Costly smart meter-compatible energy tariffs are holding back the rollout
Just one in six energy tariffs are compatible with smart meters – and they’re more expensive. It could put the smart meter rollout in jeopardy. Let’s find out more.
It was supposed to be one of the primary selling points of smart meters – that consumers would save money on their energy bills. Unfortunately, it doesn’t seem to be turning out that way. Research shows consumers find that when it’s time to get a new energy tariff, the best deals are not compatible with smart meters. They could actually save money by switching off their smart meter!
In this article, we’ll examine the findings from this piece of research and its impact on the smart meter rollout. If energy companies don’t change their ways, could it spell trouble for the already challenging rollout?
Smart meter compatible tariffs are rarer and cost more
Recently published research from Compare The Market found that out of all 223 energy tariffs available to consumers, just 37 are fully compatible with smart meters. That’s 17%, or one in six. Customers can switch to cheaper, non-compatible deals, but they may lose some of the functionality of their smart meters. It’s like going back to having a traditional meter that just ticks over.
What’s more, the specific tariffs that work with smart meters are more costly. On average, smart meter tariffs are £18 more expensive over a year than non-compatible tariffs.
This is clearly bad news for customers with smart meters. The idea of smart meters is that they help you save money by encouraging you to use less energy. However, if the energy you use is more expensive per unit, it cancels out any savings you may be making! It makes you wonder what the point of smart meters really is – and it could have a dramatic impact on the UK-wide smart meter rollout.
Impact on the rollout
The success of the smart meter rollout depends on consumers actually wanting to get them fitted. Money is a huge motivator for most people, and many consumers would’ve accepted smart meters on the grounds that they could save money. If expensive tariffs eliminate that selling point, people won’t want to get smart meters installed in their homes.
If consumers who have smart meters find it cheaper to switch to tariffs that are not compatible with their meters, and they don’t notice a discernible drop in the quality of their lives when their meters don’t work, they will never bother to use them again. Already out of the 22.2 million smart meters fitted in domestic homes in the UK by the end of 2020, 4.6 million are not operating in ‘smart mode’ due to technical problems. You would expect this number to rise if consumers switch away from smart meter compatible tariffs.
The smart meter rollout has not gone well so far. Challenges include:
- First-generation meters that stopped working when customers switched suppliers. They eventually had to be replaced with new style meters
- Significant delays because of the COVID-19 lockdown and further restrictions
- Higher projected budgets and extended deadlines
Due to COVID-19, the current target to finish the rollout (the end of 2025) is already in jeopardy. If energy suppliers cannot persuade reluctant consumers to get meters fitted with cheaper tariffs, it may never be finished.
The primary unique selling point
Smart meters are supposed to help customers save money by showing them more about how and when they use their energy, so they can make minor adjustments that lead to savings. However, if consumers cannot save money due to higher unit costs of energy, it instantly eliminates the main selling point of the smart meter.
Smart meters are supposed to be better for the environment as they cause consumers to use less energy. But, due to the smart meters manufacturing and transportation process, as well as the impact of disposing of traditional meters, the environmental benefits of smart meters is negligible.
If they’re not better for the environment and don’t help consumers save money, you may wonder what the point of smart meters is – and why you need to get one. Saving energy without saving money is not as attractive a proposition.
Encouraging smart meter take-up
If the smart meter rollout is to be a success, energy companies must encourage their customers to get smart meters rather than make it more expensive. It is very discouraging for users who enjoy their smart meters to lose the benefits if they switch suppliers.
Suppliers should be competing with each other over who can offer the most competitive pricing to customers with smart meters. They could even incentivise them by offering discounts for new switchers or customers who get meters installed.
The government targets suppliers for the number of installations they make as part of the rollout, so it’s strange to see them not taking action to encourage greater take-up. Seeing them doing the opposite is even stranger.
A better solution
At Meter Corp, we have been saying for a while that there is a better solution. Instead of having a target-driven smart meter rollout that puts pressure on the energy companies for minimal results, we should simply fit smart meters when customers’ current legacy meters have reached the end of their lives.
News that suppliers are charging higher unit prices to customers with smart meters proves that we were right. In many cases, customers are better off keeping their old meters while they still function well, while energy suppliers are not genuinely dedicated to encouraging greater smart meter use.
If this trend continues, and chances of completing the rollout by the deadline fade further from view, perhaps the powers that be will consider our idea.