Will smart meters benefit consumers?


This article is by Gill Owen, Research Program Leader, Monash Sustainability Institute at Monash University. It first appeared on The Conversation and is replicated here with permission.

analysis Smart meters are in the news again with much discussion about what Prime Minister Julia Gillard is expected to propose to the COAG meeting on Friday. Smart meters can perform various functions, from remote meter-reading to facilitating time-of-use tariffs to the consumer. Some of the main smart-meter capabilities are to:

  • measure electricity consumed – how much and when (on a time interval basis)
  • help the customer and their supplier communicate with one another
  • store interval-data and transfer it remotely to a data collector or utility
  • display consumption, tariff and other information.

Smart meters are not an end in themselves. But they can be a way to develop a more effective “demand side” in the electricity system; right now, most of the control of electricity delivery comes from the “supply side”.

At the moment, most power users get a flat tariff, whatever time they’re using power and however much demand there is for it. Smart meters can be used by power companies to introduce time of use tariffs – that is, to charge based on how much demand there is for power at a particular time. If accompanied by good feedback (such as an in-home display), they can allow consumers to control when they use their power, thus controlling what they spend.

Smart meters can also improve billing systems and bring other benefits. Costs in the electricity system (and hence impacts on customers’ electricity bills) are driven both by overall demand (the total amount of electricity consumed) and peak demand (the maximum amount consumed at any one time).

Peak demand is a particularly important driver of costs. Energy companies have to build power stations and networks to serve demand for only a small number of hours of peak demand each year, which means that this infrastructure is effectively unused for much of the time. Yet the companies who have built it will still need to recover the high fixed costs. The Australian Government estimates that 25% of retail electricity costs are derived from peak events – such as hot weather – that occur over a period of less than 40 hours per year.

The rapid growth of peak demand relative to overall (or average) demand has been a major factor influencing costs in the Australian electricity system. Between 2005 and 2011, peak demand increased at a rate of approximately 1.8% a year, while total electricity usage grew at 0.5% a year.

Although peak demand has fallen more recently this may just be due to cooler summers (and hence less use of air-conditioning). It is rather soon to say whether this drop off is a trend.

Tackling peak demand could help reduce the growth in costs. However, that there are many factors to consider in assessing whether reducing peak demand will in fact reduce costs – notably whether there is scope to defer or avoid investment. In some areas, where much investment has been made in recent years, the scope for savings may be limited.

Smart meters can deliver information, technology solutions and price signals, such as time of use and critical peak tariffs or rebates. They could therefore enable consumers to provide demand response in the electricity market. They could do this by electing to use less power when power is expensive.

Many time of use trials have found that the biggest reduction in peak demand comes from a combination of price signals, automated control (so consumers don’t have to do all the work to benefit from reducing demand at peak times) and clear, simple information.

Some sources say the Prime Minister is likely to propose the AEMC recommendation that smaller consumers be allowed to stay on a flat tariff when they get a smart meter, rather than being charged based on the time they are using power. This would help protect low income and vulnerable consumers from the risk of a bill shock.

It would be good practice for consumers to have a smart meter for some time before being offered a time-of-use tariff, so that they can build up a picture of their consumption (load) profile and then work out whether a time-of-use tariff would be the right choice for them.

Consumers also need ways of accessing information on their usage. A meter on its own will not do this; customers also need in home displays or web portals and these should be provided at the same time or soon after the meter has been installed. In the UK, the Government requires the energy retailers (who are responsible for the roll-out) to provide every consumer with a free in-home display at the same time as their smart meter is installed – and the installer will also show the consumer how to use it.

Smart meter roll-outs can be costly however and costs may escalate beyond original estimates – as was the experience in Victoria. It certainly makes sense to undertake robust cost and benefit assessments for any major change in energy markets – including smart meter roll-outs.

There are pros and cons of all forms of roll-outs. Network led geographic roll-outs may offer economies of scale but retailer led roll-outs may allow for more effective targeting of smart meters (for example, large users could get meters first). Whoever rolls out smart meters however, it is the consumer who will pay the costs. Consumers, therefore, should see some benefits.

