Why are suppliers pushing customers so hard on smart?

As the 2020 deadline for domestic smart metering looms, suppliers across the board are ramping up their install rates. During the first three months of 2018, we’ve witnessed a variety of tactics used to increase installation rates – some of which have drawn criticism from the press.

So why the big push? Smart metering is optional for consumers, as highlighted by a range of media when Prime Minister Theresa May said the programme to “offer” consumers a smart meter by 2020 would continue. Consumers have always had a right to refuse a smart meter, and there have been campaigns highlighting the purported health and data security risks of smart metering.

However, the programme is not optional for suppliers. There is continued pressure from Ofgem, mostly through agreed targets with suppliers, but also through expectations set out in open letters, most recently in December 2017. And of course, the obligation to take “all reasonable steps” to install (not offer) smart meters by 2020 is still a licence condition.

There is also a commercial pressure to install SMETS1 meters (the first version of technical standards, which is now being surpassed by SMETS2) before the end date for that technology. That date has slipped back, most recently to 5 October 2018, and 12 suppliers (including all six large suppliers) have additionally been given a derogation to install further SMETS1 meters (in limited numbers) until January 2019. But once those dates have been reached, any uninstalled SMETS1 meters will be stranded assets.

As these commercial pressures have aligned with a fairly negative press coverage of the smart metering programme, suppliers have made moves to increase uptake. The tactics used so far can be broadly split into two categories: incentives and messaging.

One obvious incentive is to offer a cheaper tariff to customers willing to have a smart meter installed. First Utility and EDF Energy are amongst the suppliers to take this approach, with “smart tariffs” becoming their cheapest offer in at least a few regions. A different approach has been taken by SSE, which recently launched a £10 cashback offer for existing energy customers that book a smart meter installation.

Whilst the offering of a cheaper tariff has been criticised in the media for being a “desperate attempt” to increase uptake of smart, some of the ‘messaging’ approaches from suppliers have proved more controversial. Large suppliers have been lambasted by Citizens Advice for “bullying” tactics in relation to the smart roll-out, with reports of letters to customers saying there is a “need” to replace old meters with a smart equivalent. In the aftermath of them media coverage, E.ON UK agreed to review its communications around smart metering.

With a continued, significant ramp-up in installation rates required to meet the 2020 target, and pressure from BEIS and the regulator, these tactics to drive consumer demand look set to continue. Many suppliers have long argued that the 2020 deadline is overly ambitious, and the way in which they are trying to get the programme done may demonstrate that this is true.

Our quarterly Domestic Smart Metering Market Report contains the latest information and news on the smart meter roll-out, including individual supplier progress, commercial deals with metering service providers, and propositions enabled by smart meters. To find out more, please contact Tom Goswell on 01603 604400, or at enquiries@cornwall-insight.com.

Related thinking

Energy storage and flexibility

Waiting to connect: the problems and solutions for network connection queues (Part 2)

Network connection queues continue to be a notable topic of interest as many generators face significant delays to project development – an issue that is directly conflicting with net zero ambitions and recent focuses on strengthening domestic energy supplies. In Part 1 of our two-part series on connection queues we...

Home supply and services

Addressing consumer harms in the non-domestic market

In recent months, Ofgem has shone a light on areas across both the domestic and non-domestic market where suppliers could improve their practices for customers and go beyond what they are obligated to do in the licence conditions. In a time of significant and extended volatility, the regulator has brought...

Energy storage and flexibility

Waiting to connect: the problems and solutions for network connection queues

The number of grid applications has risen significantly in recent years, resulting in increased pressure on the electricity networks to facilitate new connections. In its Energy Security Strategy, the UK government set out ambitions for 95% of electricity to be sourced from low carbon generation by 2030, and for the...

Energy Market Design

Are prices going to rise in Contracts for Difference Allocation Round 5?

A number of factors may be about to put an end to the trend for falling energy prices in the Contracts For Difference (CfD) scheme. The CfD scheme has provided strong subsidy support whilst also providing consumers robust levels of protection. High investor confidence and steady reductions in capital costs...

Business supply and services

What happened in 2022 in the energy market?

The GB energy market never stands still and 2022 was no different. In this infographic, we look back at some key happenings from the past year in different segments of the GB energy market.  Click the image below to see our snapshot.

E-mobility and low carbon

2022’s most exciting ‘Charts of the Week’

Some of our team have looked back throughout 2022 and picked their most exciting ‘Chart of the Week’.​Their choices include exploring green tariffs, wholesale gas prices, CfD allocation round 4 and the MHHS Implementation Levy.  It’s My Birthday – Two years of Dynamic Containment Picked by Tom Faulkner, Head of...

Business supply and services

Terms and conditions apply: Ofgem looking further into business market

As turbulence has continued in the wholesale energy markets throughout 2022, including through the crucial October contracting round for the business supply market, non-domestic energy suppliers have come under considerable pressure. Firstly, they have had to attempt to pass through extraordinary price increases to customers in recent months, particularly if...

Energy storage and flexibility

Energy Market Bulletin: 2022 Review of Power and Gas

2022 has positioned itself firmly as one of the most memorable for the energy sector in recent years. We have witnessed seismic changes in the wholesale cost of energy, transformational proposals for market reform and two new Prime Ministers. In our last Energy Market Bulletin report of 2022, we have...