© BITKOM

Smart meters can deliver electricity at whole-sale prices and make the meter reader in your bedroom a thing of the past. Having your household technologies communicate with the energy system will become part of ordinary life, simply because it helps consumers save money. What really matters in this transition is to get the interplay right between the state and the market players involved. A limited roll-out of the technology can help build the necessary infrastructure, bring down the cost of the devices, and send the right price signals.

As we move forward with the Energy Transition, we need to bring the volatile supply and demand sides into concert. Otherwise, we will all have a high price to pay. And there are positive incentives already: thanks to the electricity from renewables being fed into the grid, the power-exchange price on a Sunday is now as low as 1.9 cents per kwh - on average! Around noon, we even see negative prices, which means that, in theory, you should be paid for using electricity. In practice however, end users pay an average of 29.9 cents per kWh. No matter what day it is. How come?

We are lacking the infrastructure that would be needed to pass on these price signals to the consumer. We would be well advised to build that infrastructure, because it is the basis for innovative and consumer-friendly applications. This is how digitisation has always worked. Nowadays, a credit card is more than a digital savings account. Smartphones are more than a mobile phone. And the same is possible for energy – as long as we all work together. As it is, there are too many stakeholders who are racking their brains to think of reasons why maybe having this interaction with the energy system might not make sense after all. Too expensive, too complex, no demand – that’s exactly what they said about renewables 15 years ago.

We only need to look at other countries to see how it could work: 40% of consumers in Sweden, for instance, purchase their electricity at prices that are tied to the power-exchange price – no more complaints there about lower wholesale prices not being passed on to consumers. Customers of British Gas get electricity for free every Saturday. Interaction with their customers has made it possible for DTE, a U.S. based energy company, to bring down household electricity consumption throughout the US state of Michigan by around 10%. Without a doubt, smart meters allow for the development of products that are beneficial to private households. All it takes is the will to do so.

Felix Dembski is Head of Smart Grids and Energy at the German Association for Information Technology, Telecommunications and New Media (BITKOM).

© VZBV

On the face of it, smart meters seem useful. They provide information on our power consumption and can help us use that power when it is cheapest. It all sounds good. So good in fact that the EU has called for 80% of European households to be fitted with a smart meter by 2022 – provided that it makes sense economically. But there is strong evidence suggesting that, for most electricity users, the costs would outweigh the benefits. Which is why we cannot have an obligation for consumers to have smart meters fitted at their own expense.

Additional costs borne by the consumer ...

The Federal Ministry for Economic Affairs and Energy wants to make it mandatory for private households using more than 6,000 kWh of electricity per year to have smart metering systems fitted. Households consuming less than that are to receive smart meters that do not do remote reporting. The cost of the devices varies between 20 and 100 euros per year. In addition to this, some of the cost is to be recuperated by adding it to grid fees. This means that many households will be paying more, because – unlike many large-scale consumers – they do not receive any discounts.

... will they be compensated?

It seems rather unlikely that all households will find that the benefits of the devices compensate for the higher costs. There is little potential in private homes to shift electricity usage to a different time and for as long as there are no flexible rates, there will be no scope for saving electricity costs. In the case of smart meters without an in-home display, there are no recognisable benefits for the consumer.

And given the small amount of electricity typically used by the average home appliance, such devices hardly have any impact at all on grid stability. Moreover, in future, many home appliances will be able to independently communicate information about their operating status. Regulated distribution transformers provide a more cost-effective and consumer-friendly alternative to smart meters when it comes to increasing transparency in the low-voltage grid.

It is therefore hard to understand why the Federal Ministry for Economic Affairs and Energy wants to force consumers to have smart meters fitted in their homes – not least because it raises issues with regard to data security and the right to control one’s personal information. If smart meters really help bring down electricity bills, this should be enough of an incentive for people to decide to have one fitted on a voluntary basis.

Ingmar Streese is Director-General of Consumer Policy at the Federation of German Consumer Organisations (vzbv).

Follow the link to learn more about the Federal Ministry for Economic Affairs and Energy’s proposal regarding the future use of smart meters: as from 2021, private households using more than 6,000 kWh of electricity per year are to be fitted with smart metering systems. There are no plans to add any new surcharges to grid fees to finance this; the highest standards of data security will apply. Learn more.