Gill Owen does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations. This article was originally published at The Conversation. Read the original article. Image credit: Andrea Kratzenberg, royalty free

The Conversation


  1. It must be just me , but I cannot see how smart meters can have as much impact as suggested, we can not change our lives as much, Government Services, Business and Schools all have a locked in time cycle has the same effect on transport .

    • as someone who works for an electricity retailer, i think people underestimate exactly how much data these meters can obtain and once that data is obtained and ‘massaged’, the benefits of proper analysis should be of great benefit to the sector as a whole…

      • I can see it makes sense for the Industry not so sure the average consumer will in reality find any great advantage

  2. The article’s analysis isn’t complete without mentioning security and privacy concerns.
    For example, one of the “features” of smart meters is the ability of the provider to disconnect the user from afar. It’s meant to be used in cases of excessive loads, but one can clearly see the attraction the feature will have with hackers.
    With privacy, there is the matter of our consumption habits being stored [probably] on American servers, with all the implications that might have. Given the ability of some meters to provide information to a level that allows knowing exactly what devices you are using and when, there is some reason to worry for the public’s privacy.

  3. For Solar PV households and particularly in Victoria where the Premium and Transitional feed-in tariffs are no longer available, smart meters will extend the pay-back period by quite a bit.

    Happy to be corrected, but I think the Vic Government really shafted those of us looking to go solar.

    Without a smart meter, I assume you’d be charged based on the difference between generated and used kWh over the course of the bill. If I generate 20 kWh a day and use 30kWh, no problem, I’ll pay the 10kWh.

    With a smart meter, the difference is calculated every 30 minutes. For a household that is out during the day and their usage doesn’t kick in until they return home, they’re getting (in Victoria) 8c/kWh for their excess generated during the day, when their usage is low, and when they get home, low/no solar generation so copping the regular electricity rates.

  4. Until someone can explain *how* I can benefit (bearing in mind that my taxes will be spent on this upgrade, I am at a loss to see why I would want my taxes used to pay for these things. I do not believe for one second that power companies will use this for consumers advantage, in fact I think it will be the opposite. Someone educate me, Im interested to find out why I am totally wrong, but until them – Im not in the slightest enthusiastic.

    • Having access to your own detailed power usage is quite handy for reducing your own consumption and also rearranging when you do certain things (owning a solar system with detailed generation & consumption monitoring enabled will teach you this).

      As for tarrifs adjusting on the fly for home users, im not convinced this is such a great idea.

      • But i can install a few simple devices and get far better per device and overall energy use stats, without enabling the electricity co to fine tune their billing opportunities at my expense.

    • I’m the same Greg. My thinking goes like this.

      Power companies charge a peak, and off peak rate. Traditionally, thats been split between day, and night. But what happens when they get access to very specific data showing our peak period is different?

      I just cant see them looking at the info for our benefit.

      Right now, peak usage works around both business and home consumption being at the same time, when it fact its not. By the time most home users are ramping up their power consumption, most businesses have closed for the day, and are down to a maintenance level of use.

      It should show that the daily peak is due largely to business consumption, and that home users in this period should be charged less – its actually our off peak period because we’re not at home. That should mean lower costs for the home consumer.

      Instead, I see them altering the definition of peak/offpeak, so we end up paying more. If the usage is broken down so finely they can see what we use by the hour, its not hard to see them changing the agreements to read something like “your offpeak period is defined as the 6/8/12 lowest consumption hours averaged over the billing period” or something like that.

      I just cant see how access to more information can be good for our wallets when all it really means is being able to see when we really do use power the most.

      Only thing I can see being beneficial out of that is that maybe those consuming mostly in the traditional off peak period will get slugged their fair share, and push the peak price down a little. But I really cant see that happening.

      • You are misinterpreting what Offpeak and Peak means to the actual electricity provider, by conflating what it means to home-ISPs.

        A hope ISP sees peak load when the majority of their users are online. They then structure their quotas around trying to spread load into the Off-peak times, by charging less (providing more quota in this sense).

