Smart Meters: Do the Savings Outweigh the Costs?

 In 2013, a YouGov survey of 3000 British citizens revealed that 63 percent did not know what a smart meter is and 75 percent were unaware of the smart meter roll-out plan that is due to start in 2015. 


Smart meters for both gas and electricity will be coming to every UK home by 2020 aspart of a £11bn Government programme designed to cut carbon emissions nationally by 34% and modernise the energy industry. Some energy companies havealreadystarted to install these in customer’s homes and The Energy Saving Trust estimates there are already 1.5 million installed across the UK. The main roll out of approximately 50 million smart meters will begin in autumn 2015.

What is a smart meter?

What is a smart meter

Smart meters will replace existing electricity and gas meters and will be connected, via a wireless network to the energy companies. This means no more estimated billing or meter reading. Each smart meter will have some form of in house display that will present consumers with details about their energy use and costs.



What are the benefits of smart meters? 

What are the benefits of smart meters

The obvious benefits of smart meters to consumers is the automated meter reading. This should help to ensure bills are accurate, customers aren’t paying too much via direct debit and building up large credits, and there will be no need to let anyone into your property to read the meter.



Other benefits include:

  • No issues with changes from BST to GMT that can affect standard meters, particularly for those on time-based tariffs such as economy 7 and economy 10.
  • An in home display will be provided that will show how much energy is being used and when. It will also display up to date costs based on the tariff the consumer is on. This will be updated automatically by the energy company when appropriate making consumers more aware of usage and help them to reduce energy bills.
  • Meters can be switched from pre-payment to standard meters by the energy company without having to replace the meter so there will be no wait to have the meter changed.
  • The new smart meters will work with renewable energy sources allowing customers to track how much energy they are generating.
  • It should be smoother and faster to switch suppliers.
  • Pre-payment customers may be afforded better protection as meters will be able to be set so that power doesn't go off at night or when the shops are shut even if credits run out. There will also be further options for topping up the meter, making this easier. 
  • Smart meters will be free to all customers.


What about the disadvantages?

Inevitably, with any new technology, there will be some features of smart meters that are considered to be disadvantages and may give more power to the energy companies. The most commonly cited disadvantages include:

  • Remote disconnection - because the meters can be controlled by the energy companies, it will be possible to disconnect a customer very easily.
  • Because smart meters can be switched from normal operation to pre-payment, many consumers may be concerned that should they miss or struggle to pay a bill, they may automatically be switched to pre-payment.
  • Load limiting is a feature of smart meters that may, in the future, enable energy companies to control how much power an appliance can draw or even limit energy supplies to households during peak demand periods. This gives a sense of "Big Brother" which consumers may find disconcerting.

Smart meter security


smart meter securityBy far the biggest concern is likely to be security. Given smart meters will communicate over a combination of mobile or wireless mesh depending on coverage, in theory it will be possible for that data to be intercepted and read. This leads to concerns about data protection and privacy on the part of consumers.  Whilst this will be the main security concern of the consumer, other security concerns are being voiced by the Information Security community including:

  • Smart meters could become a home security vulnerability if wireless signals from the meter can be intercepted. It may be possible to detect the power usage of a home over a period of time and it will be obvious if the house is unoccupied , leaving it vulnerable to theft or squatters. 
  • Because smart meters can be extended to control other appliances, it is possible in the future that the internal network used by smart meters could be used to control home security systems and heating systems. Any exploit of this network could potentially leave a home vulnerable.
  • Given smart meters will be connected to a national power/gas network and will be able to control power or gas to individual households, there is the potential for a mass hack attack to shut down power, gas or both to millions of households via the smart meters. From a cyber-terrorist point of view, it may be easier to establish a method to attack smart meters rather than power stations that are better protected against cyber-attack.
  • Smart meters that can be hacked could under or over report energy usage with all the consequences this may entail.

