Information is power in closing the energy gap

Information is power in closing the energy gap
By Joe Hemming, chief executive of Logica UK and a member of Logica’s executive committee

Published: February 26 2009 09:52 | Last updated: February 26 2009 09:52

We believe we have just 11 years to revolutionise the way we satisfy our energy needs – or we could be experiencing black-outs in the UK between 2015 and 2020.

As part of this process, the government said in October that all 47m meters in 26m homes and more than 2m business meters will be exchanged for smart meters by 2020.

Smart meters already exist and work well. They allow consumers to see exactly what energy they are using and manage their consumption intelligently. Suppliers get detailed insights into their customers’ behaviour and can offer tailored tariff packages. The suppliers most adept at using meter information will win market share by adding value to their offerings – and many people will try to save money by curtailing energy consumption and using appliances at different times.

Smart meters are a classic example of the power of information.

Information from smart meters and the communications infrastructure behind them could notify of boiler breakdowns, tell carers if a vulnerable person’s energy use changes or could turn on heating remotely. This new set-up will also underpin the shift to power from distributed microgeneration – such as solar panels, wind turbines and ground and air source heat pumps – back into the network, helping to cut the energy shortfall even further.

The sticking point for mass introduction is setting and co-ordinating smart meter communication standards, to ensure that barriers are not created to entry for potential energy suppliers, strangling competition or preventing consumers from changing suppliers quickly and easily.

We need a central body to agree an open information standard, so that the various ways smart meters talk to suppliers and consumers – by broadband, text message, radio or another technology yet to be invented – is irrelevant.

Open standards will transform the energy industry, allowing it to change at the fast pace of the communications industry. It will cease to be a commodity market and instead use meter information to tailor packages to suit the lifestyles of its customers, in the same way that telecommunications companies bundle services today. Energy packages will reflect the way we live and reward changes in consumption behaviour.

To meet the 2020 deadline, the central body will need to be up and running by around 2010, with full support from across the industry – generators, distributors and suppliers. The central function will be an efficient and effective way to focus co-operative efforts and free businesses to compete on value, as past examples ranging from financial clearing systems to the electricity industry’s own balancing and settlement body, Elexon, show.

We fully expect that when the Department of Energy and Climate Change (DECC) publishes the revised benefits case for smart meters, the numbers will prove to be compelling.

Consumer acceptance is not a problem. A Logica survey published in October 2007 shows that 77 per cent of Britons say smart meters are a good idea and 72 per cent would reduce their energy consumption if they knew how much they were using.

If the results of an initiative in Växjö, Sweden using Logica’s web-based technology are replicated, people mean what they say. There, 20,000 people use smart metering of electricity, water and heating. Personal web pages show consumption by the hour, comparing this with neighbours’ and other properties of similar size. Among those taking full advantage of the information they now receive, household energy use has fallen by up to 30 per cent. People are just as comfortable – but they have lower bills.

If, by 2015, around 30 per cent of consumers have committed to taking advantage of what smart meters offer, there will be a sufficient decline in demand to bridge the coming energy gap, to reduce carbon emissions and minimise dependence on foreign energy.

It’s no longer enough to turn down our thermostats by a degree or feel virtuous in the eerie glow of subsidised energy-efficient light bulbs. We need smart meters as a self-sustaining homeland insurance policy.

As national priorities go, few could be more important. We need to establish the central body for smart metering now.

Copyright The Financial Times Limited 2009