Heating & energy

Smart electricity meters

Updated: 07 Mar 2008
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Introduction

Smart electricity meters are being installed in New Zealand homes. These will bring big benefits to the electricity industry ... and smaller ones to consumers.

Meridian Energy is installing 112,000 smart (advanced) electricity meters in Christchurch homes. Another 6000 are going into Hawke's Bay homes. Power companies say these meters will allow consumers to save electricity. Possibly true - but at what cost?

What's a smart meter?

Every household has an electricity meter. The meter records the amount of electricity you use and is read by the meter reader - in most cases six times a year. In essence the design of these meters has not changed for over 100 years.

A smart electricity meter

A smart meter replaces the old-style meter with an electronic unit containing a small computer. The amount of electricity you use is still recorded; the key difference is that a smart meter can communicate with your electricity company.

This communication has two important tasks:

  • It allows the electricity company to "read" your meter as often as every 30 minutes
  • It can also allow the electricity company to send up-to-the-minute price information back to you.

Some smart meters have a small display panel located in a convenient place in your house. The panel displays your current electricity use and the price.

Smart meters have the potential to allow your electricity company to charge using a tiered pricing system that reflects electricity demand during the day. Meridian is not doing this at present. With tiered pricing, you could pay much more during a winter evening, when heaters and stoves are going and the load on the system is high. Later at night it could be cheaper because most people are sleeping and the system load is low.

Big money

If every house in New Zealand (around 1.4 million) had a smart meter that was read by the electricity company every 30 minutes, over 2 billion readings would be collected and processed every month. This is a large amount of data - even by modern computer standards. It means expensive behind-the-scenes computer systems have to be installed and maintained to run the system.

Substantial infrastructure is needed for the two-way communication between the smart meters and the electricity company. In Christchurch, a dedicated network has been built to do this.

Power company benefits

Smart meters have two main benefits to power companies: managing customers and managing peak demand.

Managing customers

Because smart systems "read" customers' meters every half an hour, monthly power bills can be more accurate and up to date. That means no more visits by the meter reader and no more estimated accounts.

Meridian says its smart-meter system will give customers improved billing accuracy and information, as well as providing more payment options such as pre-pay. It also says the time-of-day use graphs generated by the system can help customers make changes in energy use by pinpointing times of high usage.

These are worthwhile advantages - especially for people who are keen to reduce their consumption for environmental reasons or who currently have problems paying their bills.

Managing peak demand

The highest loading on the electricity system occurs during cold winter nights, when people are often simultaneously heating their houses and cooking their meals. For the system not to fail (and create blackouts) there must be enough supply infrastructure to cope with this peak demand.

But providing additional infrastructure that's used for only a few hours a day during winter is a very expensive investment for electricity companies. So limiting or reducing peak loads is an attractive option, because it reduces the amount of infrastructure they need.

Varying electricity pricing

Smart meters allow electricity companies to vary the price of electricity during the day. Meridian is not doing this at present, but the capability is there. If punitive peak-demand pricing is introduced, people will "switch off" - at least in part - and the load on the system will be reduced.

The power companies say consumers will benefit from smart meters by being able to adjust their electricity consumption to reflect time-of-day pricing. Sounds good - but the reality is somewhat different.

You arrive home at 6pm on a winter's evening after a long tiring day. The first thing you do is switch on the heat pump (or electric heater) and then you start to prepare dinner. The heat pump (while it's warming the house) uses significant amounts of electricity, as does the electric cooker.

The smart meter panel tells you that right now the price of electricity is exorbitant. But what option do you really have? Stay cold? Go hungry? At peak-demand times, consumers have little choice but to use the electricity they need - there and then.

If the peak price of electricity is made punitively high, no doubt some people will forgo being warm and will choose to cook at other times. We think this is counterproductive. New Zealand houses are already too cold and damp - and this is associated with our high rates of asthma and other respiratory diseases. The Ministry for the Environment is promoting a "Warm Homes Project" to increase the average winter temperature of New Zealand homes. We think the widespread introduction of smart meters with punitive peak-demand pricing is likely to have the opposite effect.

Is there a better way?

We think so. Most appliances are required at the specific time you need them. But for some appliances that chew through the power, delayed use could be possible - we're thinking clothes dryers and dishwashers here.

If the electricity rate after 11pm was around half the daytime rate, there'd be a price incentive to use night-rates for dishwashers and clothes dryers. Some consumers would certainly do this, which would have an effect on peak electricity demand. Day/night metering is already available in many areas and it doesn't require the introduction of smart meters.


Our view

  • Smart meters are going to cost a substantial amount to implement.

  • Smart meters will be of great benefit to the electricity industry. Billing systems will improve.

  • The introduction of punitive pricing at periods of peak demand could adversely affect lower-income households. Consumers may have little choice but to reduce winter-evening heating.

  • A public-education campaign to use night-rate electricity could help reduce peak-demand now using the current metering systems. This would help the industry and consumers, without the cost of introducing smart meters.


Hot water

Water heating makes up around 40 percent of the average household power bill.

Traditionally New Zealand has used a system called ripple control. This allows electricity companies to switch your water heating on or off, depending on the demand on the supply system.

Because water heating has always been under the control of electricity companies, the introduction of smart meters will have little impact on this part of the electricity system.


More information


More from consumer.org.nz

  • Energy and heating - our collection of resources on this topic

Smart metering conference
Late last year Consumer NZ spoke at the Advanced Metering Summit, an electricity-industry conference promoting the introduction of smart-metering technology. We were invited to address the conference from a consumer's point of view. Download the full transcript of our speech (Word document, 37.0 KB).


Report by Bill Whitley