It’s a great pleasure to be here at the Smart Metering Forum event this afternoon.
This is the third time that I have been invited to speak at this event. It’s good to be back and to recognise a number of familiar faces.
The range of expertise assembled in the room today is a testament to the importance attached to the Smart Metering Programme.
I know that you have already heard a number of useful presentations, including one from DECC’s Smart Meter Programme Director, Jim Hayward, at the start of the day.
Jim set out how DECC is working with our partners to ensure that the Programme is delivered successfully. I’d like to round up today with a look at the progress we have made since I became responsible for this Programme, but in the context of wider energy policy.
The Smart Metering Programme is part of an effort by this Government, industry and many other stakeholders to revolutionise our energy system.
A system that will keep our energy bills down, will keep the lights on and will keep our pledge to address climate change.
A system that replaces the old energy infrastructure with a new, cleaner, more efficient system.
These changes, that will lead us to an energy secure, low-carbon future, require significant investment.
Britain needs up to £100 billion investment in new electricity infrastructure by the end of the decade. Investments of £45 billion in the three years to 2013 have put us on target to meet our future low carbon power requirements.
And we are doing this while also making sure that energy remains affordable.
We recognise the pressures that energy costs have been placing on household finances.
That is why the Government is committed to helping consumers manage the costs of their energy bills, and providing them with the tools with which to do so.
Through our energy efficiency strategy we are taking action to help households use less energy while maintaining warm and comfortable homes.
Our aim is to improve the energy efficiency of one million homes by the end of this Parliament.
Already, significant progress has been made, with almost 800,000 homes improved through key energy saving policies, such as the Energy Company Obligation (ECO), and Green Deal measures.
We’re helping households keep warmer and save money. On average, households are saving £90 this year on their energy bills because of our policies.
We’re also helping businesses to manage the costs of their energy bills. The total value of energy savings to UK businesses this year is nearly a billion pounds.
Energy efficiency is one of the ways of helping consumers with their bills.
The other key focus of Government policy in this area is to make sure that markets are working as they should, with competition driving down costs for consumers.
Working alongside Ofgem, the Government has been successful in increasing both the number and market share of the smaller energy suppliers.
For example we have seen 12 new firms entering the market since 2010. Consumers now have more choice than ever before.
Over two million electricity customers have switched to these new competitors. More than one million of these switches occurred in the last year.
The independent suppliers continue to make inroads into the market share of the large established suppliers. They now have around 9% of the dual fuel domestic market, up from around 1% in 2010.
Last year the Government challenged industry to halve switching times by the end of this Parliament. We have worked with industry and Ofgem to deliver this.
Ofgem is consulting on its roadmap for moving to 24 hour switching, with a decision due by the New Year.
Smart Metering Programme
Which leads me to smart metering. Smart meters will be a key enabler of faster switching, in turn helping to stimulate competition.
You will all know that Smart Metering is a complex and ambitious Programme.
It involves installing over 50 million smart electricity and gas meters by the end of 2020. It will impact every home in Great Britain and over 2 million smaller non-domestic sites.
But the Programme is not just about installing a new meter on a wall, important though that is.
It’s about modernising industry’s operations, helping to reduce their system costs.
It’s about assisting the move towards smart grids which support sustainable energy supply. This will help to reduce the total energy needed in the system.
And most importantly it’s about putting power into the hands of consumers.
Helping us all as consumers to understand our energy use and change the way we think about energy, making our energy consumption more relevant to people’s everyday lives.
Putting power in the hands of the consumers
The Government’s position has been clear from the start: consumers are at the heart of the Smart Metering Programme. And the benefits for consumers are clear.
Smart meters will give consumers near real time information, in pounds and pence.
They will bring an end to estimated billing.
The experience of being a prepayment customer will be transformed, with topping up as easy as topping up a mobile phone.
And as you will have heard today, they are the beginning of smarter living, opening up opportunities for innovation in new products and services.
Smart Energy GB
There is an important step needed to achieve these benefits.
International studies and experience show that consumer engagement activities are crucial in persuading consumers to change behaviours.
We need to explain to consumers what smart meters are about. What’s in it for them. So that they want a smart meter rather than feel that it is being pushed onto them.
Suppliers have a direct relationship with consumers. They are the main interface with their customers before, during and after installation. So they are the primary route for consumer engagement.
