Smart Grid European Style

The European Union’s (EU) ambitious plan to rollout smart meters to 80 percent of its 500 million population by 2020 is not going well as hoped.

Europe has enjoyed notable success with smart meters. In 2006, Italy became the first country in Europe to complete a national smart meter program after utility Enel conducted a five-year, €2 billion ($2.6 billion) scheme—mainly to reduce non-technical losses—for its 30 million customers.  

Elsewhere, Scandinavia leads the way. Sweden also achieved full-scale penetration in 2010, while Finland, Norway, and Denmark are likely to achieve their targets by 2016.  Yet for many EU nations who did not take it upon themselves to be early adopters, smart meter programs have struggled.  

The European Union's 2009 Third Energy Package, which sets out measures to liberalize Europe’s power sector, required each of the 27 member states to publish a cost-benefit analysis by end-September 2012. If the analysis found a positive business case, member states are compelled to install smart meters to 80 percent of consumers by 2020. 

Most nations have reported a positive cost-benefit analysis, although there were some exceptions. The Czech Republic’s analysis was negative and has recommended its rollout start in 2018, while Germany delayed the publication of its report until February 2013. 

While utility benefits of smart meters are not in doubt, for the average European the case for consumers has not been well established. Significant tactical errors have been made, not least in the Netherlands, which proposed all 7 million households of the country should have a smart meter by 2013. 

Faced with a growing moral panic over data privacy concerns, the Dutch government pushed for compulsory installation of smart meters, with refusal punished by a fine of up to €17,000 or six months in prison. After vigorous campaigning by consumer organizations it eventually relented and the Dutch Parliament moved to make installation voluntary.

The Dutch example is a salutary lesson in the dangers of putting the cart before the horse.  Dr Philip Lewis, CEO of Finland-based utility analyst Vaasa ETT, says rollouts cannot be successful without consumer trust. 

“There are three basic stages of consumer motivation,” said Dr. Lewis, a former psychologist who now specializes in utility customer behavior. “Firstly, reasons to be positive about overall smart meter developments at a national level. The second is to be positive about reasons to get involved with smart meters. The third is eliminating reasons not to get involved.”

Promoting them at a national level in Britain is the job of Maxine Frerk, deputy director and head of consumer engagement of the UK Department of Energy’s smart meter program.  

Engaging consumers is proving tough in Britain, which is very much its own beast.  Rather than regulated distribution network operators, deregulated energy retailers have the responsibility to procure and install 53 million gas and electricity meters, involving visits to 30 million homes and small businesses, by 2019.  

It is an interesting policy choice and, in that respect, Britain is in a minority of one worldwide. The rationale is simple: Energy retailers have a relationship with their customers, and customer behaviour change is a major element of their business case. So it was decided that it made sense for suppliers to be the primary interface for the rollout.

After years of inflation-busting price rises, tariff mis-selling and poor customer service at a time of stagnant wages and rising unemployment, however, British energy retailers are among the least popular organizations in the nation, barely more popular than banks, estate agents and even parking attendants. 

So the energy companies will have assistance from the UK Department of Energy’s new smart meter ‘Central Delivery Body’ that will conduct a public awareness campaign about the benefits, which are estimated at a total £16 billion ($26 billion) in return for £11 billion in costs. Frerk believes a strong push from the centre is needed because smart meter awareness and public trust in utilities is very low.

“Our latest survey of consumer awareness showed only 49 percent of respondents had heard of smart meters and from some of the other questions we asked, it’s not clear that even all of those did,” she said.  “Getting consumers to just open their front door is the first challenge. If suppliers are faced with a lot of apathy, and find it hard to get access, it will increase costs.”

Tim Probert is a London-based freelance writer with a focus on European power markets and new smart grid technology. He helms Millicent Media and can be reached at timprobert@millicentmedia.com.

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