by K.T. Weaver, SkyVision Solutions

This article provides specific information to counter claims made by smart meter proponents that smart meters provide consumers with financial benefits, i.e., saving energy and reducing their utility bill.  In addition, this article presents information to help disentangle how policy makers conflate the topics of grid modernization, smart meter deployments, and sound environmental policy.

Inflated or False Claims on How Smart Meters Help Consumers Save Money

As an attempt to convince consumers that smart meters are “good” for them, they are fed propaganda-like messages regarding “consumer empowerment” by smart meter proponents.  In short, and as stated by the Attorney General for the state of Illinois:

“The pitch is that smart meters will allow consumers to monitor their electrical usage, helping them to reduce consumption and save money. …  Consumers don’t need to be forced to pay billions for so-called smart technology to know how to reduce their utility bills.  We know to turn down the heat or air conditioning and shut off the lights.”

We certainly do not need to spend billions and billions of dollars on smart meters for the consumer to know that if you start shutting off switches or changing the thermostat setting that you can save energy.  The whole concept is actually quite absurd.  For those consumers who do want more detailed usage information, there are a number of products available online or at your home improvement store that can provide the same or better information than with a smart meter.

To help counter some of the claims, ridiculous as they may be as to how smart meters are somehow needed to help consumers save money, I have already written a number of articles highlighting studies and auditor-general reports that reveal that smart meters offer no net benefits to consumers.  Among the past articles supporting this assertion are the following:

• ‘Smart’ Meters Have Failed and Were a Dumb Investment, an article which includes reference to the Ontario auditor-general report demonstrating that the $1.9-billion smart metering initiative has yet to realize any benefits, i.e., “Benefits Not Yet Realized” [1];

• Smart Meter Rollout a Waste of Money, According to Study, referencing the study by Kathryn Buchanan, “The Question of Energy Reduction: The Problem(s) with Feedback.” [2];

• President Obama Touts ‘Smart Meters’ at Clean Energy Summit, an article referencing a study demonstrating that real-time information feedback at the household level does not lead to a decrease in electricity use [3];

• Consumers and Environment Unlikely to Benefit from Smart Meters, Confirms Latest Research, where research results from the Kellogg School of Management were reported that neither consumers nor the environment necessarily benefit from smart meter deployments [4];

• Smart meters giving Victorian consumers ‘no benefit’ on electricity bills, auditor-general says, referencing another auditor-general report that a $2 billion smart meter deployment has resulted in “no overall benefit to consumers” [5]; and

• Families Punished by ‘Smart’ Meters and TOU Rates, Recent Study Confirms, highlighting an Australian study showing that time-of-use electricity rates have inequitable financial and social impacts for households with children [6].

Adding to the research and auditor-general-type reports covered in the above articles, I will now introduce the results of two (2) additional reports that apparently have been ignored by smart meter proponents and policy makers.

A 2011 report for the BEUC, the European Consumer Organization [7], found it not to be true that smart meters will help households reduce energy consumption by up to 15% (as claimed by earlier reports).  An analysis of six (6) scientific studies on “the use of meters reveals that the actual energy savings average between 2-4% in the best cases where consumers have clearly opted for their use.”  More specifically, the findings were as follows:

“From the six scientific studies, we see that in best cases a consumption reduction of 2-4% can be expected in the short term. …  The best cases include a smart meter that is linked to an IHD (direct feedback) or to accurate billing, with energy efficiency advice.”

“[S]mart meters are not instruments that deliver energy savings by themselves.  Even with advanced functions as an IHD, consumers who are not already minimally interested by energy issues do not appropriate [or make use of] smart meters.”

“We have seen that current systems of feedback associated with smart meters can yield to a reduction of 2-4% of electricity consumption when consumers have opted for its use.”  

“No effect is observed when smart meters are installed without the explicit agreement of consumers.  And the vast majority of consumers are today probably not interested in any kind of feedback.”

“In conclusion, without a prior motivation to save energy, feedback is useless.  Besides motivation, capabilities such as knowledge, money and skills are important factors to effectively [make use of] feedback and accordingly change energy-using habits.  As many experiences show a ‘drawback’ effect, the motivation towards energy savings must be frequently restored.  But the sole presence of an IHD [in addition to the smart meter] is not enough to maintain the attention.”