        The same occurs for power companies. Except they DONT provide electricity to Home-users only. They provide electricity to home and business users. They will structure their pricing around trying to drive usage to actual off-peak times. IE times when there is less total power use (same as an internet provider!).
        Unlike an internet provider, with a significantly greater demand for electricity from business, their offpeak times will reflect that.

        Why do they want to do this? If they convince every house in Australia to only use electricity during Off-Peak time, they don’t have to spent millions of dollars building new power plants to satisfy electricity demand. They get to avoid making that investment, saving them money (they won’t have to pay interest on the millions they would need to borrow).

        Conversely, if they convinced home users to schedule their Clothes-dryer to run during Business hours, and perhaps run the aircon during business hours to cool the house before they get home – It would run counter to their purposes. Incentivising home users to run electricity intensive tasks during peak time would screw up the whole system and cost them much more money.

        • Sorry Peter, I wasnt missing that point, I was saying that to the power companies, its an opportunity to slug us as home consumers with more. Yes, peak/offpeak is driven by total power usage at a given point, but if they have the ability to fine tune when they have to bill us, they will.

          The home user is as captive a market as the business user is. Businesses know they peak between 9am and 5pm, and home users are the same, except our peak is 5pm to 9pm when we’re at home and most active. They know this, which is why off peak isnt 9am to 9pm. The broad strokes of their billing loosely capture most of the heavy use now, but smart meters can do more for them.

          I’m saying that if enough people have smart meters, its an opportunity for the power companies to gouge us more, based on our personal usage rather than societal usage.

          If smart meters show that there is a spike in power use from 7am to 8am (as people get out of bed, and ready for the day), you can bet a dollar that they will look for a way to take advantage of that. Or there is a spike at 9pm to 11pm as people are online using their computers.

          They cant just extend the timeframe for peak, but they can customise the billing to the consumer. If that encourages them to use power over a wider part of the day, its a win/win situation. Most consumers can benefit by lower bills, industry benefits by spreading the load and using infrastructure more efficiently.

          But if they can turn a bigger profit in the meantime by catching those that fall through the cracks (eg, shiftworkers, spiking their use in offpeak periods), why wouldnt they?

  5. ZMan it’s not the differential, it’s constant recording of what is taken out & what is feed in.

    The only reason you would get a solar system in Vic is if you used power during the day.
    As when you have solar (here in Vic anyway) you always use what you product first, it’s only the excess that’s exported.

    My issue with the 8c/Kw feedin is that the wholesale price might be 8c and the distributor+retailer charge the 17c delivery fee (to cover cost of the network, billing, etc). So you get paid 8c to export, but they sell it to yor neighbours for ~25c (or ~33c if you’re on a Time Of Use system). That is just government mandated price gouging. When you export from your solar (or wind, etc) you’re using very little of the infrastructure which is priced into that extra 17c delivery fee, there’s no long distance high voltage powerlines, no step down transformers. It just exports up the street to your neighbourhood.

    The big claim from the distributors is that the wide spread installation of air conds places a high load on the network. Well solar produces power during these hot sunny dayso, thus is actually helping their network cope.

    The thing which annoys me about consumers having to pay for the smart meters, is that it’s a tool for the distributors to cut costs (no meter reads, they get valuable time of use data to help with load planning, they can remotely disable meters, etc) yet the consumers are paying for it. It’d be like the banks & utilities making us pay for switching to email billing, or airlines charging us for self check-in. It’s a system whose primary purpose is to save the distributors money, yet they demand they consumers pay for it. Probably even worse, our elected officials, those who are supposed to represent us, agreed and mandated that we pay for it.

    Ausgnome, as someone who has switched to solar & forced onto TOU tariff, it’s actually made a difference to our power usage, especially using the washing machine, dishwasher & even the air con.

  6. Simple question – just why are the governments, the Greens and the generators so desperately keen to ram smart meters down our necks?

    Oh, of course, they are all just here to help us.

    Silly me.

    • Yeah, exactly.

      You don’t see anyone agonizing over whether iPhones are in the consumer’s best interests do you?

