Smart electricity meters: how households and the environment can benefit
Dr Jan Wright
Parliamentary Commissioner for the Environment
Greypower Annual General Meeting
12th April, 2010
A few of you may know me from previous addresses but I suspect that most of you won’t have heard me speak before. So by way of an introduction I will talk a little about my role.
23 years ago in 1986, the Environment Act created the Parliamentary Commissioner for the Environment as an Officer of Parliament.
The only other Officers of Parliament are the Auditor General and her deputy, and the two Ombudsmen.
So there are just five of us in this special relationship with Parliament.
There are many other Commissioners – Electricity, Childrens, Commerce, Retirement… the list goes on. But the others are all appointees of Government with varying degrees of independence specific to their legislation. They don’t have the freedom that comes with full independence that I have.
Like the other Officers of Parliament, my appointment debated in Parliament.
I didn’t feel like sitting in the public gallery to find out if I had the job, but fortunately all the political parties supported my appointment.
Many of you will remember the first Commissioner -- Helen Hughes, and the second -- Morgan Williams. I’m the third.
Some have described the position as that of an “environmental ombudsman”. I’m not particularly fond of that term as I think of an ombudsman as someone to complain to rather than someone who actively advocates.
“Environmental watchdog” catches more of the role perhaps, but I don’t like the negativity associated with the term.
I don’t like the dog part either – and especially when a recent North and South article on government watchdogs superimposed my head on a dog’s body!
My basic job is to provide Parliament with independent advice on the environment. It’s a set up that give me independence from the government of the time and allows me to give full and frank advice to our legislators.
Of course this occasionally leads to me getting involved with some controversial issues such as the current mining debate or indeed, my reason for being here today -- smart meters.
Although I can freely give advice, no one is obliged to take it. Helen Hughes – the first Commissioner -- was once asked if she had any teeth, and famously replied “No, but very big gums”. I was rather amused by one newspaper headline that said “The new Commissioner bares her teeth”. I was relieved the headline didn’t read “The new Commissioner bares her gums”!
And Smart Meters are one of the issues I continue to gnaw on because, as I told the Commerce Select Committee when talking to them last December, energy has long been ‘one of my things’. My first degree at Canterbury was an Honours degree in Physics. A few years later I did my Masters degree in Energy at Berkeley in California. While there I was involved in pioneering energy research at Lawrence Berkeley Laboratory. I also have a doctorate in Public Policy from Harvard.
Why do I care about smart meters?
Smart meters create the opportunity to decrease electricity consumption through efficiency.
Although electricity is a wonderfully versatile form of energy that has become essential to our way of life, its generation and transmission have significant effects on the environment, ranging from the global climate change impact of carbon dioxide emissions to a variety of local and regional impacts. All new power plants attract opposition, whether the energy source is ‘renewable’ or not. It’s worth remembering that the modern environmental movement began because of concern about a new power plant that used renewable energy – I’m referring to the raising of Lake Manapouri.
Yet we continue to use more and more electricity. The average amount each of us consumes – the per capita consumption – keeps increasing, driving the construction of new power plants and transmission lines - the supply-side.
New Zealand is just one of many countries who are pushing against the limits of their electricity infrastructure. But we shouldn’t be relying on just the traditional response – generate more, build more. Especially since some new power plants are designed to meet peaks and are thus lying idle much of the time.
I think that point is worth delving into.
Two things matter – peak electricity consumption and total electricity consumption.
It’s the first -- peak consumption that dictates how much generating capacity we need in New Zealand.
The need to build new power plants – with all their environmental impacts -- can be reduced by shifting some electricity consumption out of peak periods.
Total electricity consumption matters too. If we can curb that, the thermal power plants – those that burn coal and gas – need not run as much and our carbon dioxide emissions will be lower.
Really smart meters can help with this. There is a worldwide trend to become smarter about how electricity is transmitted and used by developing what are called smart grids. Really smart meters are a key component of smart grids.
Note that I’m saying really smart meters because the so-called smart meters being installed in houses in this country are not very smart at all. In fact, I have called them dumb meters.
So as Parliamentary Commissioner for the Environment, I’m very keen for this country to become smarter in its management of electricity because I want to see our emissions of carbon dioxide drop and fewer new power plants being built.
Why you should care about smart meters
Some of you may share my concerns about the environment. But you are all electricity consumers.
Really smart meters can provide you with information about your electricity use and give you more control over it. Power users can be empowered if you’ll excuse the pun.
But we are blind consumers of electricity – and the new meters being rolled out now won’t help.
