The UK Smart Meter Programme: time to get smarter

The UK Government has tasked the energy sector to provide the option to consumers to install smart meters by the year 2020. This is a broader European led initiative and is a good one, which provides a better customer experience by removing the need for meter readings and longer term will enable us to manage our energy usage more effectively.

Sounds simple – however the scale is huge. There are over 53m households in the UK and to date less than 15% installations have been made. The clock is ticking – and if energy companies are to meet the government target, there must be a radical shift in approach to the smart meter rollout to overcome the current challenges. We believe the solution to this requires a more joined up approach: energy companies and government need to collaborate better and foster on-going innovation. There also needs to be more effective and efficient engagement with customers.

Challenge 1: Not enough engineers

The first key challenge is the chronic lack of field engineers with Dual Fuel (electric and gas) skills to meet the rollout requirements. This has driven up costs, with incentive payments being offered to engineers to ensure loyalty. The industry is alive to the challenge and investing in training more engineers to meet demand; however, there will continue to be pressures on availability in the run up to the 2020 deadline.

There are consequences for energy suppliers unable to meet the government target: if they fail to demonstrate sufficient attempts to offer and install their customers smart meters, fines of up to 10% of global turnover could be enforced. However, within the industry there is an unspoken belief that only the companies with the worst rollout performance will be fined. This has led to suppliers working in silos and adopting a Darwinian approach, desperately competing for the limited pool of field engineers to meet their rollout commitments.

A potential solution to address this industry wide issue would be increased collaboration between energy providers and even resource sharing to deliver on time. However, this would require government to promote sector coordination by leading a national smart meter rollout programme, rather than one led by the suppliers.  In short, the way forward here is Government intervention to drive better collaboration.

Challenge 2: Customers seem unsure 

The current customer engagement model has resulted in smart meter installation appointments not being booked. In the UK, smart meters are not a national requirement: customers must choose to have a smart meter installed.

The background to this is a change in language in the Conservative party manifesto. The manifesto promised only to “offer” one to everyone, softening the language in the 2015 manifesto pledge for suppliers to ensure everyone had one by the end of 2020. However, according to the head of engagement for the government’s smart meter programme, Oliver Sinclair, “Nothing has changed… (the obligation) remains 2020. It remains to try and ensure there is a meter in every home.” So the concept is sound, the government is committed and the industry is working hard to deliver the 2020 commitment – however, something is missing in translating this into customer intake.

The low uptake is primarily because customers must be proactive and book an appointment rather than receiving one. In addition, it appears some customers are distrustful of smart meters due to some negative press they have received and concerns over privacy and data security.

A solution would be to offer customers an appointment with the opportunity to reschedule or cancel if they prefer not to have a smart meter. Or there could be a more radical approach to allow energy providers to offer smart meters on their doorstep.  The key here is to improve the engagement with customers. 

Challenge 3: Implementation inefficiency                                                 

The appointment booking approach taken in the UK has resulted in additional rollout inefficiencies due to engineers’ travel times between installs. So whilst there is a lack of field engineers, they are also not being utilised to full capacity due to travel times.

In many European countries, a more innovative approach has been developed – smart meters are fitted by distribution network operators (DNOs), the companies that own local power cables delivering electricity to homes. DNOs will try to install a whole street at the same time which allows them to achieve appropriate density for customer installs. 

With prior communication and leaflet drops, this could be a solution in the UK, but again, this approach would need to be clearly initiated by Government who would need to change rules and guidance around customer engagement. 

Challenge 4: Big IT government delays

The impact of delays to Government sponsored IT is not unique to Smart Meters. In this case, delays to the Data Communications Company’s (DCC) system go-live have caused challenges as this is the core backbone across the UK that will receive information on energy usage from smart meters.  There is a short-term fix of rolling out smart meters with less capabilities – but these will all need to be replaced as they do not work with the DCC and mean that when you change provider you need to change your meter. Therefore an implementation solution should be to first ensure this core backbone is delivered, and then rollout the longer term meters.

So where are we going? 

As the 2020 deadline looms ever nearer, Government needs to show greater leadership and help to address the challenges currently faced by energy suppliers in their smart meter rollout. It needs to decide how important it is to maintain the current approach that is different to most other European countries that are performing much better, or whether a smarter approach is needed. In our 2017 Barometer on Change Report we identified three key themes which organisations need to focus on – collaboration, engagement and innovation. All three with the addition of improved execution to address the DCC issues we believe will provide the answers to the critical challenges. Tough decisions will need to be made if the 2020 target is to be met. 

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Edward Charlish Client Director