Can clock-watching smart meters really drive down energy bills?

Smart meters were sold to the nation as a way of saving money on energy bills. 

The gadgets automatically send readings and link to a display screen that shows exactly how much power is being used in real time — and how much it is costing.

Billions of pounds have been blown since the rollout began in 2009, with the deadline for completion pushed from 2020 to 2025. 

The cost of installing digital meters in every home has spiralled from £2.5 billion to £13.5 billion — and is being funded through hikes to household energy bills.

The Department for Business, Energy & Industrial Strategy says households will save an average of £175 by 2034. 

So after a costly start, can smart meters really save us money as we face record high energy bills?

Regular rates and readings 

Energy watchdog Ofgem last week paved the way for smart meters to send readings to suppliers every half hour.

The move will also let suppliers change rates throughout the day, and will take place before the end of 2025, and the regulator says it could save bill payers as much as £4.6 billion by 2045.

It is a major step towards enabling millions of homes to sign up to ‘time of use’ tariffs that give discounts for power use at off-peak times, but charge more for use when demand on the grid is higher.

Currently, smart meters send out readings every month, but households can opt in to send updates every day or half-hour.

Using data from half-hourly readings, energy suppliers will also be able to better manage supply and demand and make efficiency savings that, in theory, can be passed on to customers. But MPs have raised concerns that supplier savings might not be shared with households.

The ‘time of use’ tariffs will help households save when charging electric cars overnight or powering up heat pumps.

Industry insiders have told Money Mail this is the real benefit of smart meters — and the public should have been told that from the get-go.

After all, academic studies suggest display panels help homeowners to cut down on as little as 3 per cent of their energy.

Roll out: The cost of installing smart meters in every home has spiralled from £2.5bn to £13.5bn — and is being funded through hikes to household energy bills

Save while you sleep

Ofgem documents reveal that half-hour readings will save households as little as £2 a year, and no more than £9.

Research by the University of Reading also found time-of-use tariffs will cost high and middle income households extra if they do not change their habits.

Their figures show running a washing machine at off-peak times is more than three times cheaper than at peak time, and half the cost of standard tariffs.

Leaving an Xbox games console on standby for four hours during peak time also costs more than one hour of gaming at off-peak time. However, charging an electric car in off-peak hours is half the price compared to a standard tariff.

Anthony and Julie Hibbs from Newcastle-under-Lyme in Staffordshire have cut their bills by £240 a year with their smart meter. The retired water company employee says: ‘When you see the little meter ticking away, it motivates you to save more money.’

Octopus Energy says customers on its half-hourly ‘smart’ Agile tariff have saved £676 over three years compared to a standard variable tariff or £251 compared to a fixed deal.

The supplier has capped peak prices at 35p/kWh, which is 23 per cent above the price cap. Yet if and when, wholesale prices plummet, electricity could be free for those on these tariffs.

Octopus says it has even paid households up to 10p per kWh to use electricity in ‘price plunging events’ when there is excess power on the grid. In May 2020, one driver was paid £4.51 for charging his Tesla when demand for power slumped.

Off peak: ‘Time of use’ tariffs will help households save when charging electric cars overnight or powering up heat pumps

Uncapped charges

Soaring energy prices are fuelling the worst cost of living crisis in Britain for 30 years.

The failure of more than 26 suppliers last year alone will add £68 to the nation’s bills. Suppliers are not allowed to charge customers on standard variable tariffs higher rates than the price cap allows.

The current cap of £1,277 is to rise to £1,971 in April for the average household.

Rory Taylor, of trade body Energy UK, says homeowners on time of use tariffs could pay more than the price cap rate at peak times.

Experts are warning that the regulator needs to build in safeguards to stop struggling households from having to ration their power at peak times.

Greg Jackson, chief executive and founder of Octopus Energy, says: ‘As tariffs like this grow, we need to ensure proper protection for consumers. 

That’s why Octopus calls on the regulator to ensure customers always have the choice of standard or smart tariffs, and that there’s a sensible cap on peak prices for smart tariffs.’

Gillian Cooper, head of energy policy at charity Citizens Advice, says: ‘Strong protections must be in place for those of us who can’t be flexible with our use of electricity.’

Rising bills: The current energy cap of £1,277 is to rise to £1,971 in April for the average household

Still a long way to go

The latest figures show more than 26 million smart meters have been installed — which means fewer than half of all domestic meters have been upgraded. Yet around 4.8 million of the devices have stopped working when customers switch supplier — or turn them off.

Hundreds of thousands of households are unable to get a smart meter because they live in high-rise flats, old properties with thick walls, or remote regions with poor signal.

John and Beverley Marchment want to save money but their smart meter shows only their daily standing charge for gas and not their usage costs.

This is because of an internet connection issue, according to supplier EDF.

Smart Energy GB says a survey found 42 per cent of people said a smart meter had made a difference to their energy use.

A spokesman says: ‘Using your smart meter’s in-home display is a simple way to track and adjust your energy usage as the in-home display gives near-real time information in pounds and pence on gas and electricity use.

A Government spokesman adds: ‘The replacement of traditional gas and electricity meters with smart meters is a national infrastructure upgrade that will make our energy system cheaper, cleaner and more efficient.’

A spokesman for the energy regulator says: ‘Ofgem will work closely with industry to make sure it delivers this major upgrade while ensuring those in vulnerable circumstances remain protected.’

b.wilkinson@dailymail.co.uk