      Simple rule: if people voluntarily go out of their way to get the thing… then they want it. If people have to be forced to take it, then they don’t want it.

      Very, very simple to understand.

      • @Tel

        That rule has 2 exceptions:

        1- If the consumer sees no difference in service or price, but it saves the supplier money

        2- If the consumer has IMPROVED service for no extra price AND it saves the supplier money

        An example of 1 would be making a car out of lightened, stronger steel.

        And example of 2 would be the NBN. (I’m well aware you don’t agree with that sentiment)

        • PS

          Smart meters are, IMO, in neither of those exceptions. There is no hard evidence they save the consumer significant portions of money. But there IS evidence they can cost extra and cause inconvenience. And they definitely save the supplier money.

  7. What concerns me is that the media, the government and the industry conflate smart metering with time of use charging, when in reality they are different things (although smart meters make time of use charging easier).

    In general smart metering is a good idea – instead of getting a huge bill once per quarter I can get a (slightly less huge :( ) bill every month because they don’t need an army of people walking around the neighbourhood reading meters. For example I live in a rural area and the meter reader needs to drive down 2k of road to read about 20 meters – all this labour and fuel could be saved with a smart meter. As others have said this should reduce the costs of running the network and be used to fund the rollout rather than passing the cost on to consumers.

    Time of use charging is the real demon. We hear the stories of how much peak power costs, but as we pay an average price per KW/h we consumers are isolated from this risk. time of use charging shifts (some) of this risk back to ordinary consumers. Now some households may be able to shift consumption to take advantage of off-peak pricing (e.g. Pool filters can run at night) but many can’t (hey everyone Sunday roast will now be at 1am instead of 1pm). Combine this with privatised generators who have an incentive to reduce supply at times of peak demand to spike the spot price and you have a recipe for trouble.

    Smart meters combined with optional time of use charging and a simple web service that lets you examine your data to determine which tarrif will leave you better off is good idea. Smart meters with forced TOU is not.

  8. Short answer:

    From what I’ve read (fair bit over the past 6 months) the breakdown of % for who they will help is thusly:

    80%- Electricity suppliers
    10%- Consumers
    10%- Electricity suppliers stockholders

    Seriously, it will only be the VERY anal consumers (which, I grant, with electricity usage, there would be more than you’d think) that see ANY appreciable drop in usage/saving of the moolah.

    Oh and if they think I’m gonna pay for one….I’ve got news- the law says I don’t have to.

    • I was very impressed last quarter, my bill actually went DOWN. I put it down to switching off the Foxtel box when not watching. Really, thats the only big change we’ve made, and the bill went down $20. Or 2 Kwh (or whatever it is they measure by – no bill in front of me) compared to last period.

      Not anal about the bill, but when 2 people get slugged with $400 in a tiny flat, with no dryer, air con, heaters, etc somethings going wrong. Having said that, the pedant in me (note, said as I go back to correct the ‘teh’ typo) would be interested to see exactly WHEN power use spikes.

      It would be interesting to see at least once so I could narrow down an easy way to lower power use and get $20 or more easily. After that, I’m not going to micromanage usage to shave cents off the bill.

      • @GongGav

        Not anal about the bill, but when 2 people get slugged with $400 in a tiny flat

        Do you have electric hot water? Electric stove?

  9. Smart Meters are old dohickeys, we’ve had one at my parents house here in the southwest of Western Australia for a good 10yrs now.

    We get charged 3 different rates, which change their times based on month of the year.

    Right now, we have 4 timeslots:

    – Offpeak – 9pm till 7am
    – Low Shoulder – 7am till 11am
    – Peak – 11am till 5pm
    – High Shoulder – 5pm till 9pm

    During winter, it is reversed:
    – Offpeak – 9pm till 7am
    – Peak 1 – 7am till 11am
    – Shoulder – 11am till 5pm
    – Peak 2 – 5pm till 9pm

    Costs are the same regardless of time of year, around 42c/kwh for peak, 12c/kwh for offpeak, and around 32c/kwh for the shoulder(s).

