New research by the Big Deal and ITV Tonight reveals the smart meter installation could cost £1 billion more than previously predicted.
Total cost of the smart meter rollout could be a massive £12 billion.
New research from consumer collective the Big Deal and ITV Tonight reveals that the smart meter rollout could cost £1 billion more than previously predicted taking the total cost of the programme to a staggering £12 billion.
New analysis using BEIS’s own figures reveals that the cost of installing the meters into every home may have been underestimated by £1.093 billion.
|BEIS calculations||Big Deal & ITV calculations||Difference|
|Equipment||£4,442 million||£4,048 million||– £394 million|
|Installation (inc. 2nd visits)||£2,077 million||£3,563 million||+ £1,486 million|
|Total||£6,519 million||£7,612 million||+ £1,093 million|
 Breakdown of costs including meters, IHDs, Installations and Communication Hubs – Smart Meter Roll-Out Cost-Benefit Analysis Part 1 p.13 – BEIS – Published 10th November 2016 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/567167/OFFSEN_2016_smart_meters_cost-benefit-update_Part_I_FINAL_VERSION.PDF
Our analysis finds that BEIS have overestimated the cost of purchasing equipment by £394 million but have dramatically underestimated the cost of installation by £1.486 billion.
A full breakdown of how we get to the £1.093 billion overspend is in the tables in the Notes to Editors. BEIS do not provide a detailed breakdown of their calculations so it isn’t possible to work out exactly why they have made the estimates they have but we believe the two main reasons for the overspend are:
- Underestimating the number of homes that have either just one meter or those homes with a gas and electricity meter from different energy suppliers. Each of these installations will cost £67 each rather than the £107 (£33.50 per meter) it costs when one supplier replaces both meters.
- Underestimating the number of households that will require second visits because the installations don’t go well in the first visit. BEIS have said that 5% of installations will require a second visit. However from conversations with industry insiders – from energy companies to meter installers – as well as customers the Big Deal and ITV estimate that 15% is a more accurate figure and could be much higher.
Smart meters are currently facing numerous issues making second visits a relatively regular occurrence:
- Installed meters are not communicating to the energy supplier correctly
- Gas and electricity smart meters are not communicating to each other properly. For example a gas meter may be in a different place of the building than the electricity meter causing communication issues.
- The in home display not working properly such as not receiving information from the meters.
Edward Molyneux, Head of Research for consumer collective TheBigDeal.com, said:
“Smart meters are good in principle but it’s an open secret across the industry that the rollout is running behind schedule and over budget. The price is paid by consumers as suppliers will inevitably end up passing the cost on in higher bills.”
ITV Tonight – Energy Bills: Can We Be Smarter? will be broadcast tonight (Thursday 2nd February 2016) at 7.30pm.
When sharing the story on social media, please use the hashtag #CanWeBeSmarter.
Notes for editors
Costs of the smart meter programme
The installation costs can be broken down into two sections.
- Cost of equipment
First the cost of the equipment, there are 50 million meters in the UK, 28 million electricity and 22 million gas. The cost of an electricity smart meter is £44 and a gas smart meter is £57. As well as this, every electricity smart meter also comes with a communications hub costing £29, allowing the meter to communicate back to the energy supplier, and an In Home Display costing £15, allowing the customer to monitor their energy usage.
|Equipment||Number needed||Cost per unit||Total cost (inc. PV uplift)|
|Electricity Meters||27.923 million||£44||£1,339 million|
|Gas Meters||22.048 million||£57||£1,370 million|
|Communication Hubs||27.923 million||£29||£883 million|
|In-Home Displays (IHD)||27.923 million||£15||£457 million|
 Cost of equipment – Smart Meter Roll-Out Cost-Benefit Analysis Part 2 Technical Annex p.10 – BEIS – Published 10th November 2016 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/567168/OFFSEN_2016_smart_meters_cost-benefit-update_Part_II_FINAL_VERSION.PDF
BEIS calculated the equipment cost as £4.4 billion, whereas the Big Deal and ITV calculate this at £400 million less, £4 billion.
- Cost of installation
The major cost overruns comes when considering the costs of the actual installation of the smart meters. For a supplier to install both gas and electricity meter together it costs £107 – roughly 85% of the 22 million homes with gas and electricity have the same supplier for both, so that’s 18.7 million homes. That means that there are 3.3 million homes with gas and electricity supplied by two different companies. On top of the 22 million homes with gas and electricity there are 5.9 million homes who have no mains gas, but do have an electricity meter.
 85% of households with electricity and gas are with the same supplier (dual fuel) – Competition in British household energy supply market p.15 – Cornwall Energy for Energy UK – Published September 2015 http://www.energy-uk.org.uk/publication.html?task=file.download&id=5741
|Type of home||No. of homes||No. of meters||Installation cost per home||Total installation cost (inc. PV uplift)|
|Two meters (gas and electricity) from same supplier||18.7 million||37.4 million||£107||£2,186 million|
|Two meters (gas and electricity) from different suppliers||3.3 million||6.6 million||£134 (£67 + £67)||£482 million|
|One meter (electricity only)||5.9 million||5.9 million||£67||£431 million|
|Total||27.9 million||49.9 million||£3,099 million|
Costs of installing smart meters – Smart Meter Roll-Out Cost-Benefit Analysis Part 1 p.21 – BEIS – Published 10th November 2016 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/567167/OFFSEN_2016_smart_meters_cost-benefit-update_Part_I_FINAL_VERSION.PDF
This means that another 13.4 million meters would need to be changed separately – a cost of £67 per install. We estimate that this will cost £3.1 billion, £1.3 billion more than BEIS estimates for these installations.
We also believe that BEIS have underestimated the number of second visits required. They believe this is just 5% and this is covered in their £2 billion figure for installation. BEIS have said that 5% of installations will require a second visit. However from conversations with industry insiders – from energy companies to meter installers – as well as customers the Big Deal and ITV estimate that 15% is a more accurate figure and could be much higher.
About TheBigDeal.com – what is a collective switch? https://blog.thebigdeal.com/collective-switch-work/
TheBigDeal.com is a consumer collective focused on reducing people’s energy bills. We bring together hundreds of thousands of consumers and use our collective buying power to create exclusive deals.
Launched in March 2014, we now have over 250,000 members and continue to grow. 62% of our members have never or hardly ever switched before – these are the very people who have been let down by the energy market for too long. Moreover, 60% of our members are over the age of 55 and 30% over the age of 65. We have moved over £100 million of custom and saved the British public over £15 million since we launched.
TheBigDeal.com is a start up business and charges a commission to energy companies. Unlike price comparison websites we are 100% transparent and publish the exact amount of our commission. For our most recent switch that is £46 for a dual fuel (both gas and electricity) switch. This compares to £50 to £100 for the main price comparison websites.