gas and electricity consumption.

Image copyright Smart Energy GB
Image caption In-home displays like this will show up-to-date information about our energy consumption

But they do it digitally, which means we can see exactly how much energy we're using - and how much it's costing us - in real time via a wirelessly connected in-home display. That data is also sent wirelessly to the energy company.

What's so good about that?

For one thing, it means no more estimated bills because your energy supplier will know precisely how much energy you've consumed at any point.

Image copyright British Gas
Image caption Smart meters should mean an end to estimated bills and the need for manual meter readings

It also means an end to people having to come into your home to take meter readings, or you having to send readings to your supplier.

But will they save me money?

With annual dual fuel energy bills running at £1,300 on average, cost savings would be welcomed by most of us.

But this won't happen simply by having smart meters installed.

It's how we respond to the data - seeing the effect in pounds and pence of boiling a full kettle when we only want to make a single cup of tea, say. Or noticing the difference it makes when we switch off the TV and set-top boxes at night rather than leaving them on stand-by.

Image copyright Smart Energy GB

"We're all going to be much more in control of our energy usage than we are now," says Ann Robinson, director of consumer policy for U-Switch, the price comparison website.

"We'll have so much more data about how we use energy and how we can reduce the costs. We'll be able to pay less, use less and waste less."

But the government estimates smart meters could save us £17bn on our energy bills over the next 15 years.

How else will they help?

Smart meters will increase competition by making it easier for new suppliers to enter the market, says Sacha Deshmukh, chief executive of Smart Energy GB, the body responsible for publicising smart meter roll-out.

Not so long ago there were just six energy suppliers in the UK - now there are 31, and many more could enter the market.

Image copyright Thinkstock
Image caption The more control we have over our appliances the more efficiently we can run them

"The reason companies like Amazon, Tesco, Virgin, or Google haven't entered this retail energy market yet is because it hasn't been digitised," he tells the BBC. He also envisages media companies like Sky and BT potentially including energy as part of their bundles of services.

And more accurate, up-to-date data will enable households and businesses to switch supplier far more quickly. Energy regulator Ofgem is aiming for energy supplier switching within 24 hours.

Will I know how much energy individual appliances are using?

Not yet. The in-home display will merely show the total energy usage, so you'll see the display and cost fluctuate as you switch things on and off.

To reach that more sophisticated level of analysis we'll need smart appliances that can talk to the in-home display via another piece of kit called a consumer access device, explains Howard Porter, chief executive of Beama, the trade association for the UK electrical infrastructure industry.

Image copyright Thinkstock
Image caption Microwave ovens can be more energy efficient than electric ovens

"Smart meter roll-out is a catalyst for change... it's stage one in the move towards connected homes and buildings linked in to smart grids," he says.

Who will own all this energy data?

You own your energy usage data - that's a basic principle of this whole programme, says Smart Energy GB. It will be transferred to the energy suppliers over a dedicated secure network being built by a new consortium called the Smart Data Communications Company (Smart DCC), comprising O2/Telefonica and Arqiva. This network is due to go live in August 2016.

"If consumers want it they may choose to share their energy data with third parties to help manage their energy consumption," says Smart DCC's managing director, Jonathan Simcock.

Why would I want to share my energy data?

You might want to allow price comparison websites or energy management companies to shop around for the best energy deals on your behalf and switch suppliers for you, for example.

Image copyright Getty Images
Image caption Governments hope smart meters will help us manage our energy systems more efficiently

Or you may want advice on how to improve your energy efficiency, by upgrading appliances, switching to LED lighting, or using the dishwasher and washing machine at times when electricity is cheaper. Such companies could effectively manage your energy usage for you.

How will smart meters help business?

For business processes that don't have to be done immediately, it makes sense to do them when energy is cheapest or at its most plentiful.

For example, a big food retailer running energy-hungry chiller and freezer cabinets can run them at a colder temperature at night when electricity is cheaper, then use them less intensively during the day when electricity is more expensive, knowing that there is enough stored coldness in the equipment to keep it running properly.

"We can achieve energy savings of 15% to 25% for our customers," says Sara Bell, chief executive of Tempus Energy, a new energy supplier offering this type of service.

Follow Matthew on Twitter here: @matthew_wall