Ross Clark Ross Clark

You’re not being paranoid: smart meters are out to get you

(Photo: iStock)

If anyone was still in doubt as to why the government is keen to press ‘smart’ meters onto us, those doubts will surely now be dispelled by the latest intervention of Ofgem, which has proposed abolishing the current electricity price cap and replacing it with a cap which varies throughout the day in response to the wholesale price of electricity. No, the smart meter sitting in your home is not there just to help you manage your electricity use – it is there to facilitate a future ‘dynamic’ pricing structure for electricity consumers. It is there so that we can be offered cheap electricity when wind and solar power is plentiful – and be hammered with Uber-style surge pricing when it is scarce.

Constant changing of electricity tariffs threatens to upset budgets for millions of households

Customers of some energy companies have already had a foretaste of this. In January 2023 they were offered – through the National Grid’s Demand Flexibility Service – the chance to earn £10 or so back on their electricity bills if they agreed to turn off appliances between 4 p.m. and 6 p.m. during a spell of sunless, windless weather.

In future, however, we are not just going to have a carrot dangled between our eyes, we are going to be regularly struck by a walloping great stick too. Pricing which is sensitive to demand is not necessarily a bad thing in itself; we are all used to paying more for a peak-hours train ticket or buying our budget airline ticket far in advance. For decades electricity customers have been able to save money at night by fitting an Economy 7 meter. But the constant changing of electricity tariffs – which Ofgem says could vary by the half-hour – threatens to upset budgets for millions of households.

Here is the scale of the problem. Britain already has enough wind turbines and solar panels theoretically to meet the country’s average power demand of just under 37 gigawatts – at least on a windy and sunny day. But on calm winter evenings the output from wind and solar can fall away to less than one gigawatt. Moreover, that is often when electricity demand is highest, because calm winter evenings tend to be cold, too.

At present, we balance intermittent wind and solar with gas power, but both main parties want to remove all unabated fossil fuels from the national grid – by 2035 in the Conservatives case and by 2030 for Labour. What happens then when wind and solar farms are able to meet only a fraction of demand? We could possibly store large quantities of energy – albeit at enormous cost – use gas power stations fitted with carbon capture and storage. Or we could import electricity – as we already are doing. All solutions threaten to drive up electricity prices to eyewatering marginal levels. This already happens in the wholesale market, but consumers are protected from it because consumer tariffs don’t change.

In July 2022 the wholesale price of electricity briefly reached £9,724 per megawatt-hour – over a hundred times its average level. And that was when we have gas power available to back up the wind and solar farms. God knows what level wholesale prices will reach when gas is gone, and what pain it is going to inflict on households once those spikes in wholesale prices start to be passed onto the retail market. At least with Ryanair surge pricing we can look up the price in advance and decide whether or not we want to pay it. If electricity prices swing wildly by the half hour it will be extremely difficult to guard against a surge in prices. Many washing machine cycles, for example, last over two hours, and would end up being spread over several different charging periods. Moreover, we might book a budget airline flight once or twice a year – whereas we use electricity constantly.

When the implications of decarbonising the national grid, and the surge pricing which will be used to achieve it, become clear, electricity consumers are not going to like it.

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