I got rid of mine, says smart meter minister
Key figures in Labour’s £11bn scheme lay bare flaws that dogged it from the start
THE architect of Britain’s smart meter revolution has admitted he removed his own device because he “barely looked at it”.
Mike O’brien, who served as energy minister under Gordon Brown, has told The Daily Telegraph of fundamental flaws in the £11billion project to install the meters in every home.
He said that Ed Miliband, who was energy secretary when the policy was adopted, was wrong in his belief that households would constantly monitor their consumption of gas and electricity and use less as a result.
Other key figures in the roll-out have told The Telegraph that it was a mistake to cave in to pressure from the Big Six energy firms to put them in charge of the installation programme.
The result has been meters that stop working when consumers change energy supplier – known as “going dumb”; technology that relies on mobile phone signals and does not work in blackspots; and suppliers pressuring customers into having meters installed even if they do not want one.
Former ministers also said the programme was rushed through by politicians and civil servants who were desperate to meet climate change targets but who, according to one expert, “couldn’t tell the difference between a spanner and a banana”. Smart energy meters were the initiative of the last Labour government in 2008 but the policy has been pursued by successive governments since. They are designed to show householders how much their energy is costing them, in real time, and transmit meter readings electronically.
However, the programme to install 53 million devices by 2020 is way behind schedule. One in 10 of the meters does not work, and ministers have faced calls to pause the roll-out until a new generation of meters is ready later this year.
Mr O’brien said: “I had an early version. After a while I barely looked at it, didn’t use it. We got rid of it.”
Second-generation smart meters, known as Smets2, were supposed to be ready by 2014, but by January this year only 80 had been installed.
Other European countries have entrusted the installation of smart meters to distribution network operators, which are in charge of the infrastructure connecting the National Grid to individual homes. But in Britain, the Big Six firms were handed the prize of installing the meters, following constant lobbying. Mr O’brien said he would meet senior industry figures “about once a month for dinner” but now says he cannot remember how the decision to hand responsibility to the energy firms was taken.
A spokesman for the Department or Business, Energy and Industrial Strategy, said: “Over 11 million smart and advanced meters are already benefitting households and small businesses up and down the country, and over 400,000 smart meters are being installed every month. Smart meters are expected to take £300 million off domestic energy bills in 2020 alone, rising to an annual saving of £1.2 billion by 2030.”
Are you fed up with your smart energy meter? Mike O’brien is. He used to use one of the devices, 53million of which are due to be rolled out across the country by the end of 2020.
“I had an early version,” Mr O’brien told The Daily Telegraph this week. “After a while I barely looked at it. Didn’t use it.”
The difference between you and Mr O’brien, however, is that in 2008 Mr O’brien was minister of state for energy at the newly created, Ed Miliband-led Department of Energy and Climate Change (DECC), which launched Britain’s smart meter revolution – the biggest and most expensive in the world.
It is an IT project that will not meet either its 2020 deadline or its
£11 billion budget. That seems certain. What seems much less sure, however, is whether the £16.73billion savings the plan’s backers claim for it will ever materialise.
After all, according to the Government’s own analysis, a full third of those savings are due to come from reduced energy usage, driven in no small part by consumers staring in horror at the screens of their smart meters before frantically turning off electrical appliances at home. That’s what Mr Miliband told a select committee in 2009. “As a user of a real-time display,” he said, “I know that it makes a difference. It makes you careful when you boil the kettle.”
Yet his energy minister had a different view. “We got rid of it,” he recalls of his own smart meter.
Still, just because the energy minister “got rid” of his smart meter, don’t imagine that you will not be getting one. Many people have complained of heavy-handed tactics from energy suppliers to force them to accept installation, despite the fact that there is no obligation. It’s true that the suppliers are in a hurry, having fallen profoundly behind schedule.
So far, about 13million smart meters have been installed, at the rate of a little over 10,000 a day. To hit government targets, 40million more must be installed before the end of 2020 – a rate of more than 40,000 a day.
That would be hard enough, even if suppliers had the right meters to install. Unfortunately, those they have been putting in so far (known as Smets1 meters) are far from smart. For a start, they rely on mobile networks to communicate data, so if you live in a mobile network black spot, they don’t really function. Most significantly, however, they stop working properly if you change energy supplier – an issue known as “going dumb”. To consumers who have had them installed, this can act as a disincentive to change supplier. Yet one of the principal motivations for the whole project was to create a seamless, user-friendly system that would put consumers in charge and allow them to switch suppliers easily, so getting the best energy prices.
“The big stuff was around energy efficiency and [the customer’s] ability to switch,” says Philip Hunt, Baron Hunt of Kings Heath, who was energy minister with Mr Miliband. “For me that was the core thing. So going dumb – that is obviously not great. Not great at all.”
