In May 2009, the UK’s Department for Energy and Climate Change (DECC) confirmed the Government’s plans to install smart meters in all households by 2020 and launched a public consultation on smart metering for electricity and gas in Britain (the Consultation). The Consultation includes high level proposals for the roll-out of smart meters to domestic households and certain small and medium non-domestic (business and public) sites. This roll-out will transform (and has the potential to revolutionise) metering as well as patterns of energy production and consumption. Following on from our article discussing the Consultation (to view the full article please click here), over the coming few months Law-Now will present a series of updates and comments on the topic of smart metering. These updates are likely to be of interest to all those in a variety of sectors, including energy suppliers, distributors, consumers, communications and technology providers, and water and other utility operators.
Smart metering is also a live issue in the water industry. The Environment Agency considers that smart meters have the potential to assist in reducing demand and managing the UK’s limited water resources and is pressing for future regulatory and business policy to reflect this.
Smart meters - a business opportunity?
The Government and the energy industry will first need to agree upon what exactly will constitute a “smart meter”. Please see our earlier article on smart metering for a brief overview of what is commonly understood as a “smart meter” and an outline of the background to the recent consultations and legislation.
Although there have been a number of substantial roll-outs of smart metering technology in other jurisdictions, Britain sees itself as a pioneer in seeking to introduce electricity and gas smart metering on such a large scale in a competitive market. Due to proposed scale of the roll-out (approximately 50 million domestic meters alone) and the scale of required funding, together with the operational, technical, business and legal issues that will need to be resolved, the Government has estimated that it will probably take several years to resolve most issues and to design the ten-year nation-wide roll-out in sufficient detail.
Our previous article identified several of the core operations benefits that energy companies might anticipate following the introduction of smart meters. In addition, energy companies may expect the devices to allow them to expand their businesses into non-core areas. For example, an energy company might seek to use the existence of its high-technology hubs in domestic households to allow it to act as a distributor of unrelated services, such as broadband connections. Further, the additional services that smart meters may offer will create new market opportunities for other players such as telecommunications and data companies.
The current Consultation reveals the Government’s preference for a “centralised communications” model. The management and control of pools of data, and of the network and IT infrastructures, required to support the new meters may also create a major new role for consultancies or systems integrators, as well as business-process and IT outsource providers.
The energy industry will need to consider fully the challenges involved in the roll-out, which may include:
- replacement and disposal of serviceable “dumb” meters;
- the installation of smart meters may be expensive and complex and new maintenance and support networks will be required to support the new meters;
- one of the primary drivers behind the introduction of smart meters is the aim to reduce consumption of the energy industry’s core product;
- costs and risks could increase generally in proportion to the technological sophistication of smart meter solutions; and
- in a competitive market (and in the current economic climate) the degree of Government support and intervention may be a significant factor in determining the scope and speed of development of smart meters and the success of the project. The energy industry can take some comfort from the fact that the present Government has previously assisted with pilot schemes and that smart meters also enjoy support from the opposition Conservative party.
Forthcoming Law-Now articles
Over the next few months, we will explore smart metering in more detail and identify key developments. We will also discuss some of the key legal, commercial and technical issues. Future Law-Now articles will cover:
- Issues facing the energy companies in preparing for the smart meter revolution - The energy industry will need to know what minimal technical specifications will be required of smart meters and how ownership and inter-operability of the new meters will be structured in a competitive market. The energy industry will obviously be concerned to ensure that any meters it rolls-out are not rendered obsolete in a few years and must also consider the issues posed by Britain’s competitive market for gas and electricity supplies.
- Data recording and transmission - The recording and transmission of significant quantities of data is a cornerstone of the smart metering concept and this will give policy makers, stakeholders and their respective advisors much to consider, including:
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- How the data is to be transmitted and the implications of related legislation. For example, data transmission in smart meter networks could be by wireless, cable or even down power lines through digital power line transmission. Whatever technological solution is devised, this is likely to involve the creation of several networks subject to the requirements of the Communications Act 2003 and other telecommunications laws and regulations. Such networks might include the network in a house connecting consumption devices to the meter; the network within a house connecting the meter to an external network; and also the network(s) over which data is finally transmitted to energy companies. In future articles, we will consider each of these sub-networks and certain legal responsibilities and issues that arise.
- Who will have access to the smart meter network and data and to which parts will they have access? - In the Consultation, DECC accepts that data access and data protection issues will require careful consideration. The ownership and use of the data raise a wide range of major issues.
- How the metered data will be held and processed and by whom - There have been suggestions that it may not be efficient for individual energy companies to handle the data; instead a central data repository could be created and energy companies then given access to data as and when an individual becomes their customer. The handling of large volumes of personal data and private information will, in any event, raise data protection and privacy concerns for individuals and compliance issues for businesses.
- How the security of data will be preserved and whether there are special dangers in the concept of two-way communications (for example, if a power company can remotely shut off power, in theory it may be possible for malware, viruses or hackers to do the same).
- Risk management and health and safety liability issues.
- We will also consider how smart metering technology might tie-in with other developments such as micro-generation, a smart national grid, a “smart city” or a fully “on-line” home.
- As is often the case with new technology, the desire for low cost, certainty, standardisation and inter-operability, along with a rapid introduction of new devices, may conflict with law and policy as regards competition, including rules on state aid and the public procurement regime. Many of the more futuristic concepts (such as meters providing an ‘internet under the stairs’) may inherently involve tying of products and services. Policy makers are likely to want to ensure that smart meters do not act as a constraint on a customer’s ability to change suppliers.
Consumers, businesses and taxpayers will want to gain maximum benefit from the billions of pounds likely to be invested in Britain’s smart metering project. It will be crucial for all stakeholders to use the next few years to create a workable industry-wide solution. We hope that forthcoming articles will contribute to and stimulate what are likely to be lively debates.
