A recent study by IMS research has revealed that over the next five years, more than £2.4 billion will be spent in the UK on a range of smart home energy management devices, including smart meters themselves and advanced in-home devices that can ‘talk’ to them.
To help the UK’s ageing energy infrastructure cope with the demands of a modern, low-carbon grid, smart meters are set to be installed in the majority of British homes by 2019. Smart meters provide two-way communication between electricity (or gas) meters, and utility companies via an Advanced Metering Infrastructure (AMI) network, enabling the companies to measure how much electricity consumers are using remotely and send signals back to the meter.
In the short-term, the rise of smart meters will sound the death knell for the often-criticised estimated bill. UK regulatory framework also stipulates the use of in-home displays to accompany installed smart meters. The display will show consumers how much electricity they are using, helping them effectively manage and reduce their consumption. Over the next five years, IMS research predicts that in-home display revenues in the UK will hit £400 million.
In the long-term, smart meters will also pave the way for new, variable electricity tariffs, such as a dynamic pricing model. Dynamic pricing involves market-led tariffs which charge the highest unit prices when demand is highest. This helps balance out demand, and avoids turning to the most costly and often least environmentally-friendly power plants in times of peak demand.
Lisa Arrowsmith, Senior Analyst with IMS Research, explains: “It is not only Government and utility companies that are looking at ‘smart’ energy management solutions. A range of other companies, from relatively small start-ups to major telecommunications companies, are expected to become more active in improving UK households’ green credentials – for a nice fee. For example, they can offer consumers a way to manage their electricity consumption online, letting them remotely control devices such as thermostats and even individual plug sockets”. Arrowsmith continues, “A study published by IMS Research earlier this month projects the market for smart home energy management devices in the UK – not including the smart meters themselves – to hit over £500 million in 2016 alone.”
Many are concerned that the technical infrastructure required for the national adoption of smart meters will not be realistically achievable. Ofgem’s initial proposed plans for energy companies to restructure tariffs to take advantage of smart meters has also come under criticism for being too complex to initiate.
“Despite a number of potential teething problems,” Arrowsmith concludes, “the benefits of smart meter deployments will be felt by a range of parties. For consumers, at the very least, the practice of ‘estimated billing’ will cease; and, longer-term, variable pricing tariffs are likely to be able to engage consumers.
“For utility companies, benefits are expected to include avoided costly visits to read meters, fewer enquiries, and lower customer overheads. For device suppliers and service providers alike, these developments present a major opportunity to develop many new revenue streams, from providing devices with the ability to communicate with smart meters, to offering home energy management and control platforms.”