We are not always blind consumers. When I go to the shop to buy apples, I see the choices laid out in front of me. I have what economists would call full information – red or green, imported or local, expensive or cheap. Organic or… I do not think the opposite is inorganic. I can buy just one of a new variety and taste it.
But when I buy electricity, my information is very poor. And therefore the market cannot function well. My monthly bill is largely mysterious. Maybe it’s lower than last month. I don’t know if this is because I bought a more efficient refrigerator. Or because the weather was warmer than usual. Or because the price has fallen – but pigs might fly.
What makes a meter really smart?
At the heart of a really smart meter is a Home Area Network chip – a HAN. We have computer chips in many things now – in our washing machines, for example.
The key thing about a HAN chip is that it can communicate – it enables the meter to hold conversations with devices both inside and outside the house. So what kind of future can this take us into?
First a really smart meter – one with a HAN chip - will be able to talk to an in-home display. An in-home display might be as simple as a globe that sits on your coffee table or kitchen bench and glows red in peak times to remind you to turn off unnecessary lights or appliances. Or it could be something much more sophisticated giving you detailed information about how much electricity you are using and how much you are paying – what is called real-time information. Overseas evidence shows that in-home displays, delivering only simple consumption information to a readily accessible location, can lead to a 5 to15 percent reduction in electricity use. This could happen virtually right away – Noel Leeming, Dick Smith and L V Martin will make sure in-home displays are quickly available as soon as there are meters that can talk to them.
Next a really smart meter will be able to talk to smart appliances. These aren’t available in New Zealand yet. Why would they be? Meters with HAN chips need to come first. General Electric is selling smart appliances in the United States. Whirlpool in Australia is planning to make all its appliances smart by 2015 and is aiming to manufacture a million smart clothes driers by 2011 - next year. Whirlpool has a strategic alliance with Fisher and Paykel.
So what is a smart appliance? At peak time when the electricity system is really under pressure – say around dinner time on winter evenings, a smart refrigerator might delay its defrost cycle, a smart dishwasher might slow its cycle. Think of it as a kind of sophisticated ripple control. Of course, this won’t benefit you as consumers unless you are on a tariff that rewards reducing consumption at peak times. But these kinds of tariffs are on their way.
Recently I spoke to the Finance and Expenditure Committee on the new legislation making its way through Parliament – legislation that will further restructure the electricity industry. I asked the Committee to add to the Bill the requirement for the new Electricity Authority to coordinate the development of a smart grid.
Smart meters are one essential part of a smart electricity grid. Australia, the United States, and many countries in Europe are on track to deliver their consumers a smart grid. New Zealand is not.
A smart grid makes use of modern digital technology to upgrade the current electricity system, ultimately giving much finer control. It is described by the US Department of Energy, “the kind of transformation that the internet has already brought to the way we live…” A smart grid also has much better interconnection with renewable energy sources such as wind generators.
My topic today is smart meters, so I shouldn’t get too waylaid on the broader issue of a smart grid. But to give you a taste of where we should be heading – smart devices on power lines could sense system overloads and reroute power to prevent power cuts or at least contain them to a small area.
Think ahead again – perhaps not too far when electric cars begin to grow in number. We can’t have everyone coming home at 6 pm and plugging in their cars to recharge all about the same time. Neither the generators nor the lines companies could cope. We will need smart meters and a smart grid to stagger the recharging.
Creating a smart grid will be a gradual process over many years and will require significant investment but we have an obvious opportunity to make smart meter installation the move that needs to lead the whole concept into a reality. Right now.
Why is this an issue now
Right now different companies are installing dumb meters throughout the country. They are calling them smart meters, but they don’t contain the HAN chip that is so essential if you as consumers and the environment are to benefit. 1.3 million of them will be installed by 2012.
The opportunity to build in a key component of a smart grid is being wasted.
These new meters will enable remote accurate meter reading – no problem with that. And they will provide a wealth of information about your patterns of electricity consumption to the retailers.
Retailers rightly claim that HAN chips can be retrofitted later into these meters. But consider this.
- An unknown number of smart meters will need to be replaced entirely.
- At least 14,000 meters will require a visit by an accredited electrician, costing around $150 per visit, and maybe considerably more.
- The majority will require a technician visit, costing less, but still a significant amount.
Who will pay for this?
And think of the hassle. Imagine you want your meter upgraded to be “smart”. You ring your power company – they have to find out who owns your meter ….
The cost of putting a HAN chip into a meter before the meter is put into a house is about $20. Wouldn’t that be a lot more sensible?
