The Department for Energy Security and Net Zero (DESNZ) has made recent progress in its rollout of smart meters - but it’s slower than planned and DESNZ faces challenges in meeting its latest set of targets, a new National Audit Office (NAO) report says.The government wants to see all homes and small businesses using smart meters to help achieve net zero targets and save households and small businesses money.
In its latest report, the independent public spending watchdog found that the government and industry has overcome some of the most pressing challenges facing the programme. For example, it has worked with industry to develop new smart meter technology that works in more homes.
However, the report highlights several challenges in achieving the department’s current targets, including a shortage of installation engineers and disagreements with suppliers (who argue that they have exhausted the ‘low hanging fruit’ of customers who want devices and therefore call for new policies to support the roll out – such as mandating that smart meters replace any traditional meter that breaks). DESNZ has called on suppliers to improve their performance against installation targets and invest more in rolling out devices.
In 2019, BEIS, the predecessor of DESNZ, forecast benefits of the smart meter rollout for consumers and small businesses at £19.5 billion. But the actual benefits per meter are likely to be higher than expected due to recent high energy prices and emerging technologies for increasing savings.
As part of the 2019 analysis DESNZ forecast total costs of the rollout at £13.5 billion. It is likely that the cost per smart meter will be more because average installation costs are higher than expected, because of, for example, a shortage of engineers. These costs are initially borne by suppliers and fed through to households via energy bills. Both costs and benefits have been delayed by the slower-than-planned rollout.
In 2012, the government first set a legal obligation on energy suppliers, requiring them to complete the rollout of smart meters to their customers by the end of 2019. Government required suppliers to take ‘all reasonable steps’ to install smart meters in all homes and small businesses in Great Britain, but did not at that point set out what percentage of premises would need to have a smart meter for it to consider the rollout complete.
On three occasions the government delayed the deadline for the completion of the rollout, first to the end of 2020, then 2024, and then 2025. In February 2023, the government launched a consultation on plans to have smart meters installed in 80% of homes and 73% of small businesses by the end of 2025.
According to the latest data, 57% - more than 32 million – of all meters in Great Britain are now smart, although around 9% of smart meters - around 3 million - were not working as intended in March 2023.
The Infrastructure and Projects Authority has previously4 rated the smart meter programme amber - where successful delivery of a programme appears feasible but significant issues already exist, requiring management attention.
To ensure the programme maximises value for money, the NAO recommends the government updates data on programme costs and benefits. DESNZ and suppliers also need to work together to overcome disagreements and address the reasons that installation rates are slower than planned.
Gareth Davies, head of NAO said:“The government has made recent progress in rolling out smart meters across Great Britain. The rollout is now at a crucial point – and the department should ensure it has robust information on both the total costs and benefits of smart meters to make decisions from an informed position to maximise value for money. DESNZ must now work with suppliers to get the programme on track, for the benefit of millions of consumers and small businesses and government’s wider environmental goals.”