“An obligatory smart meter rollout is therefore not advised.”

At this point, I should probably just say, “I rest my case.”  But there is an additional study that provides an even more detailed analysis.

In 2011, Frontier Economics Ltd of London investigated the economic potential of using smart electricity meters for German households [8].  This study assessed “the overall economic benefit and the respective costs that would be generated by the installation of smart meters in various types of household.”

Frontier Economics developed a model based on 200 different types of households in order to assess which consumers could financially benefit from smart meters.  The differentiation was made according to the expected energy-saving potential through different characteristics of the households: size of the dwelling, number of persons, electricity consumption, affinity for technologies, and readiness to use a smart meter.  A somewhat unique aspect of this model was to take into account the diversity of consumers, not only regarding consumption but also regarding motivation and skillfulness.

Some of the conclusions of the Frontier Economics study are as follows:

“Net benefits will be maximised if households retain the freedom to decide whether to install a smart meter, and choose which technology to install. …  Ultimately, households themselves are best placed to identify whether the installation of a smart meter is worthwhile, and which technology option will be most effective.”

“The highest net benefits in our analysis are generated by those scenarios in which households are granted complete freedom of choice.  These scenarios benefit from the fact that due to the significant heterogeneity across households, individual households are best placed to decide whether a smart meter is worthwhile and which technology option will deliver the greatest benefit.”

“Mandatory national roll outs always result in a negative net benefit.”

To further illustrate that mandatory deployment of smart meters results in a financial “net loss” for households, review Figure 5 below from the Frontier Economics report.

“Figure 5 presents an example of the net benefits (i.e. the benefits after deducting installation and operational costs) per household in the ‘Mandatory rollout EDL 40’ scenario (where all German households are obliged to have an EDL 40 meter installed).

The green area indicates those households for which the benefits would exceed the costs in this scenario.  Net benefits are only positive in around 15% of households.  The red areas in Figure 5 represent the net loss in those households that are obliged to have a smart meter installed even though the expected advantages do not justify installation costs.”

Whether or not the costs associated with smart meter installations could result in a net benefit for consumers depends on a number of factors, including:

• Annual household electricity consumption;
• Specific consumption patterns based upon the types of appliances existing within the home and when they are used based upon the nature of the consumers in the home;
• Motivation to conserve energy which is typically also dependent on the ability to make additional investments that not all consumers can afford; and
• Load shifting potential or ability for each household.

Most components of household consumption (cooking, lighting etc.) cannot be easily shifted since they are always required at specific times in the day.  As such, only a small proportion of household consumption can potentially deliver load reduction or shifting benefits.

Figure 6 shows a comparison of different smart meter deployment scenarios considered by Frontier Economics.  A forced or mandatory deployment always delivers negative results.  Only in voluntary or selective deployments can smart meters be economically justified.  In those cases, consumers are either motivated to conserve energy and/or have sufficient means and load profile to engage in energy reduction and energy efficiency measures to justify the smart meter investments.

Policy Makers Conflate Topics of Grid Modernization, Smart Meter Deployments, and Sound Environmental Policy

What has just been presented regarding smart meters not providing any positive financial net benefits to consumers is not rocket science.  It is common sense which I have been able to now fully substantiate with published studies and reports.  So are policy makers just stupid as they continue to deploy smart meters?  Possibly so, and these same policy makers never mention the tremendous consumer risks [9] associated with smart meters and continue to tout the already debunked purported benefits.

In addition, for those few consumers who might be motivated to use smart meters to somehow conserve energy, they will pay a yet to be quantified price related to a loss of privacy and a loss of control over one’s appliances, comfort, and health [9][10].