Clearly if a job is worth doing it should be done well and installing meters without HAN chips is not doing the job well. Instead it represents a lost opportunity for consumers, a loss for the environment, and a loss for lines companies who lose the opportunity to reduce peak loads on their infrastructure. In fact it’s pretty much a lost opportunity for everyone but the retailers.
Our complex electricity system
Our electricity system is complex and fragmented. There are five parts.
The companies that build and run the thermal plants that burn gas and coal, the hydro dams and the wind turbines. Three are owned by the state – Meridian, Genesis, and Mighty River Power. The other big ones are Contact and TrustPower.
The State Owned Enterprise Transpower is responsible for transporting bulk electricity from where it is generated to cities, substations and some major industrial users.
The local lines companies are responsible for getting the power from the national grid to your door. In this part of the country it is Orion. In Auckland there is Vector; in the Waikato there is WEL Networks.
These are the companies you deal with – most of these are also generators.
…and finally we get to you.
It’s no wonder that with so many different commercial interests involved in getting the power from the generator to your electric blanket or microwave that the complexity of the situation can easily leave electricity users at a disadvantage. Especially when the only information available to you is a deeply uninformative monthly bill that lists nothing but a fixed line charge and total electricity used at a flat rate.
Without good information consumers cannot make a direct link between the electricity they use, when they use it and how much it costs them.
By contrast a consumer using a really smart meter can be informed through an in-home display of their electricity use in real time. And if tariffs are more complex – not just a flat rate -- the cost of that electricity at a particular time.
The gains that can come from a well-coordinated smart electricity system go well beyond individual consumers. The gains to you as consumers would be modest – in the short term. But this is about getting our act together as a country.
Benefits being captured by retailers
But complexity isn’t a problem for everyone. I think that consumers need to be worried about something else than HAN chips being left out of the new meters.
Let me diverge from electricity companies to telephone companies. You may remember the famous – or perhaps infamous – statement from Theresa Gattung, ex Chief Executive of Telecom, in 2006.
“Think about pricing. What has every Telco in the world done in the past? It’s used confusion as its chief marketing tool, and that’s fine…
… at some level, whether they are conscious of it or not, customers know that that’s what the game has been, they know we’re not being straight up.”
Gattung’s quote highlights the use of complexity to confuse consumers. We all experience the marketing from the telephone companies and the difficult task of trying to decide which is the best pricing plan for our particular situations. But telephones are easy compared with electricity. We know who we ring often, where they live, and what time of the day we usually ring. If we are worried about cost, we talk quickly and hang up. We have a great deal of knowledge and control.
But electricity is different. We are much more in the dark about how we use it. The meters being installed will provide the retailers with the information a really smart meter would supply you with – meaning they’ll be holding all the cards when it comes to your electricity use. I suspect that we may see a plethora of complex tariffs and it will be really hard to decide which arrangement is really best for you.
It is interesting that none of the companies installing the new not-so-smart meters will put in a HAN chip if the customer offers to pay for it.
There is, of course, no industry standard for HAN chips. This argument is losing credibility fast. A standard open source communication protocol called Zigbee is fast emerging as the global leader. The state of Victoria in Australia carefully considered all the options and has now mandated Zigbee chips in meters in all homes in the state.
The open source part is really important. We don’t want a proprietary system like Microsoft locking us all into HAN chips produced by one company.
If it is too early to settle on an industry standard for New Zealand, then why the big hurry? Wouldn’t it make more sense to have a cup of tea and take some time to sort out where the country should go?
I have been frustrated by erroneous claims from some retailers. For example, Genesis Energy claimed there was a $10 fee per year to be paid for each Zigbee chip. This is not true.
And of course I was particularly disappointed late last month to see Meridian cancel the really smart meter trial it had planned right here in Christchurch.
A better future
It doesn’t have to be like this. Imagine if New Zealand set off in a coordinated way toward developing a smart grid. What might be going on in your home a few years from now?
Imagine your home at 6pm on a winter evening. Maybe your heater, lights, oven, refrigerator, water heater, clothes drier, dishwasher, TV and computer are all on. Electricity consumption across the country is near its annual peak. Power stations are running flat out.
Huntly and the other thermal power stations are burning fuel and sending carbon dioxide out their smokestacks.
Planners are worrying about the hydro lakes – how much water should they let through the turbines and how much do they need to save?
Some lines companies are worrying about whether their lines can cope with the load and whether they will have to make major new investments in new lines.
Peak power is expensive.
But put a smart meter in every home and let it talk to smart appliances. Does your refrigerator need to defrost right now? No. Does it matter if your washing machine stops its cycle temporarily? No. Do you notice if your dishwasher delays the drying cycle? No. Or if your hot water drops a degree or two? No. And on your kitchen bench you have a display that tells you how much you are paying for power right now – it flashes reminding you to turn off that light in the office that nobody is using. Or maybe to let you know to override a smart-pause in your clothes drier because you need clothes dried as soon as possible.
