Type of Measure: IrishPolicyTechnology
Policy Focus: Energy
Status of Implementation: Ongoing
EU Climate Relevance: Non-ETSRED

Summary

The rollout of smart meters has the potential to aid the decarbonization of the Irish energy system and contribute to the achievement of EU and European Commission targets. The Internal Market in Electricity Directive (2009/72/EC) mandates the provision of smart meters for 80% of consumers by 2020 subject to cost benefit analysis conducted by each member state to determine the economic feasibility for distribution. This is part of the Third Energy Package and the European Commission’s 2030 Climate and Energy Framework. The 2030 framework sets EU-wide targets of: at least a 40% reduction in greenhouse gas emissions from 1990 levels; at least a 32% share for renewable energy; and at least a 32.5% improvement in energy efficiency. (European Commission, 2020).

The immediate benefits offered by smart meters in Ireland are the potential for reductions in overall electricity consumption and peak electricity demand. The most substantial costs of the rollout are associated with the labour and infrastructural requirements of physically installing the new meters. The overall cost-benefit assessment for the rollout is broadly neutral, but future benefits could be significantly greater than accounted for in this analysis if anticipated advanced benefits of smart metering such as the development of smart grids and homes, electric vehicle penetration; and local microgeneration are realized into the future.

Ireland is engaging in a phased rollout of smart meters, following findings from preliminary cost-benefit analyses that this approach represented better value for money for electricity consumers in Ireland (Commission for Regulation of Utilities, 2017).  The meter upgrade programme is to operate from 2019-2024, with the goal that  all Irish homes and businesses will have a smart meter by 2024 (Commission for Regulation of Utilities, 2019). The smart meter rollout will be accompanied by rollout of dynamic pricing/Time-of-Use (TOU) tariffs and other product offerings which aim to incentivize consumer responses which result in overall reductions in electricity consumption and reductions in peak demand.

Implementation, is to be undertaken in three phases, with 250,000 meters to be installed in phase 1 (2019-20), 1,000,0000 in phase 2 (2021-22) and a further 1,000,000 in phase 3 (2023-24). Pay-as-you-go tariffs and time-of-use tariffs are to be introduced in phase 2, with the expectation for more advanced and user friendly attributes of smart meters by phase 3,  including the provision of real time usage information, in-home displays and the development of microgeneration capacity. (Commission for Regulation of Utilities, 2019).

The aim for smart meter technology is that it will support Ireland’s transition to a low carbon future by facilitating dynamic pricing structures, enabling the development of smart grids, and supporting the electrification of heat, transport, local renewable generation and microgeneration. (ESB, 2020). Residential energy use accounted for 10.2% of Ireland’s greenhouse gas emissions in 2018, amounting to 60.93 million tonnes of C02 equivalent in emissions (Environmental Protection Agency, 2020).

The Department of Communications, Energy and Natural Resources (2015) white paper on Ireland’s transition to a low carbon economy 2015-2030 states that the strategic objectives of smart metering in Ireland are to:

  1. Encourage energy efficiency
  2. Facilitate peak load management
  3. Support renewable and microgeneration
  4. Enhance competition and improve consumer experience
  5. Improve network services.

These objectives are further supported by measures outlined in Ireland’s National Climate Action Plan 2019, which commits to gird development, providing routes to market for renewable energy, and supporting the development of markets for micro-generation (Government of Ireland, 2019).

The provision and uptake of dynamic pricing mechanisms (e.g. time-of-use tariffs) have been identified as crucial to the success and cost-effectiveness of the technology (Commission for Regulation of Utilities, 2017; Faruqui et al., 2010). There is evidence that consumers may not engage with these pricing options if they appear complex and the potential benefits are not explained properly (Belton and Lunn, 2020). To support consumer engagement, electricity providers will be required to: Offer at least one time-of-use tariff for customers; Provide a time-of-use “primer” giving consumers a clear overview of the tariff operates and how they can benefit from it; and provide annual reminders to any customer who has a smart meter but is not on a time-of-use tariff. (Commission for Regulation of Utilities, 2019).

