Energy Update: Smart Electricity Metering – One Step Closer
29 April 2019
“Smart” electricity metering – which can allow electricity use to be tracked on a time-of-day basis and reported automatically – is regarded as a pillar of the EU’s “clean energy transition”.
It is also a staple topic on the energy conference circuit: one of those ideas that is widely agreed to be (i) potentially very beneficial to the efficiency of the electricity system; (ii) expensive and difficult to implement; and (iii) always “on the way”, safely consigned to the next generation of initiatives but never quite ready for deployment.
However, the latest publications by the Commission for Regulation of Utilities (CRU) suggest that after a decade in development, the start of Ireland’s smart metering roll-out is imminent.
Peaks and troughs
It is well known that electricity usage, both in Ireland and internationally, exhibits "peakiness", whereby two daily demand peaks occur, coinciding with the main morning and evening food-preparation periods. "Peakiness" is costly: on the one hand, because electricity cannot be stored efficiently, sufficient generators must be on hand to serve the highest demand peak. On the other hand, much of this generation capacity will be idle during the intervening demand “troughs”. Building and maintaining idle generators is expensive, and could be avoided if a way could be found to reduce demand peakiness.
Economists have long argued that peakiness could be reduced by encouraging consumers to shift their electricity demand from peak periods to other times of the day. To achieve such a shift through economic incentives requires the levying of electricity prices that vary across times of day. This is known as “time-of-use” pricing.
However, a major barrier is the technology that underlies the billing of domestic electricity consumers. At present, domestic electricity consumption across Ireland is paid for on the basis of measurements taken mainly by mechanical electricity meters, which only record aggregate consumption and which are generally unable to record the specific time of day at which electricity is consumed.
A brief history of time-of-use
“Smart meters” are a potential solution. These instruments make use of more advanced technology to record granular data about when electricity is consumed. Crucially, they can also communicate, in both directions, with the wider electricity network, thereby ensuring that the voluminous time-of-use data can find its way to the necessary supplier billing systems.
Given that the implementation of universal smart metering in Ireland will require the replacement of some 2.25 mechanical million electricity meters and the installation of new data links, such an exercise is clearly a major undertaking.
The EU recognises both the costs and benefits associated with smart metering: while the draft electricity directive that forms part of the EU Clean Energy Package requires member states to ensure the implementation of systems, it is acknowledged that such implementation may be subject to a cost – benefit assessment.
Experimentation with smart meters and time-of-use pricing has been under way in Ireland under the supervision of the CRU since around 2010, and in 2017 the CRU completed a cost-benefit analysis (CBA) of a full smart metering roll-out.
It was subsequently confirmed that ESB Networks will deliver smart meters to all Irish electricity customers in three phases, between 2019 and 2024.
Ireland’s electricity meters form part of the electricity distribution system, whereas the primary interaction of each electricity consumer will be with its electricity supplier. In order to achieve universal coverage, any time-of-use pricing initiative will therefore require the co-operation of electricity suppliers as well as the distribution system operator, ESB Networks.
To facilitate this co-operation, the CRU published (in late February 2019) a further decision entitled “The Customer-Led Transition to Time-of-Use”, which requires electricity suppliers to play their part in the introduction of time-of-use pricing by:
- Offering at least one time-of-use tariff for electricity customers
- Providing to customers a ‘Time-of-Use Primer,’ which will be developed by the CRU (or, possibly, the Sustainable Energy Authority of Ireland) and which will provide the customer with a clear overview of how the tariff is to operate (as well as an explanation of the wider benefits of such a tariff), and
- “Reminding”, on an ongoing basis, any electricity customer who has a smart meter installed but who has not elected to switch to a time-of-use tariff.
To mitigate initial consumer confusion around time-of-use pricing, the CRU will limit the number of time-of-use tariffs that each supplier can offer to customers. These limits will apply only until the end of the smart meter installation phase in 2024 – at which time, consumers will be presumed to be sufficiently informed to navigate whatever range of tariffs are then available.
The EU regards the empowerment of energy consumers as a key pillar of its clean energy policy, and Ireland stands on the verge of empowering its own electricity customers through the smart-meter roll-out and time-of-use pricing.
Ireland’s energy regulator, electricity system operator and suppliers will be playing their part - it then remains to be seen to what extent Ireland’s electricity consumers will engage actively with time–of–use pricing, both by (i) agreeing to such a tariff; and (ii) maximising the available savings by actively shifting their peak electricity demand to low-price periods.
For more information issues concerning Smart electricity metering which may affect your business, contact a member of our Energy, Utilities & Projects team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.