Are energy smart meters the answer?
Far-reaching changes to the way you are charged for electricity are under way. What does it mean for you?
Key points
The AEMC has proposed a roll-out of electricity smart meters across Australia.
Power distribution and retail customers are implementing technologies and tariffs without consulting customers.
National Seniors says the rollout is misguided and more support and protection for consumers is needed.
Remember off-peak electric? It was a special tariff you could use to power appliances like hot water and pool pumps at night.
It rewarded people for using power when the grid had surplus energy at night by offering a cheaper rate.
But as energy production changes, the times at which energy is cheaper has changed. Surplus energy is being produced during the day as more solar and renewable energy gets produced and energy is not as cheap at night as it once was. Added to this, demand at peak times continues to rise, meaning more work is needed to smooth out energy production and consumption.
In the absence of large-scale batteries or other energy storage technologies (for example, pumped hydro), it is becoming harder to provide round-the-clock, consistent, at-call power.
As such, the energy grid must be carefully managed to preserve the electricity network from strong demand, especially at peak times.
That is the problem that the Australian Energy Market Commission (AEMC) and policy makers are grappling with – and they are looking at smart meters as part of the solution.
A smart meter is a device that measures your electricity use digitally and sends data back to your electricity provider.
Alongside the ability to monitor energy consumption, smart meters can be used to smooth out consumption by impacting consumer behaviour. This is where they get more contentious.
The logic is that smart meters allow retailers to charge different rates at different times of the day, to better mimic the price they pay for energy on the wholesale market at different times.
The theory is that higher prices at peak times will encourage consumers to shift their electricity usage away from peak times to times when electricity prices are cheaper – making more efficient use of the poles and wires network.
However, few customers appear to be aware of smart meters or plans to make them mandatory, and ultimately the impact these will have on the price you pay for energy.
One issue that has reared its head is that many of the people moving to smart meters have no idea they can be put on rates that change according to the time of day, partly because there is no obligation for retailers to advise them of this.
Even more disturbing, is that these time-of-use tariffs appear to have significant detriment to consumers. For example, under time-of-use tariffs, the single highest point of demand for power from the grid – measured in 30-minute blocks – is used to calculate how much you pay for a whole month.
ABC News noted this could affect a person who is away from home for all but one day in a month but returns on the final day and has heavy power needs, such as using the washing machine, cooking dinner in the oven, running the heater, and drying clothes.
This usage would form the basis of the demand charge for the entire month!
Electricity distribution companies control the electricity network and have been allowed to change the way they charge retailers. Thanks to a loophole in Australia’s energy rules, retailers were in turn allowed to pass those network tariffs on to household consumers without even having to tell them beforehand.
Recently, the AEMC, which sets the rules in a national electricity market servicing about 10 million homes on the eastern seaboard, proposed an accelerated roll out of smart meters to hasten the transition to cost-reflective tariffs.
The proposal is to compulsorily roll out smart meters for all households by 2030, with no ability to opt out.
Belatedly, and after actively promoting smart meters, the AEMC has raised a red flag.
According to the ABC, AEMC Chair, Anna Collyer, suggested a slower rollout of tariff reform as the commission undertook a review of the rules around electricity pricing and looked to strengthen consumer protections.
“It’s critical to the success of the rollout that we work through these concerns raised about how retailers might be applying demand or time-of-use tariffs in unexpected ways. And we expect we may need to push back the final determination to do this well,” she said while emphasising the roll out would proceed.
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National Seniors Australia is not convinced that the proposed rollout of smart meters is warranted. Given the inflationary environment and ongoing cost-of-living concerns, now is not the time to engage in wide-scale network investment projects which place increased cost pressures on consumers.
Simply, not enough is known about the impact, and cost, of this reform on consumers in general, and vulnerable people in particular. But there is evidence about take-up of demand tariffs in locations where smart meters have already been rolled out. And it’s not promising.
In Victoria, where there was a full roll out of smart meters, take up of demand tariffs sits at only about 20%.
The question this raises is: If smart meters help consumers, why has take-up of demand tariffs been so low? It indicates that people do not or cannot benefit from them in the way the AEMC envisions. It’s fine if you have solar and batteries and can manage your consumption, but that is not the reality for most people.
On that basis alone, it seems odd to propose a 100% rollout for all households in other states and territories.
National Seniors CEO, Chris Grice, says that despite the objective of the reform to encourage people to change their behaviour, not all consumers can do so.
This is especially pertinent for low-income households who cannot afford technologies to mitigate consumption in peak times.
“Rolling out smart meters to households that cannot realise the benefits and face increased power prices as a result is highly inequitable and undermines the logic of a mandatory roll out.
“Lower-income households cannot afford more efficient appliances or to install solar, let alone batteries.
“We are particularly concerned about the potential impact on seniors on low fixed incomes, who may depend on home heating and cooling and have limited capacity for remediation or investment in technologies that enable behaviour change or mitigate energy consumption in peak times,” Mr Grice said.
Smart meters and new tariff regimes are complicated and can require a high level of technical knowledge.
So they can better understand and manage the reforms, households must be given more time and resources, otherwise there is the risk they will be severely financially disadvantaged.