One aspect to explain why smart meters continue to be deployed relates to the fact that they enable industrial profiteering and government sanctioned surveillance [11].  But beyond that, policy makers appear to be under the illusion that smart meters meaningfully contribute to policy objectives related to modernizing the electric grid and achieving sustainability goals, i.e., “to encourage energy efficient behavior” [8].  In this regard, the report by Frontier Economics provides additional insight:

“A mandatory nationwide roll out of smart meters does not deliver environmental policy objectives in the most efficient way. … Our analysis shows that it does not make economic sense to introduce smart meters on a nationwide basis in Germany.  However, support for a national roll out is often based on environmental policy rather than on economics.  In other words, it is considered that the overwhelming policy objective is to induce significant energy savings, and smart meters are considered an effective way of doing this.”

“It is very likely the additional funds required for a mandatory nationwide roll out of smart meters could generate significantly greater environmental policy outcomes if they are spent elsewhere.”

So based upon the facts, smart meters will not “induce significant energy savings.”  We would be much better off spending limited resources elsewhere rather than wasting them on smart meters.

In the United States, it appears that smart meters are just an off-the-shelf item where money can be spent quickly under the guise that they are somehow promoting sustainability.  As characterized by Tim Schoechle, Ph.D. in 2014:

A senior Department of Energy official stated that, “We had a huge amount of money that had to be spent on smart grid, and we didn’t have anything off-the-shelf that we could call smart grid except these meters that were designed 20 years ago [12].”

As opposed to using what is really outdated “smart” meter technology, modernization of the electric grid should relate to measures taken to technically improve the operation and reliability of the electric grid, not to monitor and control the behavior of individual consumers.  More important to the objective of modernizing the electric grid would be to improve wide-area situational awareness through advanced tools that would monitor and control the conditions of the grid at the neighborhood or sub-station level.  This could include, for example, the use of “smart” switches that communicate with each other to reroute electricity around a troubled line [13].

Moreover, the modern electric grid as envisioned by the United States Department of Energy (DOE) in 2009 is one which is more reliable, secure, economical, efficient, environmentally friendly, and safer [14].  Based upon the substantial evidence provided at this website and information presented within this article, broad-based deployments of smart meters arguably conflict with each one of these six focus areas that the DOE views as the “foundation” for the “Smart Grid.”

So rather than contributing to sustainability or helping to create a modernized electric grid, smart meter deployments only act as a diversion of financial resources away from investments that would be more effective at reducing consumption and improving energy efficiency.  In addition, smart meter deployments make the electric grid less secure, less safe, and certainly smart meters are not “environmentally friendly.”

As stated by the Frontier Economics report, smart meters represent a diversion of resources away from investments which would “very likely … generate significantly greater environmental policy outcomes if they are spent elsewhere.”

In the future, I am considering to write a separate article on how to modernize the electric grid without smart meters, but one major utility company has essentially already documented how this is possible.  I have highlighted the filings by Northeast Utilities (which later became Eversource Energy) in previous articles at this website:

• Major U.S. Utility Says “No Rational Basis” for Mandating Smart Meters [15]
• Smart Meters Not Necessary to Modernize the Electric Grid Says a Major U.S. Utility [16]

Additional supporting documentation for why broad-based smart meter deployments are unnecessary includes the following:

• Universal Deployment of Smart Meters May Be Unnecessary in New York to Support REV Mandates [17]
• Reply Comments by SkyVision Solutions in Response to Comments Pertaining to the Staff Proposal regarding the Distributed System Implementation Plan Guidance (“DSIP Guidance Proposal”); New York Public Service Commission Case 14-M-0101 – Proceeding on Motion of the Commission in Regard to Reforming the Energy Vision [18]

We just need policy makers to stop and think about what they are doing and read and acknowledge what has already been written.

Conclusions

Rather than disseminating propaganda on how the consumer will be “empowered” by smart meters to save money, consumers should more realistically be told that the vast majority of consumers will experience a “net loss” and lose money from smart meter deployments.  Smart meter deployments to the extent that they exist should be totally voluntary.  There is absolutely no basis for broad-based smart meter deployments i.e., “the expected advantages do not justify installation costs,” as stated by Frontier Economics.

Smart meters only have the potential to benefit consumers who explicitly agree to their installation and therefore are motivated to use them.

