The compulsory roll out of electricity smart meters in Victoria has created a backlash from those who believe the government wants to irradiate us. In Europe, data and privacy issues have been raised. But smart meters appear to be a key element of the Federal Government’s response to concerns about electricity prices. See here and here. To make the roll out work and actually get energy savings, the government needs to do one thing – give the meters to the people.
What do I mean by this? Currently, your electricity meters are owned and maintained by your distribution company. This means that you can move retailers seamlessly but that everyone gets the same plain vanilla meter – or the same plain vanilla smart meter.
What about the retailer owning the meter? The key problem is that if a customer wanted to change retailers to get a better electricity tariff there would be a fixed cost of changing meters. This is like the bad old days when every time you changed mobile carriers you had to get a new phone number. It made it hard to switch, reduced competition and led to higher prices and less innovation.
The mobile phone problem was solved by ‘giving the numbers to the people’. By requiring mobile number portability, the government made sure that consumers can keep their phone number when they switch mobile carriers. How about we do the same for smart meters?
This approach is simple. There is a basic meter that a consumer can have as part of their electricity connection if they want. But there is also a selection of ‘approved’ smart meters from competing suppliers that a consumer can pay to have installed. If you have a smart meter then, depending on its functionality, different retailers can compete for your business through the package of electricity prices that they offer to you.
What are the benefits of this? First, if you don’t want a smart meter (fear of radiation or Martians) then nothing changes. But if you do want to use a smart meter to manage your power consumption then you can choose the one that best suits you. In other words, consumer ownership of meters creates consumer buy-in and control.
Second, it encourages innovation. Pretty quickly consumers will have a range of choices for smart meters. They will range from simple (perhaps a two-tariff meter based on spot electricity prices where your meter ‘tells you’ when you are on a high or a low tariff, but it is up to you to decide what to do with your appliances) to a ‘Rolls Royce’ version (internet/NBN connected appliance control by the retailer or through the meter so your appliances automatically adjust to electricity prices on a real-time basis). So consumers can choose the smart meter that best suits them.
Third, it encourages competition. The consumer can change retailers or upgrade meters as they see fit. If a retailer doesn’t offer the best package then easy – just switch. If a new meter comes on to the market with better functionality, great, you can choose to buy it if you want to. No waiting on a bureaucratic decision by government or the monopoly distributor.
How do we know it will work? Because this is the way competition works successfully for pretty much all other modern electronic devices. And that is all your smart meter is.
What are the negatives? The engineers complain that choice leads to cost. But this is the Soviet style approach. It is ‘cheaper’ and ‘more efficient’ if we all have the same car (say, a Trabant) but it is also a bad outcome. Indeed, I wonder how many of the ‘command and control’ engineers would be happy if they were all required to have the same mobile phone, the same computer, and the same television, all chosen for them by a central agency to ‘reduce cost’.
So will it cost more? No. Because the consumer will choose if the benefit of the meter outweighs the cost and if it does they will be willing to have a smart meter. And if it doesn’t, then there is no cost and they keep their basic meter.
What about data integrity and the integrity of the electricity network? This excuse was used for years to stop consumers having a choice of telephone. It was nonsense. There will be a range of smart meters that can safely be connected to the electricity network. These can be certified by an independent body (not the network owners who have no incentive to have anything but the basic meters).
In brief, smart meters can work. But only if we avoid making the same mistakes that we made in other network industries, like telecommunications, when technology started to revolutionise customer services. How do we avoid those mistakes? Look at where we have got to in those other industries and realise that consumer choice drives competition and good decision making. Give the smart meters to the people!