Do smart meters really save money on energy bills?

Smart meters sound like a great idea. They calculate the exact amount of electricity or gas you use, so your energy bills should be accurate without you having to submit readings. They also enable you to see exactly how energy is being used for every domestic activity, so you are better able to keep on top of your spending and save money. 

So it sounds as if we should all get a smart meter if we haven’t already. But is that the full story?

In this article we take a look at:

• How do smart meters work?
• What are the advantages and disadvantages of smart meters?
• How do you get a smart meter?
• Is there any evidence that smart meters save money on energy bills?

How do smart meters work?

Smart meters send details of your energy usage directly to your supplier so that you no longer need to submit readings yourself. There are two types of smart meter – SMETS1 and SMETS2. SMETS1 – the early smart meters – communicate with your energy supplier over the 3G network. However the newer meters – SMETS2 – use their own communications systems via a central data network. All energy suppliers have access to this network so can see your meter readings and energy usage. You also have an in-home display which shows you your usage along with the cost of what you are using.

Smart meters are not mandatory but if your existing meter is in need of replacement, Ofgem requires your energy supplier to replace it with a smart meter unless there’s a good reason not to. But if your current meter needs replacing and you decide at this stage that you don’t want a smart meter you can still request not to have one, or to have one but operate it in ‘dumb mode’ so that you still submit meter readings manually.

What are the advantages and disadvantages of smart meters?

We outlined some of the potential advantages of smart meters at the beginning of this article but will expand on them here.

The advantages of smart meters:

• Automatic meter readings

This is the main advantage for most customers. You no longer have to remember to send meter readings – and remember how to access and read the meter in the first place! All the readings are sent automatically so you don’t have to do a thing.

• No estimated bills

Another downside of having to send your own readings is that if you forget to do it, you will receive an estimated bill. Estimated bills are based on previous usage patterns and can sometimes be very inaccurate and lead to you paying too much for your bill. So in this respect, a smart meter is a good way to save money on your energy bills.

• Up to date information on your energy usage

Another popular feature of smart meters is the IHD – in-home display unit. This can be located anywhere in your home and shows you how much you have spent on energy that day. It also enables you to understand more about how much energy is used by different activities in the home. This in turn gives you the choice of cutting back on the activities that are using the most energy and costing more than you realised.

However, there are also some potential disadvantages of smart meters to be aware of if you are thinking of changing. Let’s take a look.

The disadvantages of smart meters

• Data privacy and security

Some privacy campaigners are concerned that energy usage information recorded by smart meters could potentially be passed on to third parties without customers’ permission. And there are other concerns that if meters are hacked this could provide criminals with information about whether or not a home is currently occupied due to its energy consumption. There is no evidence that either of these concerns have yet happened but they are potential risks to be aware of.

• Obsessive usage checking

There have been a few examples of smart meter customers constantly checking the in-home display units and becoming obsessed with not using energy and running up bills. In some cases this can lead to unexpected family stress and strife, which is not the aim of the smart meter at all!

• Incompatibility with some tariffs

Another factor to be aware of when having a smart meter installed is that some are not capable of handling tariffs such as Economy 7 and 10, which charge different amounts at different times of day. And some heating systems, such as electric storage heaters, are designed to operate on these tariffs and may not function correctly when a smart meter has been installed. 

In theory, the smart meter should automatically send meter readings for both the low and high-rate periods if you are on a tariff such as Economy 7 and 10, but it’s definitely worth double-checking that a smart meter is compatible with your chosen tariff.

• Complications with changing suppliers

As already mentioned, there are currently two types of smart meters – SMETS1 and SMETS2. The older SMETS1 meters can lose functionality if you switch suppliers, which means that you will need to start sending manual meter readings again. However, if you have a newer SMETS2 meter – which uses the central data network to which all suppliers have access – there should not be an issue when you switch.

How do you get a smart meter?

If you decide you want a smart meter, the first thing to do is to check with your supplier as to whether they are installing them in your area. Around 31 million smart meters have been installed so far in the UK, with the nationwide roll-out due to be complete by 2025.

If your supplier is installing them and your home is eligible for a smart meter, you can either wait until your supplier contacts you about their installation schedule or get in touch to see if you could get one now. Even if immediate installation is not possible, by registering your interest you are likely to speed up the process.

Is there any evidence that smart meters save money on energy bills?

The UK is still in the early days of the smart meter roll-out, so it is too early to do any kind of widespread analysis of the impact. However, a recent study by the London-based Global Insights Team has found that both electricity and gas smart meters have already made a significant difference to energy bills. The study analysed energy consumption from four suppliers and found estimated reductions of 3.43% for electricity and 2.97% for gas. Both these figures are higher than the government had anticipated.

So it would seem that yes, smart meters really can save money on energy bills. And we hope that this article has given you some useful information about whether a smart meter is right for you, and how to go about getting one in your home. 

Check back here with us soon for more helpful tips from Loans 2 Go on how to save money.