Policy makers who promote smart meter installation often conflate smart meter deployments with the topics of electric grid modernization and achieving sustainability objectives.  In actuality, smart meter deployments (based upon current technology) fly in the face of the vision for a modernized electric grid that is more reliable, secure, economical, efficient, environmentally friendly, and safer.  Additionally, as stated by Frontier Economics:

“’Smart Grid’ methods for intelligent grid control (e.g. through variable control of sub-stations etc) generate economic benefits for network operation in particular.  However, these methods do not rely on the introduction of smart meters, since a particular metering solution is not essential for the centralized operation of grid components and technical devices.”

Furthermore, again as stated by Frontier Economics:

“As well as having negative net benefits, we do not consider a national roll out of smart meters to be the most cost-effective way to achieve the overriding policy objective of energy efficiency.”

In summary, smart meter deployments are a waste of money and expose the consumer to tremendous risks.  Smart meters do not induce energy savings for the vast majority of consumers, and modernization of the electric grid does not rely on smart meter deployments.  To the contrary, smart meters act as a diversion of financial resources away from measures that could otherwise modernize the electric grid and achieve sustainability objectives. 

References and Notes

[1] “Smart Meters Have Failed and Were a Dumb Investment,” SkyVision Solutions Blog Article, December 2014, at https://smartgridawareness.org/2014/12/18/smart-meters-have-failed/

[2] “Smart Meter Rollout a Waste of Money, According to Study,” SkyVision Solutions Blog Article, December 2014, at https://smartgridawareness.org/2014/12/21/smart-meter-rollout-a-waste-of-money/

[3] “President Obama Touts ‘Smart Meters’ at Clean Energy Summit,” SkyVision Solutions Blog Article, August 2015, at https://smartgridawareness.org/2015/08/25/president-obama-touts-smart-meters/

[4] “Consumers and Environment Unlikely to Benefit from Smart Meters, Confirms Latest Research,” SkyVision Solutions Blog Article, September 2015, at https://smartgridawareness.org/2015/09/11/consumers-and-environment-unlikely-to-benefit-from-smart-meters/

[5] “Smart meters giving Victorian consumers ‘no benefit’ on electricity bills, auditor-general says,” SkyVision Solutions Blog Article, September 2015, at https://smartgridawareness.org/2015/09/16/smart-meters-giving-victorian-consumers-no-benefit/

[6] “Families Punished by Smart Meters and TOU Rates, Recent Study Confirms, SkyVision Solutions Blog Article,” January 2016, at https://smartgridawareness.org/2016/01/31/families-punished-by-smart-meters-and-tou-rates/

[7] “Empowering Consumers through Smart Metering,” Report for BEUC, the European Consumer Organization, December 2011, available at https://skyvisionsolutions.files.wordpress.com/2015/12/brussels-smart-metering-studies-2012-00369-01-e.pdf

[8] “Economic Potential of Smart Electricity Meters in Germany,” January 2011, Frontier Economics Ltd; available at https://skyvisionsolutions.files.wordpress.com/2015/12/frontier-report-on-economic-potential-for-smart-meters-in-germany.pdf

Prominently featured in this article is “Figure 5” from the Frontier Economics report.  Critics can say that the figure may only be applicable for German households and only applies to the specific assumptions made for purposes of the report.  This is true, but the detailed nature of the model used for the study provides results that are intuitively more realistic and plausible as compared to using an average or “representative” household as explained in the Frontier Economics report.  Granted the specific numerical values on the chart may not apply outside Germany, but the general character of the chart with much more “red” than “green” is arguably correct for all mandated smart meter deployments.

For example, as recently explained by Nick Hunn of WiFore Consulting [19], the Department of Energy & Climate Control (DECC) in Great Britain has assumed that all future gas and electric customers will reduce energy consumption by 3% per year for basically forever, based upon information feedback from IHDs and smart meters.  Hunn explains how this assumption is wrong and that a thorough study in the Netherlands showed that the “average saving” was closer to 0.6%.  In addition, it is not clear whether some or all of that savings could just be due to the natural replacement of light bulbs and appliances over time that happen to be more efficient.  Then taking into account the huge installation costs associated with smart meter deployments, you will have a financial “net loss” for the consumer.