The overall estimated impact of smart metering on carbon emissions is not clear. The European Commission (2015) notes that smart-meter rollouts will result in reductions in carbon emissions through reduced peak demand, the proliferation of low carbon generation sources and reduced transport requirements for field personnel (meter services), however specific estimates for these reductions are not offered. The rollout is nonetheless identified as central to Ireland’s transition to a low-carbon energy system and economy by facilitating demand responses, smart grid development and the electrification of transport and heat (Electricity Supply Board, 2020).

The Commission for the Regulation of Utilities (CRU) (2017) conducted a comprehensive cost-benefit analysis for the phased rollout of smart meters in Ireland. They assess costs and benefits as they accrue to relevant stakeholder groups: Electricity Networks; Electricity Suppliers; Consumers; and the Electricity generation system as a whole.

Costs

Networks must bear the cost of meter production and installation, IT system enhancement, customer support, staff training, and the disposal of traditional meters. Suppliers face costs associated with IT enhancement, increased customer support during the rollout period, deployment and support of customer devices and apps, and their overall management of the programme. The costs faced by consumers and the electricity generation system are minimal. Consumers face the time cost of facilitating the meter installation and of learning about the meter, its functionalities and the new products and pricing schemes it can facilitate. No significant costs are identified for the electricity generation system. (Commission for Regulation of Utilities, 2017)

Benefits

Networks benefit through the avoidance of costs relating to traditional meter replacements, manual meter readings, site visits for meter operations and overall reductions in electricity theft. Suppliers face a substantially reduced administrative and cost burden associated with estimated bills and consumer switching, and avoid the previously anticipated cost of installing pay-as-you-go meters. Consumers benefit through reduced bills and greater knowledge of and control over their energy usage. The generation system, as a whole, benefits from reduced capacity requirements as a result of a reduction in peak demand, and a reduction in overall system marginal price as overall consumption becomes more efficient and demand is better spread throughout the day to avoid peaks (Commission for Regulation of Utilities, 2017).

 

The CRU cost-benefit analysis also highlights the potential for advanced, currently unquantifiable benefits that smart metering could facilitate in Ireland. These include: the facilitation and development of a smart grid, smart homes and appliances; enabling micro-generation and “energy communities”; supporting Electric Vehicle penetration and the development and uptake of electrical storage. All of these may improve the realized NPV of the smart meter investment and its overall impact in reducing emissions (Commission for Regulation of Utilities, 2017).

The Commission for the Regulation of Utilities concludes that the overall Net Present Value of the smart meter rollout amounts to approximately -€36 million. This is classified as broadly neutral in the context of an overall investment of approximately €1 billion. The assessment also notes that if the infrastructural investment required to satisfy potential EU regulation mandating that consumers requesting a smart meter must be provided with one is considered a sunk cost (i.e. if this expense was required even in the absence of a smart meter rollout) , then the overall NPV is positive, amounting to approximately €106 million. (Commission for Regulation of Utilities, 2017)

 

Costs and benefits are unevenly distributed between stakeholders, with benefits largely captured by consumers (residential and SME) and the generation system itself, while costs fall on suppliers and networks. This estimated distribution of costs and benefits is shown in table 1 below.

Table 1: Full Statement of Impact of Smart meter rollout

 

 

 

 

 

 

 

 

(Source: Commission for Regulation of Utilities, 2017. All Discounted NPV calculated by CRU using 5% discount rate.)

 

This does not include the potentially substantial advanced benefits which smart meters may facilitate (smart grid development, smart homes and appliances etc.). It is also particularly sensitive to two variables: meter and associated infrastructure costs; and consumer responsiveness. Small changes in installation and infrastructure costs per meter can be significant given that the rollout involves installing meters in more than 2 million buildings. Consumer responsiveness (i.e. engagement with usage information and uptake of dynamic tariffs) is highly important also as reductions in overall consumption and peak demand are predicted to be the largest benefits of the programme. (Commission for Regulation of Utilities, 2017).