The Government has emphasised the importance of data protection in this project and the BBC reported that Baroness Verma, Energy and Climate Change minister has stated the Government is working with the National Technical Authority on security issues.  However, Ross Anderson, Professor of Security Engineering at Cambridge University stated in his paper “Who controls the off switch?” that: “an ideal attack on a target country is to interrupt its citizens’ electricity supply. This is the cyber equivalent of a nuclear strike; when electricity stops, then pretty soon everything else does too.” He also highlights in his paper that mass disruption may not only be caused by cyber-attack but also by software errors and concludes that whilst energy regulators are beginning to wake up to the problem, it is important the issues are discussed and features to mitigate the effects of errors or attacks are put into place before a mass roll out of smart meters.


How much will consumers save? 

Most consumers will be sold on the idea of smart meter by the potential to save on their energy bills. In an initial roll out of smart meters by British Gas, it was found that 54 percent saved money on their energy bills with some saving up to £75 per year. It was highlighted by British Gas that by making consumers more aware of their energy usage, they naturally make small changes to save energy. 

This is positive news but, as of yet, there is no long term usage data to support the view that energy savings will continue once the novelty has worn off and consumers have made all the easy and low cost changes to reduce their energy consumption. This is why energy companies are looking at other ways to incentivise consumers to use less energy by bringing in an element of competition.  The Guardian reported that energy efficiency company Opower is looking at software that will allow consumers to compare their energy usage with their neighbours. There are already tools available on the market in the UK such as Compare My Energy that do exactly this.

What is happening across the rest of the world?

smart meters in the ukThe UK isn’t the only country to adopt smart meters. As well as the intention to reduce energy consumption and upgrade the energy infrastructure in the UK, Europe has passed a law requiring all Member countries to roll out smart meters and have 80% adoption by 2020.



The majority of smart meter installations in Europe are driven by large rollouts in the UK, Spain and France and the majority of European Union countries have advanced plans in place to roll out the new technology. Germany has delayed their rollout following opposition over data security and a report that suggested smart meters won’t bring economic benefit.



smart meters and renewable energyFurther afield, the US has also been rolling out smart meters however, according to Renewable Energy World, their programme has only seen 30 million meters deployed in two years with a penetration level of just 23 percent. A lack of consumer confidence has been largely to blame for this poor performance.




The smart meter programme is well under way in the UK and, whilst there are obvious security concerns that may still need to be addressed, it is likely within the next five years that you will be converted to a new smart meter. 

To help raise awareness of the new scheme the Government and energy companies are going to have to embark in a high profile marketing campaign if they are going to be successful in addressing the concerns that may arise, particularly in relation to security. The recent debacle over the sharing of GP surgery data is a classic example of how the Government should not conduct such an awareness raising scheme and let’s hope they adopt a different, more informed and open approach. 

One question that will inevitably be raised about the whole programme is who is paying for the £11billion investment? The answer that is being given is that, as with the maintenance and support of existing meters, the costs will come out of the energy bills and hence it will be no different than it has been in the past. However, does the new smart meter infrastructure cost more to run than the existing one? That is difficult to answer as, whilst the new meters will eliminate the cost of reading meters, there will have to be a considerable team of people across a number of organisations supporting the network and communication of such meters. This infrastructure is complex and hence it may be that running costs are far higher. 


the price of smart metersIt has to be questioned whether the cost of the project could have been reduced slightly by not adopting in home displays. With the rise in popularity of smart phones and tablets, it could be argued that customers could use these or the internet to check their energy consumption.  This may actually be more popular for users of these devices than a static display that can only be seen from one room in the house. However, if the goal of reducing energy consumption is to be achieved, those that do not have smart phones or tablets would have to be given the standard in home display otherwise it is unlikely they will monitor usage and attempt to reduce consumption. 

Despite the recognised potential energy saving benefits of introducing smart meters across the UK, a saving per household of less than £75 in the first year isn’t in itself particularly large. Whilst every little helps both in terms of households bills and the reduction in carbon emissions, there is a thought that the £11 billion could have been spent on improving insulation, upgrading boilers and generally improving older housing stock that could have brought bigger savings.  According to The Energy Saving Trust, just replacing an old, inefficient boiler could save a typical household in the region of £300 per year. If you upgrade insulation, particularly if you implement cavity wall insulation, that figure could be even higher. 


For more information about smart meters:


Consumer advice about Smart Meters – Consumer Focus:

Who Controls the Off Switch? – Professor Ross Anderson, Cambridge University:

Helping Householders to Cut Their Energy Bills – HM Government:



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