On the topic of load shifting ability, it is expected that the primary difference between household load profiles in Germany versus the United States would be higher penetration of central air conditioning (A/C) in the United States.  For example, Eversource estimates that within its service territory in the northeastern portion of the United States that the central A/C penetration is 38% for two to three months per year [16].  In warmer states, central A/C penetration likely approaches 85% [20].  According to Eversource, residential appliance data suggest that there is little discretionary load beyond A/C.  If this is the case, it is suggested that customers desiring to participate in demand response programs be equipped with so-called “smart” thermostats that operate through household Internet routers.  This would completely eliminate any need for utility installed smart meters for demand response programs.

[9] SkyVision Solutions has previously summarized consumer risks associated with smart meter deployments as:

• The financial burden imposed by smart meters where most consumers will suffer a “net loss.”
• Privacy invasions due to granular collection of energy usage data which represents a “gold mine” to others.
• Potential health risks and actual adverse health effects caused by the additional electrosmog created by the smart meters and their associated infrastructure.
• The increased risk of household fires due to smart meter safety issues and ‘catastrophic failures’ that are expected with smart meters as opposed to traditional usage meters.
• Societal implications of smart grid and smart meter cybersecurity threats which can result in catastrophic events affecting widespread areas of the electric grid.

[10] “Consumers Resist Being ‘Systematically Controlled’ by ‘Smart’ Meters,” SkyVision Solutions Blog Article, February 2016, at https://smartgridawareness.org/2016/02/05/consumers-resist-being-systematically-controlled/

[11] ‘Smart’ Meters Represent Industrial Profiteering and Government Sanctioned Surveillance, According to Study,” SkyVision Solutions Blog Article, January 2016, at https://smartgridawareness.org/2016/01/11/industrial-profiteering-and-government-sanctioned-surveillance/

[12] “The Smart Meter Canard,” SkyVision Solutions Blog Article, March 2014, at https://smartgridawareness.org/2014/03/18/the-smart-meter-canard/

[13] “Electricity Grid Modernization,” GAO Report #GAO-11-117, January 2011, page 5; complete document available at http://www.gao.gov/new.items/d11117.pdf

[14] “The Modern Grid Strategy, A Vision for the Smart Grid,” developed by the National Energy Technology Laboratory for the U.S. Department of Energy, Office of Electricity Delivery and Energy Reliability, June 2009; available for review at https://skyvisionsolutions.files.wordpress.com/2016/02/modern-grid-strategy_doe_june-2009.pdf

[15] “Major U.S. Utility Says ‘No Rational Basis’ for Mandating Smart Meters,” SkyVision Solutions Blog Article, February 2014, at https://smartgridawareness.org/2014/02/13/no-rational-basis-for-smart-meters/

[16] “Smart Meters Not Necessary to Modernize the Electric Grid Says a Major U.S. Utility.” SkyVision Solutions Blog Article, September 2015, https://smartgridawareness.org/2015/09/30/smart-meters-not-necessary-to-modernize-electric-grid/

[17] “Universal Deployment of Smart Meters May Be Unnecessary in New York to Support REV Mandates,” SkyVision Solutions Blog Article, October 2015, at https://smartgridawareness.org/2015/10/05/universal-deployment-of-smart-meters-may-be-unnecessary-in-new-york/

[18] Reply Comments by SkyVision Solutions in Response to Comments Pertaining to the Staff Proposal regarding the Distributed System Implementation Plan Guidance (“DSIP Guidance Proposal”); New York Public Service Commission Case 14-M-0101 – Proceeding on Motion of the Commission in Regard to Reforming the Energy Vision, December 2015, available at https://skyvisionsolutions.files.wordpress.com/2016/02/reply-comments-on-the-new-york-rev-by-skyvision-solutions.pdf

[19] “UK Parliament Calls for Evidence on Smart Metering Programme,” by Nick Hunn, January 2016, at http://www.nickhunn.com/uk-parliament-calls-for-evidence-on-smart-metering-programme/

[20] “Air conditioning in nearly 100 million U.S. homes,” U.S. Energy Information Adminstration, at http://www.eia.gov/consumption/residential/reports/2009/air-conditioning.cfm

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