In this new future your electric car is plugged in your garage and some of the energy stored in its battery is actually going back into the grid. It’s OK -- it will recharge later in the night when the power is cheaper and in the meantime the power that has gone back is credited to your account – another advantage of smart meters.
Your smart meter knows when power is cheap and when it’s not and it acts to make sure you and the environment make the most of this knowledge. And that is happening in every home in New Zealand.
This may sound futuristic, but it’s a future that could be closer than you might think.
One of the common responses to my report on smart meters was that I was trying to put the cart before the horse – that there was no point in making meters really smart without smart appliances for them to talk to.
First, if you are someone who worries about your electricity bill, an in-home display will help you. As I said earlier, overseas evidence has shown average reductions of 5 to 15% from people responding to the real-time information provided by in-home displays.
But second, which is the cart and which is the horse? Why would anyone import or manufacture smart appliances if there are no meters for them to talk to?
Another frequent claim is that smart appliances are about 10 years away. This is simply not true. Neil Cheyne, General Manager of electronics design at Fisher and Paykel says that smart appliances could be available in one to two years. Neil is on the record as saying:
“The technology is readily available if consensus is reached. The issue is not a technology one, the issue is that the electricity industry does not know what it wants.”
Why would you develop smart appliances to sell to people who were not able to take advantage of the smart features? The smart meters – the meters with HAN chips are the horse – the smart appliances are the cart they can pull. But underlying all this – the road beneath the horse and the cart if I can stretch the metaphor – is the need to get going on developing a smart grid.
In a letter to me, Fisher & Paykel stated:
“Had the technology been sorted out ten years ago, over 50 percent of the appliances in New Zealand homes would now be smart-grid compatible. Had it been in place even five years ago, virtually all domestic heat pumps would now be smart-grid compatible. We share the Commissioner’s concern that the longer nothing happens the worse the situation will be.”
And remember that our market doesn’t exist in a vacuum. We are very much a part of a TransTasman market. The move by the Victorian state government to regulate for smart meters using the ZigBee protocol should make the move even more logical for us.
But this future won’t happen by itself
This future is not lost to us. Market signals from electricity users and their influential representatives including, of course, Grey Power, may yet convince retailers they have an interest in making sure meters are indeed smart.
The problem however is that consumers have limited power to make their opinions felt – apart from complaining to electricity retailers, only the option of changing electricity retailer is available. And as yet there are no retailers committed to installing meters fitted with HAN chips – or indeed committed to working with other retailers to develop a common industry standard. There is one small exception – the lines company WEL Networks is conducting a small trial with really smart meters in the Waikato and has secured the cooperation of the retailers.
Equally there are political answers such as Green MP David Clendon’s private members bill on smart meters which is due to be read on the 28th of this month. And of course, I would like it if the Government would follow the recommendations in my report. That report was published 10 months ago. What my staff and I have learned since has strengthened my confidence in those recommendations.
Currently, the electricity retailers have too much of an interest in not rolling out really smart meters because of the fragmented market in which they operate. We have an electricity system which is divided among itself. Recently the Chief Executives of eight lines companies wrote a report on smart meters that is largely supportive of my recommendations.
The development of a smart grid including setting standards for smart meters is not just being advocated by those on the left of the political spectrum. In Britain, one of the Conservative Party’s policies as they head into this year’s election is to:
“Transform electricity networks with 'smart grid' and 'smart meter' technology that automatically matches supply and demand, allowing a huge increase in renewable power.”
New Zealand is alone among developed countries in assuming that the free market will deliver a smart grid.
After all where would we be if the same approach had been taken historically to other important infrastructure moves? Different road signs in different cities perhaps? Or having to drive on different sides of the road in different provinces? A rail network with different gauges of track in different regions? Or a situation such as one faces in Japan where the power supply is either 50 Hertz or 60 Hertz depending on whether you are in the eastern or the western part of the country?
As absurd as such examples seem they could be the direction we are heading for in terms of some of our most vital infrastructure.
Every journey needs a first step. I would like to finish by quoting Paul Budde – he’s an Australian expert who recently chaired the first smart grid conference in New Zealand.
“Perhaps the role in life of the electricity companies is indeed that of a basic infrastructure provider, but they should start working with others to develop the green economy around it… If we can generate more money from new smart grid services and applications we might be able to keep the price of electricity lower, which would benefit everybody – homeowners and the New Zealand economy in general.”