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The end of energy profiles

The beginning of the real smart meter

It’s been a very long time coming, and its still not here, in fact it hasn’t even started but at least they’re now talking about starting.

If you’ve read our guide on electricity profiles you’ll know what we are referring to when we talk of smart meter settlement, if you haven’t here is a brief explainer:

By using the reads from your meter, your supplier can broadly tell how much energy you’ve used but they have no idea when you’ve used it (beyond some rudimentary time of day readings on some meters).

Energy Suppliers are required to purchase electricity in half-hour blocks to a level that is commensurate of their likely demand. This demand in each half-hour, as we’ve seen above, is not transparent and as such suppliers need to rely on the energy industry version of a guestimate, the electricity profile.

Electricity profiles are 8 assumed pattern of consumption for the 25 million plus meters in the UK. Clearly these profiles won’t fit the bill in all instances, indeed they are probably guaranteed to be inaccurate in just about every instance, but regardless this is the principle that is used to calculate your business energy price, your bill and a supplier’s costs.

Ultimately this is an inefficient market in action. For many years now however, smart meters have been a reality, first pioneered in the gas industry in the 1970s, with work undertaken in our region at the old gas research facility in Solihull. Though they were adopted in niche deployments they didn’t catch on and still to this day, whether they are deployed for gas or electricity connections they are in the minority.

Various obstacles have stood in their way, not least a total failure of the industry, suppliers, regulator, metering businesses and customers to embrace a not so new technology that can revolutionise the accuracy and efficiency of the UK energy network.

It’s difficult to pinpoint a single reason why this was, and still is, the case however a catch-all of cost concerns will work as a proxy.

For many years, smart meters and latterly smart grids (a fully e-connected grid covering generation, distribution and supply) have been trumpeted as the next big thing and recently the government, Ofgem, DECC and the energy companies have committed to a smart meter rollout – now delayed until 2015 and not due to finish until at least 2020.

This smart meter rollout is a big ask, although it should have been done years ago, however even if it proves a success, there is minimal value in just having a clever meter if the industry itself cannot utilize the data to make themselves more efficient.

And this is where the opening paragraph returns. Ofgem today announced

“Electricity settlement reform – moving to half-hourly settlement”.

First things first, this should have been done over 10 years ago but accepting that is hasn’t at least we’re talking about doing it now.

Ed Davey, secretary of state for energy and climate change said:

“I welcome this programme from Ofgem. Alongside the roll-out of smart metering, it will reform back-office electricity market processes that are vital to help deliver a more modern, competitive energy market for consumers.”

Whilst Rachel Fletcher, Senior Partner in Markets at Ofgem, said:

“Smart meters will help consumers to have much more control over when they use energy. They also make it far easier for consumers to reduce their bills if they use electricity outside peak hours, or at times when electricity is cheaper to produce.

“However, to make sure consumers get these benefits, we must reform industry charging arrangements which have been in force since the 1990s. This is so that more advanced time-of-use tariffs can be brought in. Taking these steps now means that we can make the energy market work even better for consumers, now that our reforms for a simpler, clearer, fairer market are in place.”

Ofgem has gone to lengths to underline its reasoning behind its decision as to why this settlement reform should take place however it is pretty clear that it was and remains an essential part of any move to smart meters where without it they would simply have proved a folly.

Sadly though, action will not be happening quickly, what Ofgem refers to as “Option Development” will take place in April 2014, followed by “Initial Assessment” which is forecast to be finalised by the end of 2014 at which point Stage 2, “detailed assessment” will kick in with a projected finalisation date of Autumn 2015.

For all the talk of stakeholders, the whizzy pictures and acronyms, this much welcome project is unlikely to conclude its assessment quickly, or engage in any real action for a number of years.

Given the timescales for initial development looking like 2016 at the earliest, and smart meter rollout having already begun by this point, it is difficult to see a fully connected smart grid appearing before 2020, but at least it is now a focus and not an exercise in excuses and navel gazing.

Well done to Ofgem for finally acting, now you need to make up for lost time, and quickly.

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