Government Selects Favourites For The Smart Meter Roll-Out

The Department of Energy and Climate Change (DECC) has selected preferred bidders for six government contracts as part of the £12.1 billion project to switch most of the UK to smart meters by 2020.

If everything goes according to plan, Capita will receive the Data and Communications Company (DCC) licence. It will then contract CGI IT UK as the Data Service Provider (DSP), Arqiva as the Communications Service Provider (CSP) for the North of England and Scotland, and Telefonica as the CSP for the rest of the UK.

Industry experts have previously warned against awarding all CSP contracts to a single company, since the lack of competition could inflate pricing.

Meanwhile, the Smart Energy Code Administrator and Secretariat contract is likely to be awarded to Gemserv.

The upcoming roll-out of 53 million networked devices will be one of Europe’s biggest ever IT projects, but its proponents believe it will save much more money than is being spent on it.

Get Smart

By 2020, 80 percent of the UK population must use smart meters in order to comply with the EU guidelines. If the target is not met, the country’s carbon quotas will be severely affected. The project has been in the so-called ‘foundation phase’ since March 2011, with British Gas, E.ON and nPower offering Smart Meters to certain households.

The mass roll-out will start in autumn 2015, with thousands of deployments every day, all the way until 2020.

Smart Meters reduce CO2 emissions by helping customers manage their own energy and bills, and letting them easily choose the supplier that provides the best value for money. Total consumer benefits of the scheme are expected to amount to £6.3 billion, mostly due to operational efficiency. On the supplier side, the savings are set to be even higher – £9.07 billion including avoided site visits, reduced inquiries and customer overheads.

To facilitate the roll-out, five companies were awarded a total of £2.4 billion in potential contracts. Capita won the right to manage the smart metering service, as well as arrange contracts with the data and communications service providers. The estimated value of this licence over 12 years is approximately £175 million, with an option to be extended for a further 6 years.

This means security services company G4S, the other contender for the contract which performed rather poorly during the Olympics, will walk away empty-handed.

“Smart metering will be the biggest step change in the retail energy sector since the industry was privatised, more than 25 years ago,” said Paul Pindar, CEO of Capita.

53 million reasons

The DSP contract is likely to be awarded to CGI IT UK (known as simply CGI before its acquisition of Logica), which is responsible for ten out of sixteen central energy market solutions currently in operation across the globe. The company will develop and run the system that will link gas and electricity meters with the business systems of utility companies. The estimated value of this contract over 8 years is approximately £75 million.

“The success of the programme is crucial if Britain is to keep energy bills affordable, continue to benefit from the levels of reliable supply we do today, meet our carbon reduction targets, continue to be an attractive place to invest and provide consumers with meaningful choices about how they satisfy their energy needs,” commented Tara McGeehan, head of CGI’s UK Smart Energy sector. 

As one of the CSPs, Arqiva will be tasked with providing wide area communications network to and from smart meters in the North region of the UK. Its solution is based on Sensus technology that has been deployed internationally in more than 16 million smart meters and devices. The estimated value of this contract over 15 years is approximately £625 million.

The second CSP, Telefónica UK, will manage the communications network in the Centre and South regions, implementing a solution based on its mobile technology. The estimated value for its contracts over 15 years is approximately £1.5 billion.

“It’s a huge endorsement of cellular as the right communications technology and of our vision for smart meters to be the foundation of a smarter energy future for the UK. The decision is subject to contracts and we are working with the DECC on next steps and will be making a further announcement in due course,” said David Plumb, Digital and New Business director at Telefónica UK.

Gemserv has been selected as the preferred bidder for the £10 million contract which will see it maintain and update the industry code governing the use of smart meters.

DECC expects to make a statement to Parliament in early September once all contracts have successfully been confirmed.

“This is a major IT project needing professional systems engineering to ensure that the whole end to end system works securely and reliably not just the individual components. There is much work to do between now and the start of mass roll-out to ensure that the system performs as designed,” commented Dr Martyn Thomas, chair of the IT Policy Panel at the Institution of Engineering and Technology.

“It is important that the industry, in conjunction with DECC and Ofgem, now work in a harmonised way to ensure a successful rollout and a positive consumer experience.”

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