IBM and Cable & Wireless have joined forces to provide data communications services for the UK’s forthcoming smart meter roll-out. PEi speaks to Laurence Carpanini, IBM UK’s Smart Metering & Smart Grid director and Amy Cooke, Cable & Wireless Worldwide’s Strategic Business Development director, to find out how the roll-out is progressing.

PEi: What is the UK’s smart meter roll-out trying to achieve?

Carpanini: The smart metering roll-out in the UK is the government’s response to three main issues. The first is the carbon reduction target, i.e. by 20 per cent on 1990 levels by 2020. The second is the European Union’s requirements to ensure all electricity consumers receive an accurate bill. That is enshrined in European legislation. The third reason is that the UK has a security of supply and sustainability issue because of ageing fossil fuel and nuclear plant that will need to be shutdown and replaced by renewable and embedded generation capacity around the distribution network.

Smart metering is key for meeting all three requirements because it offers electricity usage visibility at the consumers’ endpoint and that knowledge allows the power industry to do a number of things. For example, it can work with consumers to change the way they utilize electricity and generate energy savings by reducing the total amount of electricity used by the country as a whole.

IBM describes the Smart Grid as ‘instrumented, interconnected and intelligent’. The distribution network operators (DNOs) will be able to better understand how networks are being used and how to manage them better. In the past, DNOs have tended to rely on the transmission system operator to control the network by dispatching large plants. All of these different parts of the ‘smarter energy chain’ are going to change the way in which we manage networks in the future. Smart meters are the fundamental starting point in understanding what’s happening on the energy network.

Utilities and DNOs can encourage consumers to reduce peak demand. During the Pacific Northwest National Laboratory trial, which IBM conducted in conjunction with the US Department of Energy, we built a system to enable customers to define how they would like to use energy in their homes. For example, to specify the minimum and maximum temperatures of their homes, and after gaining the permission of consumers, the DNO was able to automatically control it by switching on and off consumers’ air conditioning units.

By doing that they were able to shift the peak demand from where it was previously. The resulting reduction in peak demand, which was in the region of 20 per cent, meant a decrease in demand for peaking power capacity, so fewer large power generation units would need to be built to meet those peaks.

PEi: Who will educate consumers to change the way they use electricity?

Carpanini: In the UK, the utilities are the ones that have the main contact with consumers, so the DNOs rarely have a relationship with end users – unless the customer rings up to complain that they have an outage!

The electricity generation and supply businesses are going to be the starting point for smart meters and the government is specifying that customer data will still be owned by the customer but available to the regulated distribution companies so that they can conduct their regulated responsibilities.

They also talk about the importance of usage data to generate and understand usage profiles so that time-of-use tariffs will be possible. Customers who want those innovative tariffs will be able to use them and change the way that they use electricity. In simplistic terms, that means that people who are willing to operate their washing machine at night will be rewarded with cheap electricity.

PEi: How advanced is the smart meter roll-out in the UK?

Carpanini: In March of this year, the government in its Smart Metering prospectus response, set out the initial framework against which both the data communications agent and the communication and data services providers will be procured by the end of 2011. The data communications agent will operate the data communications hub for the smart meter network.

It sets out how the technical and commercial interoperability standards will be defined, so that the metering and other appliance manufacturers will be able to build the devices compliant with the UK functional requirements. The government will start the procurement of the data communications company and also start to define the new license codes applying to the energy suppliers in this new smart energy regime.

While there is still a lot of work to do with the smart meter roll-out, IBM welcomes the clarity within the prospectus response and the potential role it will play over the next 12 to 24 months.

Cooke: Cable & Wireless (C&W) also welcomes the clarity within the prospectus response, and it is very apparent from what we have seen that there has been a lot of deep thinking by the Department of Energy and Climate Change (DECC) .

IBM and C&W are positioning themselves to be data and communications providers as the mandated data communications company. One of the reasons we are very excited about the collaboration between our two companies is that it is clear that there will be a large investment requirement and that the best way for consumers to benefit from the smart meter roll-out is to ensure that there is sufficient competition for the services that the data communications company will require.

The total investment that DECC estimates will be required for the entire smart meter roll-out is over £11 billion ($18 billion). They haven’t, as yet, broken down the total spend into constituent parts. It depends on the exact the level of data required within the hub and how the data communications company will actually function, and that’s not something we can comment on at this moment in time.

How the UK Smart Energy Cloud concept will benefit the smart meter roll-out

PEi: What do IBM and C&W bring to the table?

Carpanini: IBM is very excited to work with C&W because of our complementary skills. IBM brings global experience and knowledge of working in similar environments. We’ve been involved in two similar smart metering roll-outs that have a similar data communications hub, i.e. in Ontario, Canada and in Texas, USA.

We have been able to utilize the experience gained working on those projects in defining our UK Smart Energy Cloud, particularly around security and data management tools. Our experience from approximately 150 smart metering and Smart Grid projects worldwide, including in the UK, means that we have a lot of experience to define the way that the processes and operations will actually work.

