Smart meters have been a contentious program encouraged by the Government as it looks to make the way households record their energy usage more efficient.

According to the most recent data from the Government, there are now over 30 million smart meters installed in homes and businesses around the country. Over half (54%) of all energy reading meters are now smart. Conversely, energy firms have been accused of pushing too hard on customers to install such meters, and much scepticism remains about their usefulness.

What do smart meters do?

Smart meters replace traditional meters in homes and businesses and allow for two key processes to take place. Firstly, they communicate directly with your energy provider using a mobile network signal and provide them with real-time information on your energy usage. This has the benefit that you won’t ever have to take a reading and update it manually with your provider. It also means that the energy firm you use can bill you as accurately as possible based on your usage. The second benefit is that you will get a portable monitor for your home that will show you a breakdown of your energy consumption. This has the benefit of showing you in real time how much energy you are using. If you turn on high-usage appliances such as tumble dryers or dishwashers, it should show you how much those appliances are using.

The Government also says smart meters have a benefit at a national level as they help it to ascertain an accurate picture of how the country is using energy. The Government has long-term goals relating to climate change that include reducing overall consumption, so this information is useful to it in this process. It also has secondary benefits such as alerting engineers and providers when there is a power cut and how to localise the issue to resolve it quicker. This saves them time and money, which theoretically ultimately leads to lower energy bills for households.

Can they save you money?

Smart meters can only save you money in the sense that they show you exactly how much you are using, and whether certain appliances in your home are using too much. They can also show you how much your base usage is. In other words, without turning on expensive appliances such as tumble dryers, you can get an idea of how much electricity and gas your home is consuming over the course of a typical day. It may be that you’ve got electronics or lighting that are using large amounts of electricity without you knowing. Or perhaps you’ve got the heating on too high, and this is driving up your gas usage.

In essence, all a smart meter can do to help you save on energy bills is to present you with a more accurate live view through the monitor of your consumption. However, it’s up to you to work out how to reduce that consumption if you feel your bills are too high.

The drawbacks of a smart meter

Smart meters present your energy provider with accurate and up to date information on your energy usage. If your usage goes up, this can lead to the provider adjusting your direct debit upwards to anticipate higher usage. Smart meter technology has also been criticised as unreliable. While less of an issue now, it was the case that when switching providers sometimes smart meters would not be able to carry over to the new provider, effectively turning them back into ‘dumb’ meters where you have to take a manual reading. While this is less of an issue with so-called SMETS-2 meters, ensuring a new provider is receiving the right information – if and when you do switch – is really important.

Smart meters can also suffer from technological foibles such as loss of signal, software issues and other problems that prevent them from accurately providing information to your energy supplier. It is important to keep an eye on it and your bills to ensure they’re charging you fairly and correctly.

Energy firms have also been criticised in the past for forcing smart meters on customers, using heavy-handed and pressure tactics to encourage adoption. The installation of smart meters can also be an issue for renters who manage their own energy bills but have a landlord who might not be willing to have one installed.

The energy outlook

Energy prices for households have been at record levels this winter, leading to eye-watering bills despite the Government’s energy price guarantee – which it has spent lots on protecting consumers from the worst rises. The good news is that gas prices – on which overall energy prices are reliant on – have mostly come down from record levels. This doesn’t unfortunately lead to lower energy bills immediately. This is because energy firms buy their energy from wholesalers on a longer-time horizon over many months.

Currently the energy price guarantee (EPG) ensures the average household will only pay a maximum of £2,500 a year for their energy. This figure can however be higher or lower based on a household’s usage as the guarantee relates to a cap on units of energy rather than the overall bill. The EPG is set to expire after March 2023. Energy consultancy Cornwall Insight has good news, however. It says that energy bills should on average come back down to below the EPG this year. Based upon current gas price levels, it believes average household bills should be around £2,200 by July-September 2023. While this is still well above historic levels, it should help to soften any further blows to household bills.

This outcome is still uncertain as Europe continues to suffer from energy market disruption thanks to the conflict in Ukraine. Much still depends on how governments respond to these ongoing geopolitical issues and how this ultimately affects wholesale fossil fuel prices.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 14th March 2023.