Tory smart thinking could be short-circuited by party's past

Photograph: Christopher Thomond. Source: Guardian.

The new Conservative policy document on energy is keen to emphasise how smart it is. At its core are proposals for smart meters, smart grids, and smart battery charging. The enthusiasm for these technologies is almost palpable. On one page, the word 'smart' occurs eight times. But readers of the policy proposals are largely left in the dark about what all these intelligent devices will do. David Cameron's comments about building 'an electricity internet' didn't shed much light either.


So let's give an example of how these technologies might work. Last Saturday evening was windy. A westerly gale meant that almost every wind turbine in the UK would have been producing close to its maximum output. If wind power continues to expand rapidly, Britain will eventually have a surplus of electricity on some winter days. On these occasions, we will need what is known as a 'smart grid' to help deploy the extra electricity elsewhere in Europe. While the wind was blowing hard across our westerly coasts at the weekend, large parts of the Continent were calm and could have usefully imported our surplus. Forecasts suggest that eastern Europe will see higher wind speeds later in the week, when the weather in Britain has calmed down. In these circumstances a smart European grid would redirect power back towards the British Isles. During periods of high wind speeds in the UK 'smart meters' in people's homes will signal the abundance of power, offering consumers discounted prices to use the surplus electricity. In 10 or 15 years' time, it is not fanciful to say that many householders will use these periods of cheap power to recharge the batteries in their electric cars. This is the third leg of the Conservative proposals: 'smart charging'.

In a world where intermittent renewables form a larger and larger part of energy supply, countries will need to link their grids to allow the export and import of huge quantities of electricity at short notice. At the moment, our link to the French electricity system gives a buffer of only about 5% of our power consumption. The Conservatives are right to emphasise the importance of changing this. Multiple new high-voltage lines will be required to move power from where it is in surplus to where it is in deficit. We will need to invest heavily in the storage of energy so that we can cope with transitory shortages of supply. The UK must also have a major investment in new high-voltage lines to bring power from wind and tidal farms in Scotland down to the south of England, where the electricity is in greatest demand.

What the Conservatives don't tell us is how these huge investments of many tens of billions of pounds are going to be financed. The UK has a problem – its electricity distribution system is privately owned. National Grid is a public company, responsible to shareholders. It provides access to its existing network of high-voltage transmission lines in return for regulated fees paid by the six large electricity supply companies. Whether or not the UK gets the new smart grid infrastructure in place to move electricity around Europe at 10 minutes' notice is entirely dependent on whether National Grid thinks it is profitable to make the investments. We cannot be too optimistic about this. Many large Scottish wind farms have not been built because the operators are unable to connect the turbines to the high-voltage pylon network.

The material on smart meters is similarly vague. These meters, under the stairs or in outside cabinets, contain a little transmitter that sends energy consumption data every 30 minutes back to the electricity supplier. Small wireless displays in the hall or the kitchen also show householders how much gas or electricity that they are using. These systems are expensive; Landis + Gyr, a major supplier of these devices, told me that the cost for gas and electricity may be as much as £10bn, or almost £400 a home once the costs of fitting the meters is included. A report from the leading economics consultancy Frontier put the figure at a slightly lower level. In Britain's liberalised energy markets it is unclear who should pay for this expense and the Conservatives give us no clue how they think the bill should be apportioned. In fact, the cost of this scheme is never even mentioned.

The policy paper says that smart meters incentivise people to cut back on their energy consumption by providing real-time information on utility bills. This is probably true. Some early studies using enthusiastic volunteers have shown cuts in electricity of 5% or more, perhaps worth £30 a year at today's prices. But the report by Frontier Economics suggests a much smaller figure of one or 2%, implying trivial savings to the householder.

Despite what the Conservatives suggest, the real benefits are likely to be considerably more controversial. Smart meters allow suppliers to change prices to encourage us to cut back or to increase energy consumption. Electricity use goes through predictable daily swings, falling to a low point at about 5am and rising to an early evening peak. Smart meters can be used to price electricity to deter the use of appliances at times of high demand when electricity tends to be most expensive to produce, something that can be very helpful in reducing carbon emissions and improving security of supply. Experience from around the world shows that smart meters and differential pricing can make substantial differences to energy consumption. But not everybody likes these changes – we've got used to turning our appliances on and off without worrying about the time of day.

In addition, suppliers can use smart meters to introduce emergency restrictions on electricity consumption at times of unexpected shortage. If the wind suddenly drops or a nuclear power station fails the smart meter can temporarily ration a household to one or two kilowatts, enough for lights and the TV but not for the vacuum cleaner. This aspect of smart metering is nowhere mentioned in the Conservative paper. In line with Conservative philosophy, people are reassured that participation in the smart meter programme will be entirely voluntary. Elsewhere in the world governments have always decided that advanced metering will only work if it is almost universal. I know of no other country intending to make participation a matter of householder choice. This will substantially reduce the effectiveness of the programme. Who will join in if they think it will increase their electricity bills or restrict their access to power?

Smartening up our supply and use of electricity is an important aim – and the Conservatives are right to pull this issue into the public debate. However, their proposals are completely uncosted. This is a problem throughout the document; for example, they tell us that covering a roof with 40 square metres of solar panels will provide the typical household with enough electricity to cover its annual consumption. Nowhere do they say that this will cost at least £25,000 and probably more. Moreover they consistently fail to specify how their proposals can be implemented within today's entirely privatised energy markets. Plans for smart metering in the UK have already been bogged down in arguments between Ofgem and the big six energy suppliers for almost five years. The Conservatives give us strikingly little detail on how they propose to clear this log-jam. Their heart is in the right place, but they have still to fully understand how the privatisation of the electricity supply system 15 years ago may now make modernisation of our energy infrastructure almost impossible.

This article was originally published in the Guardian on Monday 19 January 2009.