Problems ahead for NSW smart meter rollout

A decade after the Federal Government’s review of smart meters, New South Wales has bitten the bullet and launched its own smart meter policy. Obviously they have drawn heavily from the experiences during the mandatory rollout in Victoria, which led to a customer revolt and great political upheaval. But Australian Smart Communities executive director Paul Budde says NSW will have its own problems.

Rather than having a mandatory meter rollout, residential customers in NSW have the choice of having a smart meter installed in their home or not. The installation of smart meters could cost households up to $600 – this will depend on how the retailers package the smart meter into their long-term contract with their customers.

Also, customers who have installed solar panels – and who will lose their lucrative feed-in tariffs at the end of 2016 – will need a smart meter to manage their own use of solar power, and the power they generate that they will sell to the energy company. The current feed-in tariffs are 60ct and 20ct per kilowatt hour, depending on when the solar panels were installed, but from 2017 onwards the new feed-in tariff will drop to 6ct, while buying power from the energy company will cost around 30ct.

So, there will be quite a few people facing bill shock. They will see their feed-in disappearing and at the same time will need to buy a new smart meter. Clearly this is something the government will need to manage in order to avoid another political smart meter crisis like the one that happened in Victoria.

We estimate that apart from the solar panel customers, there will be relatively few people who will be asking for a smart meter, as customer interest in the meter is very low in the absence of clear financial benefits to them.

Under the NSW Government smart meter policy, customers are being offered a larger range of products and services, which include: using smart meters to obtain more information about their energy use, more accurate bills, better and more frequent billing options and faster service to consumers moving in and out of premises. However, so far these offerings haven’t enticed customers around the world to take up smart meters offered on a voluntary basis.

Theoretically, there is the option for customers to buy electricity at prices that reflect the cost of supplying it at different times, and the utilities can reward consumers who are more flexible and efficient with their energy use

But the actual use of smart meters by customers around the world has been disappointing. While they do offer customers the option of more control over their electricity use and their power bills, in order to obtain these cost savings customers need to be committed to managing their in-house use, and there are relatively few households with the requisite level of commitment and discipline.

The major beneficiaries of the smart meter are the electricity utilities. Smart meters are going to be essential in the broader smart grid development and they have the potential to assist these companies to enable new technologies, whether these are solar panels, storage, or other devices that make homes more efficient.

The smart meter is only one element of a smart grid, but it is a critical one, since with these meters in place the electricity companies are better able to manage their network, in that they can optimise their network and increase productivity and efficiency. However, they can only fully realise these benefits if the majority of their customers are using smart meters. As this will not be the case in NSW for a long time to come the value of the smart meter policy in NSW remains limited. It should be in the interest of the industry to lower the barrier of entry for the consumers.

The rollout will be in the hands of the energy retailers. They can develop and market innovative product offerings that can be enabled through the smart meters.

But there is another problem. Thanks to deregulation, the network is run by the so-called energy distribution companies – who will be the direct beneficiaries of smart meters – while the smart meters are sold by the energy retailers, who don’t have any network benefits and therefore no incentive to look for cross-subsidies.

This is not to say that the retailers will sit around doing nothing, but their hands are tied on what they can do financially. They could tie customers into long contracts in exchange for discounts on the smart meter installation, and develop and market innovative product offerings that can be enabled through the smart meters, but, as mentioned above, customer interest has been limited.

While the mandatory rollout in Victoria was extremely painful, the benefits are substantial. There is now a modern energy supply system in place; through big data generated by the smart meters the companies involved are able to operate more effective and efficient smart grids, and in the long run this means more stable and affordable energy prices for the customers.

Already, Victoria is in a much better position than any of the other states to maintain a modern and affordable energy system.

Article by Australian Smart Communities Association executive director Paul Budde