The “going dumb” phenomenon is hardly a surprise. According to one senior source who worked inside Mr Miliband’s DECC, “there was already a suspicion that the tech was on the road to being out of date” even as it was being approved a decade ago. Due to delays and overruns, however, the very meters that looked old even in 2008 are still being installed today and can continue to be offered by suppliers until October. Whether second generation “Smets2” meters, which are supposed to iron out problems, will be ready by that time is open to question. According to the initial timetable, they were supposed to have been ready by 2014. But the kit is so beset by technical niggles that, by January 2018, only 80 had been installed in what DECC’S successor, the Department for Business, Energy & Industrial Strategy (BEIS), called “a live environment”. Only another 39,990,920 to go.
So how did a nationwide IT project costing billions turn into what Martin Lewis, founder of Moneysavingexpert.com, calls a “cock-up and a catastrophe”? For the answer to that, it is necessary to turn to Article 13 of Directive 2006/32/EC of the European Parliament, dating from 2006. There lies the seed of Britain’s smart meter madness. Note, the directive did not insist on smart meters. It was not a three-line whip. In fact, it offered plenty of get-out clauses – that meters only needed to be installed if it was “technically possible, financially reasonable and proportionate”. But despite this, the directive was seized upon in Britain, where politicians on both sides of the House were vying to outdo each other in demonstrating their green credentials.
“Far from opposing us, the Tories were saying we weren’t being green enough,” recalls Mr O’brien. “These were the days of David Cameron chasing huskies.”
That political climate led to the creation by Gordon Brown, who was the prime minister at the time, of a new department, the DECC, at the head of which he placed one of his most trusted lieutenants, Mr Miliband. DECC’S establishment only contributed to the sense that energy had become an issue of universally recognised importance.
For example, when the Climate Change Act – to reduce carbon emissions by 80per cent by 2050
– was introduced in 2008, just five MPS voted against.
That consensus only intensified as the (ultimately doomed) Copenhagen Conference on Climate Change approached in 2009.
“Everything was leading up to Copenhagen,” says one official who was at DECC at the time. “There was a lot of interest in climate change targets.”
The DECC’S job was set up to work out how these targets were going to be met – and smart meters were one of the building blocks to meet them.
“Britain was trying to take a leadership role on climate change,” the official says. “There was a sense we should be an international role model. There was such enthusiasm for that from all sides.”
“It was,” Lord Hunt remembers, “a very exciting time.”
Exciting, but not without problems. In fact, from the moment the decision was taken to gold-plate the EU’S 2006 directive, the roll-out of smart meters was struck by a series of disasters. These included failing to spot a security loophole so serious that GCHQ feared a hacker could “start blowing things up”, according to a Whitehall official. Dr Ian Levy, the technical director of GCHQ’S communications electronic security group, even gave an interview to a cybersecurity journal in which he said of the security breaches: “The issue is, will they let someone disconnect all the power to your house? Or can someone turn off the right number of meters in the right way to cause a collapse in the grid’s systems?”
But the truly catastrophic decision was the one to entrust the installation of smart meters to energy suppliers such as the Big Six instead of Distribution Network Operators (DNOS), which run the local hardware that gets energy from the National Grid’s pylons to your home. Almost everywhere else in Europe, smart meter installation was entrusted to the DNOS, which could be relied upon to create a unified system, street by street. Instead, the DECC decided to entrust installation to the nation’s patchwork of suppliers, going customer by customer.
According to an Independent review undertaken by Professor Dieter Helm for the BEIS last October, this decision was “a mistake with profound consequences”. Instead of the “coordinated and comprehensive programme” that the DNOS would have delivered, the result was “haphazard, patchy and high-cost”.
And those high costs are borne by the consumer, through higher bills. But while these costs are guaranteed to be passed down, remarkably, no legislation is in place to ensure that hoped-for savings are too.
The Government estimates that the energy suppliers will be the beneficiaries of £8billion, or almost half, of the total £16.73billion savings it expects by 2030.
They are free to pocket it. Despite its dry language, it is possible to detect a level of astonishment in Prof Helm’s BEIS report. Notably, he appears mystified by the decision to hand energy suppliers, which obviously don’t want their customers to switch away, responsibility for installing smart meters designed to make it easier to do precisely that.
“The incumbent suppliers have the incentive to capture and keep customers,” he writes. “Switching is not in their interests.”
What is in their interests, he notes, are meters that go “dumb” and so put customers off switching. So is the fact that so many meters failed a surprise? He writes: “This is what would be expected given the incentives.”
Further problems flowed from the decision to give suppliers the job. The biggest was the fragmentation of the process. Each supplier cut its own deal with mobile networks needed to communicate data, and with meter manufacturers (MAPS).
As a consequence, inter-operability has been a constant problem. Clearly, meters go dumb when customers change supplier. But that’s not all. Due to MAP contracts, those meters that survive a switch can be prohibitively expensive for the new energy supplier to take over. So they are often ripped out – even though they still work – and replaced, sometimes with an identical model. “An absolute horror show,” says the senior source at DECC. “The DNOS should have done [the roll-out of meters]. I have no idea why the DNOS were not chosen.” What might have been crucial was the fact that, as the DECC sources remembers: “Energy companies were in and out of the [DECC] building. I don’t remember the DNOS being around much, to be honest.”
