The UK Government and energy suppliers should consider a household subsidy plus a more varied information campaign to increase smart meter uptake
A broader information campaign educating consumers about the society-wide benefits of household-level action could increase uptake of smart meters if paired with a reasonable subsidy scheme, finds new research published today (May 26th) by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science (LSE).
The research elicited the willingness-to-accept compensation of over 2,400 nationally representative UK households for smart meter installation. It considered the optimal level of subsidy required to maximise smart meter installation, while minimising unnecessary policy expenditures. It also provides evidence on commonly cited market failures that inhibit the adoption of energy-saving technologies, including a lack of awareness of the individual and societal-wide benefits of smart meters, as well as being unaware of the cumulative learning and technological improvements that take place as any new technology matures and improves.
The research found that offering households £10, £25, and £50 would induce additional adoption, particularly when paired with a social information campaign. It also found that from the perspective of minimising the percentage of policy expenditures that go towards those individuals who would have adopted anyway or for a lower subsidy value, a £100 subsidy could be optimal.
“Encouraging people to adopt technologies and behaviours that have direct private costs and uncertain future benefits is an objective that will continue to feature prominently in society’s response to climate change and other environmental externalities.
“In the case of the UK’s Smart Meter Implementation Programme, a broader information campaign educating consumers about the society-wide benefits of household-level action could increase uptake of smart meters if appropriately paired with a reasonable subsidy scheme,” said co-author and Grantham Research Institute Fellow, Dr Daire McCoy.
Widespread smart meter adoption holds promise to considerably improve environmental outcomes through increased electricity grid efficiency and flexibility, which can facilitate the integration of higher proportions of renewable energy into a given system’s energy portfolio. However, The UK’s ambitious smart metering policy has failed to achieve its objective of equipping all dwellings with smart meters by this year.
Extensive cost-benefit analysis of smart metering led to the Smart Meter Implementation Programme – the single-most important domestic energy policy initiative ongoing in the UK – in 2013. The policy provides the legal framework to install about 48 million smart electricity and gas meters in UK households by 2020. However, a number of parties – including the UK’s National Audit Office, the media, and interest groups – have expressed several concerns relating to the technical performance of the meters, data security and privacy, consumer vulnerability and whether smart meters will actually save energy.
“Consumer resistance due to a range of factors has quite evidently inhibited rollout, as there were only 16.3 million meters installed and 13.4 million meters operating by the end of the second quarter of 2019.
“Not only may some households be unaware of the potential private and social benefits of smart meter installation, they may be reluctant to adopt for a number of reasons such as privacy, financial costs, hidden costs, or general disengagement with or distrust in their energy utility,” said co-author and Grantham Research Institute Fellow, Dr Greer Gosnell.
In addition, energy utilities may have difficulty in accessing certain customers, or there may be physical and structural constraints associated with dwellings that make installation of smart meters impossible. In other cases, misaligned incentives and communication channels between landlords and tenants may constrain adoption in the private rented sector. Finally, the non-monetary costs of energy efficiency upgrades have been shown to deter households from installing free measures, even once households have become aware of the potential private benefits and made an application for a home upgrade.
The research recommends that with respect to increasing energy technology uptake, policymakers rigorously engage with households in order to gain a deep understanding of the (extent of) drivers and barriers to adoption, and consider the use of financial incentives where appropriate.
Read the paper, “Market failures and willingness-to-accept the smart energy transition: Experimental evidence from the UK” (see attached). The link will be live once the embargo has lifted.
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For further information and for interview requests please contact Niamh Brannigan at n.brannigan@lse.ac.uk or +44 (0) 7933997989
Notes for editors
About The Grantham Research Institute on Climate Change and the Environment
Established in 2008 at the London School of Economics and Political Science, the Institute brings together international expertise on economics, as well as finance, geography, the environment, international development and political economy to establish a world-leading centre for policy-relevant research, teaching and training in climate change and the environment. It is funded by the Grantham Foundation for the Protection of the Environment.