Their efforts will be supported by a programme of centralised consumer engagement undertaken by Smart Energy GB, an independent organisation set up in June 2013 under the terms of energy suppliers’ licences.
Smart Energy GB will be instrumental in helping people understand the roll out of smart meters and the benefits they will bring.
Engaging low income and vulnerable consumers to help them realise the benefits of smart metering is a key part of its remit.
Smart Energy GB will work with trusted third parties such as charities, housing associations, consumer groups and local authorities, who we know are seen as effective and credible sources of information, particularly by vulnerable consumers.
I know that there will be much more discussion of consumer engagement in the sessions tomorrow.
Progress in 2013- 2014
The establishment of Smart Energy GB is only one of a series of developments that have taken place since I first spoke to this conference in 2012.
Since then we have also:
- completed the procurement processes for the data and communication service providers and awarded the Data and Communications licence in September last year; and
- largely finalised the technical and regulatory framework that will underpin the smart meter roll-out and provide protection for consumers.
The design phase of the programme is now almost complete. This design includes the technical standards that will ensure a stable and secure system.
All partners involved in delivery are now making the necessary preparations to build an infrastructure and procure equipment to these standards, so that consumers have a positive experience of smart metering.
Let us look back at the progress on installation. In September 2012, our statistics showed that the larger energy suppliers were operating 256 smart meters in people’s homes.
At the end of June this year, the number had grown to 400,000 smart meters in operation in domestic properties, along with almost 500,000 smart and advanced meters in non-domestic properties.
This has brought the benefits of smart meters to consumers and helped suppliers to prepare for roll-out. Indeed, those energy suppliers that have undertaken significant numbers of installations are reporting higher levels of satisfaction among their customers.
I was pleased to be offered a smart meter by my energy supplier in February this year and to become an early beneficiary of this technology. It has been very illuminating for my family to learn more about our energy use through the in-home display.
So we have made good progress. And while there have been some bumps along the way we should also remember that we are still in the Foundation Stage of the Programme. This is a period designed to enable suppliers and others to gain valuable learning and experience to inform preparations for the main installation stage.
I know that you will have heard Jonathan Simcock of the Data and Communication Company talk earlier today about the need for the DCC system to be in place and working reliably.
The DCC is required to ensure that the system as a whole works smoothly once many millions of meters have been installed, and that the enduring and full benefits from smart metering are realised.
The DCC is also important:
- to enable greater competition;
- to provide a basis for innovation in emerging energy service markets;
- and support development of the smart grid.
The DCC has made good progress since it was awarded the licence just over a year ago and is on track to meet its communications coverage targets.
But having reviewed its workplan to complete the build and test the national data and communications infrastructure across Great Britain, the DCC is consulting industry stakeholders about revisions to its delivery plan.
I am determined to bring the benefits of smart meters to GB consumers.
But to underpin this we need to ensure that the roll-out continues on the right footing to protect the consumer experience, and that the early adopters of smart meters become strong advocates for them.
I will not compromise the consumer experience.
And so any changes to the plan will need to give me confidence that the systems are built and tested to a high standard before they go live.
In the meantime, installations are continuing, and the Programme is on track to deliver significant net benefits.
And it remains important that we maintain the momentum on bringing these benefits to consumers in Great Britain as soon as possible.
The establishment of the DCC in September 2013 marks the start of the gradual transfer of the responsibility for the implementation of the smart metering system to energy industry and the
DCC, with regulatory oversight by Ofgem.
Our goal is a self-sustaining system, governed and operated by industry, delivering benefits to consumers.
We’re getting there, but a lot of further work will be needed from all of us to ensure that the rollout is a success and all consumers are able to benefit.
Of course my Department will continue to have a major role in making sure that the focus on delivery is maintained and to ensure that the benefits are delivered.
But DECC is not making smart metering happen. The industry is. I have been fortunate enough to meet many stakeholders and visit suppliers to see their smart metering operations in action.
I have continued to be impressed with their – indeed with your - enthusiasm and commitment in wanting to make this technology and Programme a success.
And it is only through your contribution that we will be able to complete the Programme successfully.
This is a Programme that provides a platform for new smart services and opportunities for growth.
That helps to update the nation’s ageing energy infrastructure.
That helps to restore trust between consumers and suppliers.
And, most importantly, puts power into the hands of consumers.
These are ambitious objectives and I remain very grateful for the help and support you have provided in what we have achieved to date.