Smart meters - coming to a meter box near you?

Smart meters look set to become a bigger part of the Australian electricity market.

Getting 'smart' about your energy use

You may have heard murmurings about 'smart' meters in the media. Or, if you live in Victoria, you will have had one installed in your home. But what is a smart meter, how does it save you money, and how likely is it you'll be offered one if you're not in Victoria?

What is a smart meter?

A smart meter is an electricity meter with added functionality. Unlike the passive 'accumulation' meters many people have, which only read the amount of electricity used between readings every few months, smart meters digitally record data about energy consumption in real time.

A smart meter can:

  • send data directly to your meter provider (for example, your energy retailer or distributor)
  • show you what hours or days you use more energy – helping you identify ways to be more energy efficient
  • give you feedback on your energy consumption as you go, making it easier to identify the source of high energy use.

There's also an 'interval' meter, which operates digitally like the smart meter but records electricity consumption in 30 minute intervals. They're not technically smart meters as they can't communicate the information to the provider, meaning you miss out on some of the benefits.

Can I get a smart meter?

While a smart meter can bring consumer benefits, it isn't really a consumer product. Rather, it's part of an overall energy package that a retailer may use to incentivise customers.

All households in Victoria already have a smart meter installed by their distributor, following a mandatory rollout. Outside of Victoria, while retailers can technically offer smart meters as part of their package, not many have been installed.

There are likely a few reasons for this. Marco Bogaers, the CEO of Metropolis Metering, which works with retailers to supply smart meters, believes that retailers haven't been pushing smart meters because of certain regulatory constraints. But this is changing, and retailers are definitely starting to show interest, he says.

An Energy Australia spokesperson told CHOICE that beyond Victoria it's "investigating opportunities to provide our customers with access to smart meters". An Origin spokesperson, reluctant to offer up much concrete information, said the company "will continue to offer solutions for customers who have chosen, and are seeking, greater insight and control over their energy consumption".

The smart meter rollout in Victoria has got some pretty bad press over the past few years. That aside, smart meters do have the potential to bring benefits for consumers. But to understand any potential benefits there are a few things you need to know.

How can a smart meter help save me money?

There's a pattern to how we consume energy. High energy use times are weekday afternoons and evenings. Unsurprisingly, low energy use times are overnight when we're all sleeping.

The problem is that electricity can't be stored easily on a large scale. So energy networks need capacity to generate enough energy for peak demand times, even though much of the network's capacity may lie dormant during the off-peak hours. The network also needs to cater for the periods of heaviest demand – such as hot summer days – which may only occur for several hours a year. And the infrastructure needed to supply energy is expensive; in fact, the Australian Energy Market Commission's price trends review in 2014 found that 53% of our energy bills are due to network costs.

If a large number of electricity customers shift their energy use to off-peak times, there's less need for expensive upgrades as the current network infrastructure can be used more efficiently.

Thanks to the data now available through smart meters, retailers are able to offer a range of products and services to incentivise customers to use cheaper, off-peak energy, including:

Flexible pricing

A flexible pricing plan (also known as a 'time-of-use' plan) asks consumers to pay for their energy consumption in a more cost-reflective way – that is, you pay more for energy during high demand times when it creates the biggest load on the network, and you pay less during low load times. For many consumers this could be a money saver.

Craig Memery, energy policy advocate with the Alternative Technology Association, says basic features such as time-of-use prices are a good way to reduce the amount consumers spend on electricity. "The issue is that when flexible pricing was first introduced it wasn't competitively priced," he says, but that seems to be changing. 

A typical flexible pricing plan operates across three time periods – peak, off-peak and the shoulder.

  • Peak 3.00pm–9.00pm weekdays (not public holidays)
  • Off-peak 10.00pm–7.00am every day
  • Shoulder 7.00am–3.00pm and 9.00pm–10.00pm weekdays; 7.00am–10.00pm weekends and public holidays.

While pricing will ultimately depend on the energy contract you choose, as a guide, peak prices will usually be more expensive than a flat rate, while the off-peak rate will be lower. The shoulder period may be just slightly lower than a flat rate.

