The Smart Metering Implementation Prospectus

06 August 2010

Ronald Hendrikx, Laura Holt

On 4 August 2010 the Department of Energy and Climate Change and Ofgem launched the “Smart Metering Implementation Programme Prospectus”. The Prospectus and supporting documents set out the coalition government’s programme for the introduction of smart meters in the UK, a programme with an estimated net benefit (over 20 years) of £7.2 billion. The Prospectus brings forward previous government targets, starting the mandated roll-out of some 50 million gas and electricity smart meters in the summer of 2012.

This accelerated rollout has been achieved by dividing the programme into two stages. In the first stage, industry will play a key role in the functional development of smart meters and roll-out planning. In the second stage a central GB-wide communications network handling data exchange between the meters and the energy network will be established. This staggered approach should prevent the (regulatory and physical) development of the central network delaying the smart meter rollout.

This briefing note is the first in a series giving an overview of the smart meter programme presented in the Prospectus. This note focuses on the first stage of the programme, the design process, and sets out how the key issues of functionality, interoperability and consumer protection will be addressed.

The Prospectus envisages that industry will play a key role in the development of the functional specification for smart meters and proposes the establishment of a Smart Metering Design Group consisting of relevant industry experts.  The Prospectus highlights that it is key for all suppliers to be given the opportunity to be involved in the development of functional specifications as ultimately they will be required to rollout conforming meters.

The technical requirements will reflect the bare minimum required and suppliers and service providers are free to satisfy consumer demand with the development of value-adds to the basic system. Equally, the Prospectus is technology neutral in respect of the various options for smart meter communication, whether on a GB level or in the home and a number of pilots are currently underway (trialling a range of technologies like Zigbee, WiFi, PowerLine Communication, GSM/GPRS and long range radio).

Functionality of smart meters will also be determined by the need to future-proof the system for the introduction of smart grids. Under the EU Smart Grids Directive 2009/72/EC of 13 July 2009 "Member States should encourage the modernisation of distribution networks, such as through the introduction of smart grids, which should be built in a way that encourages decentralised generation and energy efficiency.” Accordingly, Expert Group 1 of the European Task Force on Smart Grids released recommendations this June stating that some uniformity between European actors will be expected in the smart meter transmission and distribution networks.

Interoperability allows for different industry solutions to operate with each other. The deregulation of the UK energy and metering market means that without requirements on interoperability, the potential for the development of alternative competing solutions is especially high. Interoperability will be essential to allow smart meter solutions from different suppliers to operate with each other – Ofgem is particularly concerned to protect the competitiveness of the market and the consumer interest in being able to switch (more) easily.

The Prospectus envisages the development of agreed data and communication protocols to ensure interoperability as part of the functional specification. A similar exercise is already underway in a European context: under the European Commission’s mandate M/411 of 12 March 2009 European standards organisations (CEN, CENELEC and ETSI) are charged with developing open standards for smart meters. Indeed the Prospectus warns that draft functional requirements in relation to interoperability may need to be submitted to the European Commission before they can be mandated.

The minimum high level requirements for smart meters are set out in the Prospectus and the current expectation is that detailed specifications will be completed and confirmed as early as late next year. The Prospectus reminds industry that any roll-out of smart meters until then may carry the risk of incompatibility, a risk left firmly with industry (who, to put this into context, typically install some 2.5 million meters per annum).

Consumer Protection
As part of the rollout suppliers will be required to develop a code of practice governing the consumer experience to ensure that consumers are protected during the installation of smart meters. 

In order to alleviate concerns over data privacy, the Prospectus sets out the principle that “the customer shall choose in which way consumption data shall be used and by whom, with the exception of data required to fulfil regulatory duties”. The Prospectus also outlines a ‘privacy by design approach’ to ensure that concerns are addressed at all levels of the programme. This approach means that data protection is embedded within the core design of the system. The Prospectus calls for a full Privacy Impact Assessment to be carried out with enhanced consumer protections, if any, to be introduced by spring 2011. It highlights the importance of such undertakings to prevent similar experiences as occurred in the Netherlands where concerns over privacy led to its smart metering bill being initially rejected. The bill received heavy criticism particularly because consumers were obliged to accept a smart meter. The new version of the bill gives consumers a greater control over the frequency of data collection.

Expert Group 1 of the European task force on smart grids has also made recommendations in relation to data protection, stating that one generic model for data protection should be adopted for all European countries and that the lessons learned from data protection systems introduced in other industries such as banking and automated payment should be implemented.  Further information on the European Task Force on Smart meters and the latest recommendations from the expert groups is available here.

The Smart Metering roll-out is rapidly gaining momentum in the UK and whilst much is still to be decided upon, it will be essential for those who anticipate becoming involved with the rollout of smart meters to engage with the development programme now. Many decisions on design, architecture and roll-out will have to be made in the months after the summer break and these will have a lasting financial and commercial impact.

As such the government has asked for input on the proposals set out in the Prospectus with responses on the issues of functional requirements, rollout and implementation strategy due by 28th September 2010 with responses on other issues by 28th October 2010. Further information on the consultation and Prospectus can be found here.

The presentation from the Prospectus launch can be found here.

In our next note we will address the issues relating to the commercial and regulatory framework that will be put in place around the smart meter roll-out and, in particular, the central data comms provider.