References

Belton, C., & Lunn, P. (2020). Smart choices? An experimental study of smart meters and time-of-use tariffs in Ireland. Energy Policy140, 111243. https://doi.org/10.1016/j.enpol.2020.111243

Commission for Regulation of Utilities. (2017). Smart Metering Cost Benefit Analysis. Dublin. https://www.cru.ie/wp-content/uploads/2017/11/CRU17324-Smart-Meter-Upgrade-Cost-Benefit-Analysis-Information-Paper.pdf

Commission for Regulation of Utilities. (2019). Smart Meter Upgrade The Customer-Led Transition to Time-of-Use. Dublin. https://www.cru.ie/wp-content/uploads/2018/05/CRU19019-Customer-Led-Transition-to-Time-of-Use.pdf

Department of Communications, Energy and Natural Resources. (2015). Ireland’s Transition to a Low Carbon Energy Future 2015-2030. Dublin. https://www.dccae.gov.ie/en-ie/energy/publications/Documents/2/Energy%20White%20Paper%20-%20Dec%202015.pdf

Department of Communications, Climate Action and Environment. (2020). EU Emissions Targets [Online]. Available at: https://www.dccae.gov.ie/en-ie/climate-action/topics/eu-and-international-climate-action/2020-eu-targets/Pages/default.aspx#:~:text=For%20the%20year%202020%20itself,2020%20compared%20to%201990%20levels. Last Accessed July 13th 2020.

Directive 2009/72/EC of the European Parliament and of the Council of 13  July 2009 Concerning Common Rules for the Internal Market in Electricity and Repealing Directive 2003/54/EC. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009L0072&from=EN

Electricity Supply Board (2020). Smart Meter Upgrade: Benefits [Online]. https://www.esbnetworks.ie/existing-connection/meters-readings/smart-meter-upgrade/background. Last Accessed July 13th 2020

Electricity Supply Board (2020). Smart Meters: Background [Online]. Available at: https://www.esbnetworks.ie/existing-connection/meters-readings/smart-meter-upgrade/benefits

Environmental Protection Agency (2020). Greenhouse Gas Emissions [Online]. Available at: http://www.epa.ie/ghg/  Last Accessed July 13th 2020

European Commission. Directorate General for Energy. (2016). Impact Assessment Study on Downstream Flexibility, Price Flexibility, Demand Response & Smart Metering. Luxembourg: Publications Office of the European Union. https://ec.europa.eu/energy/sites/ener/files/documents/demand_response_ia_study_final_report_12-08-2016.pdf

European Commission (EC). Directorate General for Energy. (2019). Benchmarking smart metering deployment in the EU-28. Luxembourg: Publications Office of the European Union. doi:10.2833/492070

European Commission (EC). (2020). 2030 Climate & Energy Framework [Online]. Available at: https://ec.europa.eu/clima/policies/strategies/2030_en#:~:text=The%202030%20climate%20and%20energy,32%25%20share%20for%20renewable%20energy

Faruqui, A., Harris, D., & Hledik, R. (2010). Unlocking the €53 billion savings from smart meters in the EU: How increasing the adoption of dynamic tariffs could make or break the EU’s smart grid investment. Energy Policy38(10), 6222-6231. https://doi.org/10.1016/j.enpol.2010.06.010

Government of Ireland (2019). Climate Action Plan 2019: To Tackle Climate Breakdown. Available at: https://www.dccae.gov.ie/en-ie/climate-action/publications/Documents/16/Climate_Action_Plan_2019.pdf

 

Reference this

Policymeasures.com (2020). Smart Meters (Ireland). Available at: https://policymeasures.com/measure/smart-meters-ireland/. Last accessed: 20-09-2020.