Smart Meters: a government IT disaster waiting to happen

IoD Policy Press Release27 March 2015

IoD calls for Smart Meters scheme to be ‘halted, altered or scrapped’ to avoid ‘unjustified, over-engineered and expensive mistake’

The Government’s rollout of Smart Meters, digital energy meters designed to provide real-time usage statistics, should be “halted, altered or scrapped” to avoid a potentially catastrophic government IT disaster, the Institute of Directors warns today.

In a major new report entitled “Not too clever: will Smart Meters be the next Government IT disaster?” the IoD brands the £11bn scheme, the largest government IT project in history, “unwanted by consumers, devoid of credibility and mind-blowingly expensive”. The business group calls on an incoming government to review the project and “consider a fresh start”.

The Smart Meter programme, which has the hugely ambitious target of installing 100 million new pieces of kit in homes and business by 2020, was initiated by Ed Miliband as energy secretary in 2008, following an EU Directive, and confirmed by the Coalition Agreement in 2010.  The report’s author, Dan Lewis, Senior Infrastructure Advisor at the IoD, calls the political consensus “a conspiracy of silence among politicians in thrall to big ideas and even bigger budgets”.

Lewis continues:

“The professed aims of the Smart Meter programme are laudable, and we all recognise the benefits of reducing consumption and increasing energy awareness. But there is little credible evidence to suggest that a scheme of this size and complexity will achieve those goals."

The IoD report highlights a number of key concerns:

  • Despite the EU Directive, 11 nations have ruled out electricity smart meters and only 5 are pushing ahead with the 2020 target for gas meters. In contrast, as is so often is the case, the UK has gold-plated the Directive.
  • The government refuses to publish any of the reports on the programme by the Major Projects Authority.
  • The cost-benefit analysis conducted by the Department for Energy and Climate Change is so heavily redacted as to be almost unreadable.
  • The Smart Meter network would be vulnerable to cyber-attack and disruption.
  • Introducing time-of-day pricing to shift consumer demand will only work with price increases that are not politically realistic. Retail consumers really can't change their energy consumption that much.

The report places the rollout of Smart Meters within the context of previous large-scale IT fiascos, including the infamous NHS National Programme for IT, the eBorders Programme and the BBC’s disastrous Digital Media Initiative.  Furthermore, a recent survey shows that 80 per cent of IoD members rate the ability of government to manage large IT projects as “poor or very poor”.

Dan Lewis adds:

“This scheme is far from smart. The dishonourable roll call of government IT projects that have haemorrhaged vast amounts of taxpayers’ money to no discernible effect needs no further additions. Consumers will not forgive the already unpopular energy companies for a costly programme which fails to deliver and ends up making them poorer. Without a change of direction, whoever wins the general election is at risk of overseeing a spectacular failure in the next parliament. They would be well-advised to consider a fresh start.

“Consumers do not want the meters, they have proved a costly mistake in countries where they have been rolled out, and the Government is withholding key details about their costs and benefits. This makes for a programme which is devoid of credibility, over-engineered and mind-blowingly expensive. Perhaps the only reason why the cost and ambition of this project has not become a national scandal already is because of a conspiracy of silence among politicians in thrall to big ideas and even bigger budgets."

A key area of concern outlined in the report is that the technology behind the scheme is untested and some parts will likely be obsolete by the scheduled switch-on date of 2020. The new wireless standard, ZigBee, which is being developed for Smart Meters is complex and expensive compared to the better-known Wi-Fi or Bluetooth. Each property will also get an in home display, but there is scant evidence of consumer demand. British Gas found that only 60% of customers looked at their displays even once a month a year after installation.

Recommendations

An incoming government should consider the following changes:

  • Stop the smart gas meter deployment – only a handful of EU nations are planning to deploy gas smart meters by 2020. This would save billions of pounds.
  • Remove the requirement for an in home display – expected to cost £800m in total, the displays will be out of date in a few years. Far better to connect smart meters to people’s phones, tablets and PCs
  • Limit the rollout to homes with high energy usage – those who use more than 5,100 kWh of electricity, and 23,000 kWh of gas a year have much more to gain. This would reduce the scale of the rollout by 80%.
  • Abandon attempts to stretch  the rollout to tower blocks – the most technically challenging aspect of the project with the lowest potential returns. This would remove seven million homes from the scheme.
  • Make the programme genuinely voluntary – offered to customers at their own expense, not subsidised by all.
  • Abandon the whole programme and develop a smart phone app instead – look into developing a smart app which would convert a photo of their current mechanical meter into a meaningful number for the suppliers. This would cost tens of thousands of pounds rather than billions.

Lewis added:

“We know that an incoming government will be under intense financial pressure, having to find further cuts to public spending. This does not fit well with increasing energy bills for a project that has such unrealistic targets, such large costs and such uncertain benefits.”

Read the full report here.

ENDS

Contacts for further comments or to arrange interviews:

Christian May
Head of Communications and Campaigns
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
020 7451 3263
07908 358 728
Christian.May@iod.com

Edwin Morgan
Head of Media Relations
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
020 7451 3392
07814 386 243
Edwin.Morgan@iod.com


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