SMS operates right across the UK energy sector

Our core market areas fall into two general categories:
1) The UK smart meter rollout, and 2) The green economy and ‘net-zero 2050’ challenge.

The UK smart meter rollout:

Although the UK Government’s mandated Smart Meter Installation Programme saw energy suppliers install record numbers of second generation (‘SMETS2’) devices in January and February 2020, the restrictions on everyday life due to the COVID-19 pandemic disrupted the rollout from the end of March. With energy companies responding to the COVID-19 restrictions by moving in most instances onto an emergencies-only footing, the industry saw a sharp decline in installation rates, bringing the rollout to a de facto, albeit temporary, halt.

Whilst the first lockdown, from 24 March 2020 to the start of June, saw restrictions for the most part universally applied across the UK, installation statistics from the smart meter rollout in England during this period demonstrate the extent of COVID’s impact. According to figures from the Data Communications Company (DCC), the first lockdown in spring 2020 caused a fall of 96.2% in average daily installations of SMETS2 meters, or a total of just 658 per day compared to a February 2020 average rate of 17,362 per day.

Due to the pandemic-enforced pause in installation activity for Q2 2020, the UK Government subsequently confirmed a six-month extension to the ‘all reasonable steps’ obligation on energy suppliers. The Office of Gas and Electricity Markets (Ofgem)’s framework now mandates energy suppliers to take ‘all reasonable steps’ to roll out smart meters to their customers by 30 June 2021. The UK Government also confirmed that, as a knock-on effect, the overall smart meter programme deadline would be put back six months to 1 July 2025. to the COVID-19 restrictions by moving in most instances onto an emergencies-only footing, the industry saw a sharp decline in installation rates, bringing the rollout to a de facto, albeit temporary, halt.

Energy suppliers and their smart meter installation partners were able to remobilise again from early June and effectively restart the rollout in a gradual and phased manner with new strict health and safety measures and protocols in place in order to confidently re-access consumers’ homes and businesses with minimum risk.

By the end of Q3 2020, official Government statistics indicated the success of, and general consumer confidence in, the safe remobilisation of activity, with installation rates reaching c.80% of pre-pandemic levels (0.85 million domestic smart meters installed in Q3 2020 compared to 1.06 million in Q3 2019). October 2020 notably marked a recordbreaking month for the installation of SMETS2 meters, with an average of 17,579 fitted each day, signifying that installation levels were even surpassing pre-pandemic peaks by the time Q4 2020 came around.

The resounding industry recovery was demonstrated by the limited impact on installation rates during the second nationwide lockdown in November 2020. Installation rates in England during the period dropped by just 2.5% on the previous month – October itself already a record for SMETS2 meters installed as detailed above. The huge disparity in installation rates between the first and second national lockdowns demonstrates how effectively energy companies, distribution network operators and asset installation partners adapted their working practices to enable the rollout to continue safely in homes and businesses despite the ongoing pandemic.

As of 31 December 2020, there were 23.6 million smart meters installed in homes and small businesses in Great Britain, of which 19.1 million were operating in smart mode (connected to the DCC) or advanced meters. This means that more than a third of all meters in the UK are now smart or advanced, rising to 42% when including smart meters operating in traditional mode i.e. first-generation smart (‘SMETS1’) meters that had not yet been enrolled by the DCC.

Q4 2020 statistics continued to underline the industry’s strong recovery from the initial impact of COVID-19, with installation levels increasing by 14% on Q3 2020.

By the end of 2020, SMS was operating at c.80% of its pre-COVID-19 run rate and was well positioned for a continued increase in installation activity through 2021 to deliver the mandated UK smart meter rollout and its contracted order pipeline.

In December 2020, the DCC reported much-improved progress on its Enrolment and Adoption (E&A) programme, which sees previously installed SMETS1 meters migrated to its network. To realise the full benefits of smart metering, the UK Government previously decided that along with a new unified network and a single smart meter standard, all older SMETS1 smart meters should be migrated to this single network rather than remaining on various unconnected networks. This will allow seamless energy supplier switching and smart operation no matter which variant of the smart meter consumers have or who originally installed it.

The DCC started 2020 with very low volumes of migrated SMETS1 meters on its network. However, despite the hugely challenging conditions, it closed the year with more than 2.7 million migrated SMETS1 meters, enabling many more consumers to regain and maintain connectivity and/ or switch suppliers without losing any of the benefits that smart meters can bring. The DCC has confirmed that all SMETS1 smart meters, of which there are approximately 14 million in circulation, will be migrated to its network by the end of the rollout.

In January 2021, Ofgem released the results of its latest quarterly Consumer Perception Survey (Q3 2020), which found that more than 70% of consumers were happy with their smart meter – the highest level recorded since the national rollout began.

