What benefits does a smart meter have?
For system operators, smart meters bring efficiency gains. Consumers are happy about lower tariffs.
Each network operator has a monopoly in its supply area. As such, the law entrusts them with all metering services. For them, smart meters mean efficiency gains in operating their networks, particularly in terms of the long hours that usually go into processes such as meter reading, billing, moving, enabling or disabling connections. Additional benefits for system operators are
better system information and operation;
the possibility to identify which consumers are affected by grid malfunctions and therefore, more efficiency in restoring normal service;
easier integration of distributed electricity generation plant;
the possibility to create price incentives for consumers to shift consumption peaks, thereby promoting more stability in system load;
significantly fewer consumer inquiries relating to their bills (currently, this number stands at between 500,000 and 700,000 inquiries per year, most of which are made over the phone).
New chances for suppliers
Benefits for suppliers mainly arise from the availability of accurate, real-time consumption data. This enables them to offer new pricing models to consumers and to explore other innovative and customer-friendly approaches. Access to consumption data is the same for all suppliers, so by developing new pricing models, Austrian electricity suppliers can gain a competitive edge on the market which, in the end, translates into lower costs for consumers. At the same time, suppliers can offer their consumers a range of services that had not been available before, such as tailored energy consulting or energy management services.
Greatest benefit for consumers
Even though network operators and suppliers reap benefits, many studies show that the greatest advantages of smart metering will go to consumers. Thanks to smart meters, consumers can see how much energy they have consumed exactly on a daily basis. They can regularly check their energy consumption and take conscious decisions to change their consumption patterns or to take targeted steps to save energy.
A large-scale economic analysis of smart metering roll-out by consultancy PricewaterhouseCoopers (PwC), commissioned by E-Control, has shown that this can reduce energy consumption by up to 3.5%. The authors considered many approaches and worked with several European partners (including the European Commission) to develop a system that would allow them to assess individual energy efficiency measures. To considerably lower energy consumption and increase energy efficiency, consumers’ (online) access to consumption information must be combined with a thorough interpretation of these data and consultation. The possibilities offered by smart meters are merely the first step in this direction.
Even without considering energy efficiency potentials, smart meters offer a great deal of benefits for consumers. For instance, when you switch suppliers or when your supplier adjusts its pricing scheme, it makes sense to have a meter reading. Since personally reading large numbers meters at a specific date is cumbersome and costly, usually meters are not actually read. Instead, consumption as of the relevant date is calculated. Such calculations are hypothetical of course, and what a consumer has saved by switching to a cheaper supplier could be eaten up by inaccurate consumption information. Such intransparent workarounds should not be necessary anymore once smart meters are rolled out.
Dispensing with manual reading will also result in better billing quality, and this may also reduce the number of corrections that suppliers have to make. Consumers will also be spared the time-consuming and often complicated task of reading their own electricity meters.
We assume that this will greatly reduce the number of questions consumers have about their bills, which should in turn translate into lower costs. At the moment, there are consumer inquiries in the order of 500,000 – 700,000 each year.
Smart meters will also enable suppliers to offer new pricing models, for instance differentiating between periods of use. There are some such possibilities today: many suppliers offer pricing models with different rates for day/night hours, separate rates for heating or generally dual rate models. To distinguish between the time windows, an additional meter or a particular type of meter is necessary, which usually means more costs for consumers or additional equipment in the consumer’s home. In future, smart meters would even enable pricing models with more than two different rates.
Modern applications, such as for heat pumps or electric cars, will have to rely on increasingly flexible pricing to stay competitive in terms of energy costs. Even so, we assume that suppliers will continue to offer today’s single or dual rate pricing models. Another recent development will greatly depend on low-cost smart meter roll-out: our electricity system is now characterised by a much greater portion of volatile renewable power production (e.g. from wind or solar power) than before and integrating it will require active load management, including for smaller consumers. Smart meters make this possible.
Roll-out study Following a public tender, E-Control commissioned consultancy PricewaterhouseCoopers with a study on smart meter roll-out in Austria. It analyses all relevant aspects of blanket roll-out of smart meters throughout Austria and evaluates them. The study is available in German only; to download it, please visit our German pages.