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19 October 2020

What is a smart meter?

Find out more about smart meters – from what they do to whether they will save you money.
SI
Sarah Ingrams

Smart meters give both you and your energy provider accurate and regular updates on how much electricity and gas you use.

Like traditional gas and electricity meters, smart meters measure your energy use. The main difference is that they automatically send this information over wireless networks to your supplier.

Your smart meter will come with an in-home display (IHD), which will show you how much energy you use in real time, and how much it's costing. By giving you this information, smart meters should help you to better control your energy use. You might also be able to get this information through your online account with your energy company, or its app. 

Here, we explain exactly what smart meters are, how they work, whether they're mandatory, how you can get a smart meter, and whether getting one installed could save you money.

Find out more about how the nationwide smart meter roll-out affects you in our smart meter roll-out guide.

How do smart meters work?

Smart meters replace your existing gas and electricity meters. They use wireless networks, similar to mobile phone networks, to send data directly to your energy supplier about how much gas and electricity you're using. This means you won’t have to read your gas and electricity meters any more, and your bills won’t be estimated.

Smart meters are different from energy monitors. While energy monitors can show you how much electricity you’re using, they don’t communicate this information to your provider. 

Smart-meter apps

Some energy firms offer apps for customers who have smart meters, and some give their app users extra functions. These can include top-up for pay-as-you-go customers, plus data about your energy use and costs, and tips to help you save.

Find out what the biggest energy firms are offering in our smart meter roll-out update.

How do smart meters communicate with each other?

When you get a smart meter installed, you'll get a smart electricity meter, a smart gas meter, and an in-home display (IHD). These elements will talk to each other wirelessly. 

Electricity smart meters are connected to the mains, and monitor how much power you're using in real time. Gas smart meters are battery powered and 'asleep' for most of the time, waking up every half hour to give a reading and communicate this via your electricity meter.

An electricity smart meter is connected to a communications hub. Sometimes the hub is built into it. This allows it to communicate with your IHD, using the smart meter home-area network. It also talks to the wider Data Communications Company (DCC) network, via the smart meter wide-area network, so it can send your energy-use data to your supplier. 

You’ll get a different communications hub depending on where you live. In the south and central areas of Great Britain, hubs use cellular and wireless mesh technology to communicate with the DCC’s central network. Further north, they communicate via long-range radio.

There are also different technologies to connect your IHD to your communications hub. Most homes will get a standard, ‘single-band’ hub, as these work for 70% of properties. If you’re not among these, you’ll most likely get a dual-band communications hub, as these will work in an additional 24-27% of homes. 

The latest development is ‘alt HAN’ comms hubs, which will make communication possible in homes where gas and electricity meters are far apart or where there are particularly thick walls, as well as in high-rise flats and rural areas. These hubs will help the final 3-6% of homes. The design of the meters was completed in December 2019 but they won’t be installed in homes until 2021.

Will smart meters work in my home?

More than 20m smart meters have been fitted in homes in Great Britain so far. Around 4 in 10 meters in homes supplied by big energy companies are now smart. 

Types of smart meter

There are two types of smart meter: first and second generation.

Before the start of the smart meter roll-out, the government set a standard for first-generation meters to make sure they all worked in a similar way. These first-generation meters make up the majority of the smart meters installed so far. However, a flaw with the way they work has meant they're likely to lose smart functionality when a customer switches energy supplier.

To solve this problem, first-generation meters are being remotely connected to the central wireless network that allows smart meters to communicate with all energy suppliers, so that they can be operated in smart mode again.

In 2018 energy suppliers began installing second-generation meters, which are connected to the network when they're installed. These are now the default option.

To find out more, visit our guide to the smart meter roll-out .

Rural areas, flats and rental properties

Smart meters are suitable for most property types, but there are exceptions. If you live in a rural area or a high-rise block of flats, if your home has very thick walls, or if your gas and electricity meters are far apart, you might not be able to have smart meters fitted yet. 

These factors mean that your gas and electricity meter may struggle to communicate with each other, or with the communications hub that sends your energy-use data to your energy firm. Contact your supplier to check whether it's possible to fit a smart meter in your home.

A solution (called ‘alt HAN’ communications hubs) is expected to be ready in 2021 (see above).

If you rent your home, you can get a smart meter installed as long as you're paying the gas and electricity bills directly to the supplier. Check your tenancy agreement if you’re not sure; it might also restrict how energy is supplied to the property you're renting. This could include the type of meter that can be installed. It’s a good idea to tell your landlord before you get a smart meter installed, even if your tenancy agreement doesn’t say you have to.

If your landlord pays the energy bills, it's their decision whether to get smart meters.

Do I have to have a smart meter?

No, you don't have to accept a smart meter if you don’t want one.

Energy companies have to take ‘all reasonable steps’ to install smart meters in their customers’ homes. This is set out in the conditions of their licenses to supply gas and electricity. 

The deadline for suppliers to take ‘all reasonable steps’ to install smart meters in all homes and small businesses is 30 June 2021; this was recently extended from a previous deadline of 2020. They must set themselves annual targets towards meeting this deadline.

‘All reasonable steps’ isn’t clearly defined, though, and energy regulator Ofgem will judge if suppliers have done this. Those that don’t meet their targets risk fines, so they’re under pressure.