IBM’s Smart Energy Cloud is not a novel technology and we will be using existing technologies. IBM uses the phrase ‘grow as you grow’. The Smart Energy Cloud will be flexible and scalable, and will be able to grow during the government’s foundation period, so that we can help the electricity supply companies test smart metering during the deployment phase of the roll-out, as well as the technology processes to show that the smart meters will work within a data communications centre environment.

Cooke: This extends to the data communications services section as well. C&W will aggregate and carry data, while IBM will process and deliver that data. The contract to the data communications agent for the data communication centre is due to be awarded in the fourth quarter of 2012, and the mass roll-out of smart meters will then begin in 2013.

C&W would be using its deep UK specific utilities sector experience, as well as its existing next-generation core network and core skillset, which is about aggregating multiple communications technologies. Leveraging its existing assets essentially means that C&W is able to make the right cost-point choice and technology choice in specific circumstances, rather than being constrained by the technology. It is using existing infrastructure in a cost-effective way.

An architectural overview of the UK Smart Energy Cloud concept

PEi: Have the design standards for the smart meters been finalized?

Carpanini: The government has defined a set of functional standards for the smart meters. They are set out in the appendix to the Department of Energy and Climate Change’s prospectus response to the smart meter roll-out.

The next stage is to define the detailed design requirements and standards for the meters. Those all then have to go to the European Commission to be rubber-stamped as European compliant, as well as UK compliant. It is then hoped that from the beginning of 2012 the standards will exist for the smart meter makers and manufacturers of appliances, which will communicate with the meters in the home, to start making them, and for the utilities to start the equipment procurement process.

PEi: Who will install the smart meters?

Carpanini: It’s up to the utilities to install the smart meters, but they will do that through their meter asset managers and meter operators. They will work closely with the meter manufacturers and also with the providers of capital because the roll-out requires a large investment.

I expect that there will be new, innovative ways of financing smart meters, but that is not something that IBM or C&W will be involved in. I expect that there will be no upfront cost to consumers for the installation of their smart meters, but the cost will be recouped through their utility bills. A smart meter roll-out levy has been expressly ruled out by the government.

Infrastructure funds and various banks are interested in financing the roll-out, but it all depends on the allowable rates of return and how the commercial interoperability will work, these still need to be defined. For example, if I change my electricity supplier then the ownership of the meter will have to be transferred and the cost of renting that meter from the provider or the bank that has paid for it to be installed will also have to be transferred from one to the other.

These conditions have been indicated as being thought about in the government’s response document, and I expect that they will be defined in the next stage of the design and implementation of the roll-out. Some people switch their electricity supplier all the time and some never switch at all and that’s why it is so important to define commercial interoperability standards so that supplier companies can have some assurance about rolling the meters out and the banks and other investors have a reasonable rate of return to ensure that they invest in the first place.

PEi: What steps have been taken to ensure that smart metering data are secure?

Carpanini: The smart meter roll-out was stalled in the Netherlands because of the European Court of Human Rights ruling that smart meters were breaching privacy. As a result, they changed their whole regulatory framework.

In the UK, the government has always been very aware of the importance of data security. DECC’s prospectus response states very clearly that the ownership of data resides with the consumer and that the supply organizations are only able to use meter usage data to carry out their regulatory obligations, i.e. so that they can provide consumers with a bill on a monthly basis.

The government has said that if customers request or agree to it, then that data can be used for other purposes and this will be the subject of further investigation by the government.

For example, I cannot collect your data and calculate your usage profile and then offer you a different tariff unless you tell me I can do that. There is also a concern that you can ascertain from energy usage data when people are on holiday, but this will be not be possible unless you actually give permission to someone who is trusted to use that data. There are a lot of safeguards in place.

Cooke: While the specific security requirements are one of the areas being defined by the government over the next six months before procurement begins in earnest, the assets that C&W would be using are its secure IT core networks. It is a network that has been used for secure government services in a number of places and, not wanting to pre-empt the exact requirements that the government is going to set out, the data security challenges of carrying this candidate around the world are relatively well-known in, for example the banking, and telecommunications sectors.

PEi: Will new laws be needed for the smart meter roll-out?

Carpanini: The establishment of the data communications company will have to be enshrined in the UK Energy Act of 2008. The Energy Act has been set out in statute, but how that’s going to operate will have to go through Parliament.

There will also be codes of practice set out for the deployment of the smart meter roll-out – set into the supply licence will be targets of the deployment of meters and completion dates – and also because of unusual practices in the installation process, e.g. for doorstep selling of smart meters. The government is very conscious that it needs to keep consumers informed and aware of how the roll-out will happen. These issues will be finalized within the next 12 months.

PEi: Will the government sign a fat cheque for the data communications company and that’s it or will there be a continuing revenue stream?

Carpanini: The short answer is it will be regulated because the data communications company will be a regulated entity and there will be a contract awarded by the government to that entity. There is no indication as yet as to how much the value of the contract will be or for how long that contract will run.

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