NAO: Smart meter rollout is going slow and over budget

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The UK government’s ambitious plan to rollout smart meters to all households and small businesses by the end of 2025 has faced significant delays and cost overruns, according to a report by the National Audit Office (NAO).

The report highlights that energy companies have only completed 57 percent of the £13.5 billion project, almost four years past the original deadline.

The NAO report also reveals that the estimated savings from smart meters amount to approximately £56 per household annually, which is less than £5 per month. This figure falls short of the government’s earlier estimate of £19.5 billion in overall benefits over a 20-year period. These underwhelming savings offer little relief to households struggling with rising energy costs.

Gareth Davies, Head of the 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.”

The government initially set the completion deadline for the smart meter rollout at the end of 2019, but it has since been pushed back three times to 2025. The latest target aims to have smart meters installed in 80 percent of homes and 73 percent of small businesses by the end of 2025.

The NAO report calls on the Department for Energy Security and Net Zero (DESNZ) to work closely with energy suppliers to rectify the situation and maximise the value for money for consumers, small businesses, and environmental goals. The report also emphasises the importance of robust information on both the costs and benefits of smart meters to inform decision-making.

While installations are approaching the 60 percent coverage required for electricity networks to begin reaping the benefits of smart meters, there are several issues affecting their effectiveness. 

The NAO found that three million meters, constituting 9 percent of the total, were not operating in smart mode as intended. Customers also experienced difficulties maintaining smart functionality when switching energy suppliers.

Furthermore, around four million first-generation smart meters have not been moved to the central platform service, hindering their ability to retain smart capabilities during customer switches.

The NAO also highlighted concerns regarding the functionality of the central platform service provided by Smart DCC, a subsidiary of Capita. Stakeholders reported unreliability and a focus on future services rather than ensuring reliability. Ofgem, the energy regulator, has received stakeholder consultation responses raising concerns about the service.

Capita currently holds the license for Smart DCC, but Ofgem is responsible for designing and awarding the next license, which is expected to extend until 2040.

The slow progress, cost overruns, and functional issues detailed in the NAO report indicate that the UK’s smart meter rollout has not lived up to expectations.

With only a few years remaining to meet the revised deadline, the government and energy suppliers must work diligently to rectify the challenges and ensure that the benefits of smart meters are realised by consumers, businesses, and the environment.

(Photo by Siân Wynn-Jones on Unsplash)

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