A return on the smart meter investment

The compulsory roll-out of smart meters in Victoria was hammered by the media and became a political football. Initially there were legitimate complaints about how the installation was funded up-front by a consumer levy. The campaign quickly degenerated into wilder allegations that the meters were inaccurate, fireprone and “radioactive”.

A subsequent review found all these allegations were baseless and the Baillieu government decided to continue the rollout.

In fact, smart meters may actually turn out to be a major contributor to keeping future power bill increases in check and give Victoria an edge on energy efficiency.

The smart meter roll-out is now nearing completion in the state and it provides a big opportunity to make system-wide savings by prodding more efficient consumer behaviour.

Economists see smart meters and time of use pricing as a strong mechanism to encourage a more efficient market through better pricing information for consumers.

This is supported by the effect recent steep price increases appear to have had motivating a wave of homeowners to change behaviour and invest in efficiency and solar panels. However, some past studies suggest there is not a strong relationship. Momentary ‘bill shock' once a quarter does not necessarily sustain changed behaviour.

Time of use charging was intended to go with smart meters, but it remains a political hot potato. It is likely to be a long time before TOU becomes universal (currently it only applies to people getting solar panels installed or those who ‘opt in'). However it is not the only way for homeowners to get value from smart meters as a new program in Victoria demonstrates.

Origin Energy has been first energy retailer to set up a large scale attempt to maximise the smart meter benefits for both the company and consumers. Origin Smart is a web-based program that allows consumers to see their consumption over half hourly periods linked to advice on how to time the use of their appliances. Consumers can use the website to set their goals for energy saving and access tailored energy efficiency tips.

Initially run as a pilot in late 2012, it is now being integrated with the larger ‘Origin On-Line' system, free to any Origin customer in Victoria with an activated smart meter.

A survey in December of over 1,000 households in the Origin Smart pilot found more than half had been able to reduce their energy usage. Seventy-five per cent of users reported taking some kind of action as a result of what they had seen on Origin Smart.

The most popular energy saving actions reported were: minimising standby power, replacing incandescent lights, washing full loads of clothes with cold water and air drying clothes.

“It's pleasing that one third of users are logging on to the portal at least once per week, which shows there is a growing appetite for consumers to understand more about their energy use,” Origin Executive General Manager, Phil Craig, said.

Given this was a survey of ‘first adopters' it is not surprising that engagement was high. However it does show the potential of internet tools to change the utility's relationship with consumers and to provide education on energy consumption.

Previously the focus has been on ‘in house displays' that show people their current consumption. These are expensive to install and do not provide much context for the information displayed unless linked to a home computer to access advice services.

The government has committed to subsidising in home displays through the VEET scheme, although it seems there are delays in the ESC approving particular products.

An internet-based system can provide this information without additional expenditure on equipment and goes a lot further by providing ‘coaching' and education of customers in what their options are to reduce consumption. The limitation in Origin Smart is the meters don't send data to Origin in real time, so you can only see yesterday's information, not what is happening now.

In addition to actual power consumption and bill projections, Origin Smart provides carbon emission estimates based on July 2011 National Greenhouse Account Factors – the current value being 1.35 kg CO2e /kWh in Victoria. However this doesn't account for Green Power purchase and further development is needed to give accurate feedback to customers paying this premium.

Origin Smart is also currently unable to support feed-in tariffs for solar electricity fed back into the grid and hence can't give detailed figures for households drawing on their own solar panels. This is important as this rapidly growing group (about 10 per cent of households) are the ones most likely to benefit from managing energy within the home. However, it is understood a significant upgrade of Origin Smart is being planned.

As the smart meter roll-out is due to be completed by the end of 2013, other major retailers will be under pressure to match Origin. Distributors Jemena and SP Ausnet currently provide a web interface with less capability whilst United is trialling its own version. AGL Energy too, has joined the fray – launching AGL iQ Australia-wide late in February. Smart phone versions are the next step.

In the business sector, there are services such as EcoTracker that analyse a company's half hourly data trends and provide email alerts.

The problem with TOU is that it has been framed as penalising people for using power when they want it most. This is seen by many as a rip-off adding to resentment at contracts which allow price changes without notice and require exit fees to break.

This lack of consumer trust leaves electricity retailers with a big challenge to offer more attractive packages. For example, to encourage consumers to opt-in they could start showing the TOU tariff comparison on bills. ‘Peak credits' could be offered to reward consumers who use less power during a system peak than on previous occasions.

Another practical option might be to offer a lower fixed charge in exchange for a limit of say 3-4 kW on maximum demand averaged over a 15 minute interval (ie a third of the supply cable capacity of 10 kW). This might cause some inconvenience (an air conditioner switching off for a short time) but gives consumers the option of turning off some other appliances to prioritise without the pain of being “blacked out”

The long-term potential of linking smart meters to the home computer network with real time data is the growth in appliances that can be remotely controlled as part of a home's wi-fi network. These could be turned off or put into standby mode as price varies. Links to weather data could enable smart strategies for managing heating and cooling.

Internet based systems may have leapfrogged the ‘in home display' technologies and have a lot more potential if they can give real time data and more functionality.

Potentially there could be high levels of take up in Victoria within a few years, which could have a significant impact on reducing electricity consumption and price increases. If so, the smart meter investment may look a lot more attractive in retrospect.

Andrew Herington is a Melbourne freelance writer and former Labor adviser.