DECC has also published Smarter Grids: The Opportunity making the case for developing smart grids in the UK.

The aim is to deliver electricity more efficiently and reliably, increase generation of low carbon electricity through for example renewable energy, and to give consumers more control and choice of when they use electricity.

The roll out of smart meters to 26 million households and small businesses will be supported by Ofgem through Ofgem E-Serve. There will be a prospectus for the first phase of the smart meter roll out next summer setting out detailed proposals for the regulatory and commercial framework and defining the minimum functions that the smart meters will have.

DECC is providing a £6 million UK Smart Grid Demonstration Fund to companies to continue developing smart technology such as energy storage. Furthermore, Ofgem will make £500m available over five years from April 2010 for larger scale smart grid trials.

Energy and Climate Change Minister Lord Hunt said on 2 December: “Smart grids will help manage the massive shift to low carbon electricity such as wind, nuclear and clean fossil fuels.

“Globally the business of developing smart grids has been estimated at £27 billion over the next five years and the UK has the know-how to be part of that.”

Smarter Grids: The Opportunity

The DECC report on smart grids, states that £8.6 billions will be spent on replacing 47 million gas and electricity meters, with an expected benefit of £14.6bn over the next 20 years.

Furthermore, the smart grid report estimates that by 2050 virtually all electricity will need to be from clean energy sources such as renewable energy, nuclear and carbon capture and storage.

Grids will have to be connected across state borders, and energy storage solutions have to be developed further. The incorporation of more distributed energy generation will also impact grids.

In addition to energy benefits, DECC says that a smart grid infrastructure could create a high-skilled UK smart grid industry and that the global smart grid market is currently estimated to be worth €30bn over the next five years.

Funding is also comming in the form of investment from UK transmission companies, which have put forward plans to invest £4.7bn by 2020 for refurbishment and expansion of their networks.

This spring, the DECC will publish further smart grid plans in a 2050 Roadmap.

Electric transport?

The UK government will support the building of recharging infrastructures for electric vehicles in the for of the £30m Plugged-in Places framework, according to the DECC report.

Challenges for smart grids

DECC admits, however, that there are several challenges going forward for creating a smart grid for the UK. These include:

• The intermittency of renewable energy and baseload power;
• Distributed electricity generation;
• Demand and supply management;
• Heating and hot water supplies have to move away from gas increasing the demand on the electricity demand;
• The same goes for plug in vehicles; and
• Storage.

The success of a smart grid also requires consumer engagement, testing of new technologies, and adapting regulatory frameworks and business models.

Next steps for smart grids

DECC says investment is needed for:

• Large smart grid demonstration projects;
• Optimising the connection of new generation to transmission and distribution networks;
• Understanding local needs; and
• Gathering information to build a robust analysis of the costs and benefits of different smart grid technologies and approaches.

GE Energy Smart Grid Centre

GE Energy UK opened a Smart Grid Centre at its Bracknell headquarters as Lord Hunt made his announcements.

GE says the technologies used for smart meters and smart grids will be showcased in its Smart Grid Centre.

“The centre offers visitors the first-ever ‘turbine to toaster’ view of the smart grid, showing utilities, government and consumers the many dramatic energy-management and carbon footprint-reducing advances available today,” GE says.

Magued ElDaief, GE’s UK Managing Director, said at the opening: “The UK government’s goal of installing smart meters in every home by 2020 is a valuable step towards smarter energy usage.

“In the UK, GE already manages grid intelligence for 13 of the 14 Distribution Network Operators. Our solutions at the Smart Grid Centre show how we can further maximise performance from power plants to neighbourhood distribution and ultimately consumer usage in the home, the school and the workplace.”

How smart are the meters?

IBM Global Business Services’ Graham Butler, says: “With more information on energy consumption consumers will be able to make informed choices and change their behaviour.

“However, with an IBM survey finding more than 50% of UK households want more than just a figure for energy usage having to display box is only the first step. Utilities need to educate consumers on how they can use the information generated by smart meters to reduce bills and develop smarter ways of managing their energy usage.”

IBM warns that consumers and utility companies need to be able to measure consumption and find new ways to manage energy usage, implement new tariffs to incentivise change in consumption, and to implement new devices and services allowing consumers to automatically change consumption patterns of devices to minimise energy usage and effectively interact with the energy system.

IBM also says that the UK energy system as a whole is facing a set of interrelated challenges – from concerns about environmental issues, to security of supply.

“Smart metering needs to be understood and implemented within the context of the UK’s wider energy system. Tackling the challenges ahead requires an unprecedented degree of engagement with customers,” IBM says.

IBM is working on almost 50 smart grid projects around the world.

Energy consultant disappointed

UK energy consultant Onzo, says the smart meter plans are “disappointing”.

Joel Hagan, Chief Executive at Onzo, says: “It is disappointing that the Government has decided to mandate energy displays rather than mandating the information that energy suppliers should provide to their customers and leaving it to the energy suppliers to compete in relation to how that information is delivered.

“Everything now rests on the effectiveness of those displays. At £15 per display, it is doubtful whether the reductions in usage that the government anticipates will be realised.”