    The only issue with a system like that, is it requires you to be very religious about when you use high demand items such as dishwashers, dryers, washing machines, hot water, etc…

    Hot water is easy, since you can set the automatic timer to do it only during the cheap times, but clothes washing/drying takes a lot of effort. I know when we first got it, it was great, mum was very good at making sure everything happened in the appropriate slots, but as time grew on, everyone got a tad lazy.

    There’s some things our smart meter can’t do, such as the remote data gathering, etc… but meh, for a 10yr old device, it’s pretty good, apparently Western Power was offering them as far back as the 90’s.

    • Interesting info, with a charging model like that it really makes sense to have an East/West Solar array so that you are using your own power as much as possible during the peak (and to a lesser extent shoulder) periods.

      I’m about to upgrade my solar system so I have my existing 1.5kW west facing array joined by a 2.8kW east facing array which, on a nice day, should provide a minimum of 1000watts of power from 7:30am to 5:30pm (and more in between).

      • Solar would be nice, but with the current WA rates you get for it, it’s looking less and less enticing to jump to that ship.

        My stepfather can’t see the point in it, i’ve tried getting him to look, i’ve left pamphlets in his full view, etc…

        • That’s why you buy an east/west system, North facing systems are only good for folks on a massive FIT (eg 44c of better). For those wanting energy independence (and reduced bills) an East/West facing system is best as you get a much wider window of usable power and (assuming you are home, (eg on a weekend), you will waste less power by exporting it for chump change (8c FiT’s etc).

    • Btw, I did some modelling comparing a nice spring day to a hot summer day for approximate energy generation and consumption when deciding to invest in a bigger solar system – some might find it interesting what you can do when you have your own data to play with.

      I used my own consumption & generation data uploaded to PVOutput and then exported and charted in Excel – the east system facing projections came from another Adelaide PVO user with an east facing system that I scaled to reflect what I was planing to buy:


      PS, yes i’m a Data nerd with an Analytical background. :-D

    • You seem to be saying that between 7AM and 9PM (i.e. all the time most people are awake and doing stuff) it is more expensive than the standard flat rate.

      So we have to cook breakfast and wash our clothes before 7AM, and cook dinner and watch TV after 9PM. Why doesn’t this sound attractive?

      The Muslims will probably like it.

      • I’m saying get an decent sized east/west solar system and then you can use your own power in the sunlight hours and don’t have to worry so much about the peak charges.

  10. Domestic smart meters are for dumb people. Seriously, if you care in the least about the size of your electricity bill, then it’s just plain common sense how do decrease it – don’t leave power hungry appliances on when they don’t have to be in use, eg:

    1) Turn off or hibernate your PCs when not being used, especially overnight.
    2) Don’t run your pool pump all day, every day – do it overnight when needed.
    3) Run the aircon only when you have to. For cooling, set to higher temp. Or use ceiling fans/open windows if temps/humidity not too high.
    4) Turn off TVs (especially CRTs and Plasmas) when no one is watching.
    5) Replace old power hungry appliances with newer, more efficient ones (if you are able to, eg aircon, fridge, washer/dryer).
    6) Turn off lights, internal and external, when not required.
    7) Use off-peak water heating (or solar).

    If you’re already doing these things, a smart meter isn’t really going to help you.

  11. Surely smart metering combined with a “smart” wired house / products would be the only way you could save money..

    The “perfect world” scenario:

    You have Solar PV + Solar hot water and everything is smart wired to be controled based on need and price.. assuming that your rates are linked to the current spot price at the time.

    The smart meter gives you the current cost for the next time slot — 30mins or what ever..
    then you could program your washer / dryier / hot water / air con to only run when the current rates for the period are under X value, with the potental for Solar being exported whilst the highest spot price is recorded.

    Peak usage cant actually be 5pm-9pm when people turn on their tv and air con, well only if businesses who co-generate also turn off @ 5pm.. industry would use significantly more power than home users , although the distrubution is obviously different.

    Anybody know if inustrial busineeses pay for electricty based on time of use or are also given a flat rate?

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