The source suggests that the decision to go with suppliers rather than DNOS was part of Mr O’brien’s portfolio. “He was leading on it.” And Mr O’brien clearly recalls the “lobbying by the industry that [smart meters] would be a good thing.
“We would meet about once a month for dinner with some of the leading business people in the industry.”
Yet on the decision to hand suppliers, not DNOS, responsibility for the roll-out, he was less clear. “I don’t know [how that decision was taken]. I can’t remember now. We would have done that on advice.”
According to Prof Helm: “At the time there was an enormous amount of lobbying from most of the suppliers, led by Centrica. They all saw smart meters as a dimension of their supply business. So if you had a smart meter with their own branding on it, it helped sell lots of other energy services, like boilers. Whether by design or not, suppliers emerged with a meter model which fitted well with their marketing strategies.” Far from freeing customers to switch, meters were helping lock them in.
Mr O’brien left the DECC in spring 2008. By December that year, the DECC had produced an “impact assessment” of the various options for installing the meters.
The margins between the options was – relatively – minuscule. The DNO option, widely used and reliable, was forecast to have a net benefit of £5.65billion. The untested option of using suppliers who had been “in and out of the DECC building” was £5.98billion. Yet, the document reveals, “Option 2 is the Government preferred option”.
“I’m afraid, like a lot of assessments, that was not evidence-led policy, but policy-led evidence,” says Prof Helm. The ministerial signature on that document is that of Lord Hunt.
“Yeah … that I don’t remember,” Lord Hunt told me this week of the decision. “It was a long time ago. At the time we were in the throes of putting the policy together. A lot of energy was put in. It was very exciting that we would give people the ability to control their energy and to switch.
“What I find disappointing is that in practice 10 years later, people are unable to switch energy suppliers.
“The implication is that we didn’t pay enough attention to it,” he added. “I don’t accept that argument. Who knows [why it went wrong]? All I do know is that we did have this very strong vision of how we wanted smart meters to be used.”
When I suggested that the vision hadn’t materialised, he replied: “No, not yet. But there’s too much put into this for it to fail.” That sense of inevitability has contributed to the programme’s downfall.
For while it was initiated under Labour, it was not jettisoned, but cemented, in the Coalition’s “‘programme for government” in 2010. This endorsement, baked into the initial policy agreement between the Lib Dems and the Conservatives, made substantial changes hard, even when it became clear that serious problems and delays were afoot.
“None of the people initially involved in the project [under Labour] knew anything about technology,” says Ross Anderson, Professor of Security Engineering at the University of Cambridge. “None of them was an engineer. They all had degrees in Latin or something. Then, when Cameron was made aware, he wasn’t having any of it. He said, ‘It’s in the Coalition Agreement.’ And anyway, the chickens
‘They didn’t have anyone within the elite of the department who could tell the difference between a spanner and a banana’
‘What is in the interests of the incumbent suppliers are meters that go “dumb” , and so put customers off switching’
weren’t coming home to roost until 2020.”
It is a IT disaster that is particularly dispiriting because few doubt the need for, and benefits of, a wellimplemented system of smart meters. They are a crucial element of a so-called smart grid, where both users and suppliers are able to monitor, in real time, supply of and demand for energy. In an ideal world, this leads to “smart” appliances such as future dishwashers and washing machines detecting through smart meters when electricity demand is lowest, and so cheapest, and running automatically, even in the middle of the night. It leads to the nation’s future fleet of electric vehicles using their batteries to store renewable energy and then returning it to the grid if they don’t need it. Such sophisticated energy management and elasticity of use could bring Britain greater energy security and cheaper prices. It is this noble vision that still animates the ministers involved such as Mr O’brien and Lord Hunt.
One problem, as Mr O’brien acknowledges, is that “everything you do in the [energy] area is megabucks”. Cock-ups tend to be expensive.
But a second, bigger, problem seems to have been the lack of dissenting voices, of checks and balances, around the project from its outset.
“There was no opposition,” says the DECC source.
“There was at that stage a political consensus about what needed to be done,” says Lord Hunt.
“Everyone was very enthusiastic then – we just wanted to get on with saving the planet,” says Prof Anderson. “The problem was, they didn’t have anyone within the elite of the department who could tell the difference between a spanner and a banana.”
Now the voices of dissent and discontent are growing louder – and not just from consumers. A group of MPS produced a damning report earlier this week, and the National Audit Office has announced it will scrutinise the project in a report due this autumn. But critics say the Government still needs to shake off an air of complacency.
“There’s plenty of blame to go round – government error from 2008 on, regulators, suppliers,” says Grant Shapps, MP and former chairman of the Conservative Party. “The only blameless party is the consumers who are paying for it. Today we need realism. We need to stop pretending this is going to happen on time. We cannot continue to roll out old tech. It requires ministers to get into the geeky detail of what’s gone wrong.
“But the official attitude seems to be, ‘Nothing to see here. Move on.’
“First step – we need to recognise there’s a problem. And then we need to put somebody in charge who is really going to kick a---.”