At the end of March 2019, the government introduced a new rule called the New and Replacement Obligation. This means that energy firms must take ‘all reasonable steps’ to install smart meters where they’re replacing an old meter, or installing a meter for the first time (for example in a new-build home).

You can still refuse a smart meter if you really don’t want one, but companies might be less willing to install old-style meters. Some energy tariffs now require you to have a smart meter, or have one installed within a few months of signing up.

Climate Change Minister Lord Duncan said in October 2019 that he expects the cost of having an old-style meter to increase in future as they become ‘relic meters’, with a higher cost to maintain them.

If you really don’t want a smart meter, ask your energy supplier if it can set one up to work in ‘dumb mode’, with all the communications turned off.

But if your energy company has contacted you to change your meter because your current one needs replacing (ie it’s too old), then you should get it replaced as it could be a safety hazard if you don't.

How much does it cost to install a smart meter?

Having a smart meter installed doesn't cost you anything upfront. But energy companies shouldn't tell you that smart meters are ‘free’, because ultimately you pay for them indirectly, through your energy bills.

The government explained in 2019 that ‘just as with traditional metering, smart meter costs are recovered from energy supplier’s entire customer bases’.

Overall, the smart meter roll-out will cost almost £11bn, although the National Audit Office estimated in 2018 that the actual cost would be £500m higher than this. 

But with suppliers now allowed to install smart meters beyond 2020, the government said it expects it to cost £300m less than it previously predicted.

Over the course of the roll-out, the cost equates to around £391 in total per average dual-fuel household (£17 more than estimated in 2016), according to the National Audit Office.

Will a smart meter save me money?

A smart meter will mean more accurate bills for you - and remove the costs of meter readings, which are currently added to your bills.

Smart meters are expected to cut £250 on average from our dual-fuel bills between 2013 and 2034, according to the government. These savings will come mainly from energy suppliers receiving fewer customer enquiries and making fewer home visits, and, in principle, they should pass on these savings to customers.

Consumers are also predicted to be able to save money by being more efficient with energy used at home. However, smart meters will only save you money if you use and act on the information provided by your in-home display to cut your consumption. 

Follow our tips to become more energy efficient - see our expert advice on cutting your energy bills.

Whether you save through efficiency also depends on how frugal you are already. 

In the short term, smart meters may actually cost us money. The government calculates that they’ll come at a cost to households initially, but start saving money for customers overall from 2022.

Want to save money on energy now? Use our independent switching service to compare gas and electricity prices and find a cheaper deal.

What data will my smart meter collect?

Smart meters record your gas and electricity use. They don’t store or transmit personal information that could identify you, such as your name, address or bank details. Your energy firm will still have these on your account.

Information about energy use is your data, so you can choose what you want to do with it – and change your mind about how much you share, and how often. The only exception is when your data is required for billing or other regulated purposes (such as responding to customer questions, registering a prepayment meter top-up or investigating theft, for example).

You can choose:

  • how often your smart meter sends data to your gas and electricity firm (monthly is the minimum, daily is the default if you don’t state a preference, or you can opt in to half-hourly: check what your energy supplier suggests as default)
  • whether to share your energy-use data with other organisations, for example price comparison websites
  • if your supplier can use your data for sales and marketing purposes
  • whether your supplier is allowed to share your energy-consumption data with other organisations
  • how to access information about your energy data to get most benefit from it.

How to get a smart meter

All energy companies should now be installing smart meters in customers' homes in order to meet the government deadlines for when suppliers must complete their roll-outs.

Most of the smart meters installed so far are first-generation. Some people have faced problems with these losing smart functionality when they switch supplier. Companies should now be installing second-generation meters, which don’t have this problem.

Find out about energy companies' progress on installing smart meters.

Can I switch energy supplier with a smart meter?

In the long term, smart meters should make it quicker to switch energy suppliers. In theory, they can be instructed to send information about your energy use to a new energy company instantaneously.

In the short term, though, smart meters may actually be a barrier to switching. Some 70% of first-generation smart meters lost smart functionality when consumers changed energy supplier, the National Audit Office found in November 2018. 

This can happen if your chosen supplier is unable to operate your smart meter and it’s not yet enrolled in the central wireless system. In this case, you’d need to send meter readings again.

By the end of 2021, first-generation meters already installed should have been upgraded remotely and connected to the central wireless system so that all energy suppliers can operate them. However, it's worth noting that this deadline has already been delayed several times. 

Any meters that can't be upgraded will be replaced. Numbers should be small though; of 4,500 meters upgraded by November 2019, only two needed to be replaced completely, according to the DCC.

If you have a first-generation meter and want to switch energy supplier, you still can, but there is a risk that your meter will stop being smart until your meter is upgraded.

Find out more about switching problems and how to keep your smart meter smart in smart meter problems and solutions.

Fed up with poor customer service, or paying too much for energy? Then switch. Use our independent switching service to compare gas and electricity suppliers and find a cheaper deal.

Video: Smart meter myths debunked

In this video, our experts cut through the conspiracy theories about smart meters. If you're concerned that smart meters could be a risk to your health, your privacy or you bills, discover whether or not you really have anything to fear.