Update on preparations for Smart Metering
5 Jun 2014 12:29 PM
Full report: Update on preparations
for Smart Metering
The National Audit Office has
today published a briefing reviewing the Government’s progress on the
Programme under which energy suppliers must, by 2020, replace 53 million meters
in homes and small businesses with smart electricity and gas
meters.
The Smart Metering
Implementation Programme, led by the Department of Energy and Climate Change,
is expected to cost some £10.9 billion and bring economic benefits of
£17.1 billion. According to the NAO, the Department has made good
progress, with Ofgem, in preparing for mass roll-out and has established a
framework for passing responsibility for smart metering to
industry.
The economic case for the
Programme remains positive. The Department recognizes that there remain
significant risks. The Programme requires suppliers to take all reasonable
steps to install meters in all homes and small businesses by 2020. But the
current home area network radio system is not suitable for up to 30 per cent of
premises, and suppliers have been developing a solution based on a different
frequency of radio signal for these premises. In addition, some
energy suppliers have not yet developed their smart meter prepayment systems.
The risks also include customer resistance to the installation of smart meters,
the need for suppliers and others in the industry to resolve outstanding
technical issues, the readiness of suppliers, network operators and the supply
chain for large-scale installation, and the robustness of the data security and
privacy arrangements.
Although the foundation stage of
the Programme has allowed suppliers to test and trial smart metering equipment,
only two of the big six suppliers have installed a significant number of
meters.
The Department considers the
likelihood of the risks materializing to be low, but their potential impacts
are high. The Department is relying on suppliers’ commercial incentives
and competition in the industry to ensure that suppliers achieve universal
roll-out efficiently. It has worked with security experts to establish controls
aimed at securing data security and privacy.
Since 2011, the total net
benefits from the Programme have reduced from £8.3 billion to £6.2
billion, primarily as a result of the one year delay to the completion of mass
roll-out, but the benefit-cost ratio for the Programme to 2030 has remained at
around £1.60 of benefit for every £1 spent. The Department’s
economic case has allowed £1.5 billion for higher than expected
costs.
The Department must retain
ownership of the Programme’s key risks, ensure that roles and
accountabilities are clear and make appropriate use of its powers to manage the
risks, costs and benefits of the Programme.
Notes for
Editors
- The NAO has prepared this
briefing to complement the Department of Energy and Climate Change’s
update report for the Committee of Public Accounts, which was presented on 31
March 2014.
- The NAO has reviewed the
progress the Department describes and evaluated the reasons for, and impacts
of, any changes to the economic case on expected benefits and costs, based on
review of key documents and interviews with Department officials, key industry
participants and stakeholders conducted in March and April 2014. The NAO did
not fully audit the data the Department provided or statements the Department
made and has not sought to come to a value for money conclusion on the Smart
Metering Implementation Programme.
- The change in the
Programme’s estimated net benefits and costs is between the
Department’s estimates in 2011 and 2014.The figures are given in 2011
prices and a 2013 present value base year to enable comparison, with the 2011
figures derived from the Department’s 2011 impact assessment, which used
2009 prices and a 2011 present value base year.
- The home area network will
enable consumers toconnect in-home displays and other consumer devices to their
smart meters.
- The home area network currently
operates at a frequency of 2.4 GHz and is not suitable for some properties,
such as many high rise flats or buildings with thick walls. This limits or
prevents the components of the smart metering system from communicating with
each other.The NAO’s original report ‘Preparations for the
roll-out of smart meters’ published in June 2011 can be found
here:http://www.nao.org.uk/press-releases/preparations-for-the-roll-out-of-sma
rt-meters-2/
- Press notices and reports are
available from the date of publication on the NAO website, which is atwww.nao.org.uk. Hard copies can be obtained by using the relevant
links on our website.
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the House of Commons and leads the NAO, which employs some 860 staff. The
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