As well as general improved consumer satisfaction with the technology, Ofgem’s survey also showed a significant increase in satisfaction of the smart meter installation process, rising to 80% (matching the record high set in Q1 2020).

The wealth of data generated by smart meters and other connected devices continued to complement and advance the creation of new green technologies and ‘energy-as-aservice’ solutions during 2020; and these services are helping drive more efficient use of energy, lower carbon, and enhanced customer affordability and experience. Looking forward, the energy revolution, enabled by smart meters, is set to continue to develop a more dynamic energy system in the years ahead, whilst the continued development in other technology areas such as artificial intelligence, automation, and use of blockchain – combined with smart meters – will also dramatically disrupt the energy market and make significant contributions to the UK’s low-carbon transition.

The green economy and ‘net-zero 2050’ challenge

Overview

2020 was a watershed year for the UK’s green economy. With the UK Government having revealed its net-zero emissions target in 2019 – aiming to reach carbon neutrality by 2050 – 2020 marked the first full year following this momentous announcement. It was a period that would provide a valuable gauge of initial market reactions and developments.

Importantly, 2020 also saw the UK Government reveal its intentions on how to lead and support the green economy in meeting the net-zero 2050 target through a binding national strategy. Details of this strategy were contained in the long-awaited but much-delayed Energy White Paper in December, which gave clarity on the key policies that will help shape the UK’s energy and sustainability agenda for years – indeed decades – ahead.

Alongside the challenge of climate change that had served as the main driving force for the country’s greener ambitions, COVID-19 has brought unprecedented social, economic and environmental challenges that have accentuated the essential and urgent importance of sustainability in our society. In this manner, the pandemic further underlined the central role that the green economy – and the markets and industries that contribute to it – must play in leading the transition to a low-carbon world. Just as significantly, it also highlighted the importance of creating a far more resilient, shockproof economy in order to protect future prosperity.

In responding to the pandemic, the UK Government has emphasised that the country must ’build back greener’ and the Energy White Paper put forward various commitments aimed at transforming the UK’s power and heating systems and cutting emissions from industry, transport and buildings.

Besides renewables growth, a key part of the plan is around the electrification of transport and heat, including the flagship policy to end the sale of new petrol and diesel cars and vans from 2030 (10 years earlier than had previously been planned), and the provision of a £2.8 billion package of measures to support industry and consumers in making the switch to cleaner vehicles. The UK Government also committed to supporting the installation of electric heat pumps in homes, raising its target from 30,000 per year to 600,000 per year by 2028 in order to drastically reduce the use of oil and gas by home heating systems and to help decarbonise the housing stock.

With this energy transformation requiring unprecedented public and private investment, the UK Government recognised its important role in making regulatory reforms which place fairness and affordability at the heart of the net-zero programme. These reforms include greater commitments aimed at protecting the fuel-poor and supporting the upgrading of home energy performance through smart technology. In order to facilitate the funding, development and deployment of such cutting-edge technologies, continued innovation and improved private finance solutions were highlighted as crucial to reaching the net-zero goal.

In addition to SMS’s core focus on the UK smart meter market, the Group’s strategy also includes the financing and development of green carbon reduction (‘CaRe’) assets as the economy transitions towards net-zero carbon emissions.

During 2020, market demand for green finance products remained strong despite the pandemic, as a heightened awareness of environmental, social and governance (ESG) pressures coincided with a raft of regulatory changes and an uptick in green capital-market activities.

Accordingly, SMS continued to make strong progress in developing its pipeline of CaRe assets across several verticals, including grid-scale battery storage, behind-the-meter storage and solar generation systems, electric vehicle (EV) charging infrastructure and heat networks – all of which are technologies that will play an increasingly important role in the UK’s net-zero carbon mix.

This strategy will be delivered by SMS’s well-established energy services arm, which for the last 25 years has been helping businesses to reduce their carbon footprint and achieve greater control over the generation, use and storage of energy.

SMS continues to take forward its national approach to carbon reduction via the Company’s regional bases up and down the country. This national installation platform, which underpins our ability to deliver CaRe assets at scale across a wide range of lowand zero-carbon technologies, is supported by our national training academy, where our regional engineering workforces are being trained and upskilled with the ‘green’ skills that the UK requires for the carbon transition. This includes an EV charge point installation course, accredited by City & Guilds, which was launched at our academy in 2020. This approach not only strengthens our preparation and builds capability for the net-zero challenge, but crucially also facilitates our contribution to investing in local communities, by creating jobs and supporting regional economic growth through our regional CaRe delivery, which includes, but is not limited to, our asset funding partnerships with UK local authorities for behind-the-meter housing stock solutions.

SMS is playing a central role at both national and regional levels in developing energy innovation through its finance, technology and engineering delivery solutions, and is a lead partner on several UK Research and Innovation-supported energy innovation projects.