For example, in Victoria Momentum Energy's flat rate pricing is as follows:

  • 25.6 cents per kWh (first 6.57kWh used each day) then 22.63 cents per kWh.
Whereas, on a flexible pricing plan (no fixed term), the prices are:
  • Peak: 30.8 cents per kWh (first 6.57kWh used each day) then 28.9 cents per kWh
  • Shoulder: 21.19 cents per kWh
  • Off-peak: 13.15 cents per kWh

Flexible pricing may not suit everyone. It will be most beneficial for households that use most of their energy in the off-peak periods or can switch to this practice (perhaps by programming your dishwasher to start at 10.00pm, or by only doing loads of washing on the weekends).

No matter where you live, you'll still be able to choose a flat rate if this suits you better.

Critical peak pricing

'Critical peak pricing' lets a customer pay much more (potentially 10 times more) for electricity on those few days a year when electricity demand is extra high, in return for a lower rate the rest of the year. The idea is that it encourages you to reduce energy consumption at high demand times to reduce strain on the network, and in turn reduce costs associated with network upgrades.

In-home displays

In-home displays are the consumer-facing product associated with smart meters. They let you monitor your energy consumption and the price of electricity in real time. Worldwide trials have found in-home displays helped consumers reduce their energy consumption from between 5 and 15%.

Direct load control

Direct load control gives consumers the option of having specific smart appliances remotely controlled by the energy distributor or retailer to reduce demand on the network at peak times. Appliances can be turned on at off-peak times, or 'cycled', which when your energy provider turns an appliance on and off over a set period. For example, your air conditioner may be turned off for 10 minutes every hour to reduce consumption, without affecting your room temperature. 

You'd usually be given some sort of rebate or discount on your bill in return for enabling direct load control. The direct load control functionality is currently offered by Energex in Queensland, and there are a range of air conditioner models that offer this functionality.

Getting the most out of a smart meter

Do I need smart appliances?

If you don't want to be waiting up until 10.00pm or getting up before dawn to do your housework, you'll need smart appliances or at least appliances with a time delay capacity or direct load control function. Some appliances in Australia are more ready to integrate with smart meters than others. For example, around 87% of washing machines and dishwashers already have time delay functionality, but dryers are still fairly basic. Electric hot water heaters are already commonly run on off-peak circuits, usually done at the point of installation.

The most suitable appliances to shift to off-peak times are those which guzzle energy and don't need to be used on demand throughout the day, such as:

What kind of smart meter do I need?

Not all smart meters are as 'smart' as each other. In Victoria, there were minimum specifications for the mandated smart meters. They can record energy consumption in half hour intervals, read meters remotely, and remotely de-energise and energise the home (load control). However, Craig Memery from the Alternative Technology Association is concerned that meters with that functionality will not be offered in other states and territories.

The AEMC's draft decision on competitive metering services has outlined the minimum services required, and it doesn't include load control functionality and services. Consumers will instead have to negotiate for these services.

Is there a downside to smart meters?

  • Smart meters have the potential to be detrimental to consumers if retailers turn them into pre-payment meters rather than post-pay (in which you consume the energy and then get billed for it later, rather than having to pay before consuming the energy). Some consumers may prefer being pre-paid, however retailers may not give the household the option. 
  • Smart meters can limit the amount of electricity that a house can consume in a certain time – for example, three kilowatt hours over a 30 minute period. This has the potential to be used to restrict energy to consumers with credit issues. (On the plus side, it could be used to restrict individual high-consuming households in order to prevent a blackout to a wider area.)
  • Remote disconnection can also be a negative or positive, depending on how it's used.

CHOICE verdict

If used correctly, smart meters can benefit both the customers and the network. Demand-side management programs, such as households consenting to the network turning off their air-conditioners for 10 minutes an hour on peak days in exchange for a reduced electricity bill, demonstrates a win-win example for all parties. In other words, it's not whether smart meters are a good or bad thing for consumers, but rather how they are used by the networks and retailers or regulated by government.

If you live outside Victoria, you can't just call up your energy provider and have a smart meter installed. While some regulatory restraints preventing the installation of smart meters have been lifted, in other states a rollout is still dependent on the retailers.

Do you have a smart meter?
Have you investigated if you can have one installed?
Please share your experiences in the comments section below.

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