Smart meter rollout remains a challenge for government

According to the latest figures, 57 per cent of all meters in Great Britain are now smart, although around 9 per cent – approximately three million – were not working as intended as of March this year, the NAO said.

In February, the government launched a consultation on plans to have smart meters installed in 80 per cent of homes and 73 per cent of small businesses by the end of 2025 to help achieve net-zero targets and save money.

The NAO said the Department for Energy Security and Net Zero (DESNZ) had made recent progress with the rollout, but faced challenges in meeting its latest targets.

The government had worked with industry to develop new smart meter technology that worked in more homes, but there remained a shortage of installation engineers and disagreements with suppliers, who argued they had exhausted the "low hanging fruit" of customers who wanted the devices.

Suppliers were therefore calling for new policies to support the rollout, such as mandating a smart meter replacement for any traditional meter that breaks, while DESNZ had called on suppliers to improve their performance against installation targets and invest more in rolling-out devices.

The current target is a watered-down ambition from the original plan to fit a smart meter in every home in the country by 2020, which was abandoned in 2019 when the government realised there was no chance of it being met.

At that point, the target was extended to 2024, but after Covid caused further delays another year was added to the deadline.

In the report's conclusions, the NAO said: "DESNZ is at a crucial point in the rollout and the decisions it takes now will determine the extent to which it can maximise value for money from the remainder of the programme.

"DESNZ should ensure it has robust information on both the total costs and benefits of smart meters to make these decisions from an informed position, particularly on the merits of different approaches to the rollout after 2025, including considering at what point the programme can end."

Suppliers are tasked with ensuring that the homes they provide energy to are offered a smart meter, with the cost of installing them fed through to households via bills (i.e. consumers are ultimately paying for the government's smart meter rollout).

The NAO also said the forecast £13.5bn total cost of the rollout – made in 2019 by DESNZ's predecessor, the department for Business, Energy and Industrial Strategy – would rise because average installation costs were higher than expected.

The NAO has recommended that the government updates data on programme costs and benefits and said the DESNZ and suppliers also needed to work together to overcome disagreements and address the slower-than-planned installation rates.

In the reports conclusion, the NAO noted: "While DESNZ and suppliers collaborate in many areas, they disagree on the reasons for the delayed rollout. Both sides need to work constructively together on the future of the rollout, including considering the merits of new incentives and regulations that increase take-up of smart meters."

Gareth Davies, head of the NAO, said: "The rollout is now at a crucial point and the department should ensure it has robust information on both the total costs and benefits of smart meters to make decisions from an informed position to maximise value for money.

"DESNZ must now work with suppliers to get the programme on track, for the benefit of millions of consumers and small businesses and government's wider environmental goals."

Dame Meg Hillier, chairwoman of the Public Accounts Committee, said: "Smart meters are key to empowering consumers with information on their costs and usage of energy, as well as contributing to the decarbonisation agenda.

"Today's NAO report shows the government has made progress addressing technological issues in smart meters since 2018. However, 10 years on from the requirement for suppliers to install smart meters in all homes and small businesses, just 57 per cent of meters are smart; a far cry from the original target.

"Without a clear grip on the escalating costs of the rollout, the department for energy security and net zero risks chipping away at the benefits to consumers."

A DESNZ spokesperson said: "As the NAO recognises, we've made good progress in the rollout of smart meters with over 32 million now in homes and small businesses across Great Britain, putting them in control of their energy use and saving money on bills.

"But we want more people to benefit as soon as possible. That's why we've set energy suppliers ambitious but realistic installation targets and are working with them to speed up the rollout."

Smart Energy GB chief executive Dan Brooke said: "We welcome the NAO's report, which recognises the important progress of the smart meter rollout in recent years and the substantial benefits that smart meters bring to households and businesses in Britain.

"The report identifies areas for improvement, but also highlights that past challenges have been largely overcome and that smart meters are helping people to reduce their energy use and save more money than ever before.

"Nearly 900,000 new meters were installed in the first three months of 2023 alone and it's important that we keep momentum up so that as many people as possible can feel the many benefits of smart meters."

Daisy Cross, Energy UK's head of future retail markets, said: "The NAO rightly highlights the long-term benefits to customers from the rollout, by enabling a flexible, cheaper, cleaner and more efficient energy system.

"We've also seen smart customers benefit this winter by being able to take part in the 'Demand Flexibility Service' and save money. However, to maximise these benefits we need all customers to have a smart meter and for the government to get fully behind this message.

"We also fully agree that further transparency on the costs and benefits of the rollout is needed. As the energy industry, we want to work together on what will drive the rollout to completion and for the government to set up a clear pathway for the future smart meter programme in Great Britain."

The NAO's report is available online as a free download.