Wednesday, December 2, 2015

Mythbusting Smart Meters: The Pros and Cons

Nov 19, 2015 | Greg Miller, Senior Technology Analyst

If you think we live in a connected world, you ain’t seen nothin’ yet.
By the time the Internet of Things (IoT) gets up to speed, just about everything will be connected to the web – systems, networks, devices, homes, appliances… you name it.
The upside here? Greater streamlining and functionality, as well as bigger savings.
But there’s a downside, too – one we’ve previously highlighted:security concerns.
One of the most controversial IoT devices is also one of the first – smart meters.
These meters – whether for water, gas, or electricity – hold the compelling promise of both reducing energy demand and saving millions of dollars for consumers. With electric meters, for example, consumers could ease demand for the fuels needed to produce electricity.
But in many cities, these meters, particularly the electric ones, have met with opposition.
So what’s the truth here?
Smart Meters: Friend or Foe?
We’re All Getting a Raw Deal
Your Smart Meter Checklist
  • Who’s installing the meters? Presumably, the utility will do it directly. But will a senior electrician sign off on each installation before turning the power on?
  • Who checks meters for accuracy? Is there a tester independent of both the utility and manufacturer? Do utilities have an easy way for new smart meter customers to dispute their bills, or will customers have to Twitter-shame them every time they’re wrong?
  • Who gets usage information? Does the law prohibit utilities from selling the information to third parties? How will utilities try to prevent hacking and improper use of the information by third parties?
  • How much of a discount will homeowners get for nighttime electricity use? The appropriate amount will vary depending on where you live and how your utility gets its power, but the discount should be substantial – a real long-term saving if you schedule big electricity usage for off-peak hours. If the utility doesn’t have time-of-day pricing, why not?

To be blunt, many of the concerns and fears over smart meters are downright farcical. For example…
Smart Meters Make You Sick: Yes, some people really believe this. It’s entirely baseless.
However, it’s not uncommon for such fears to accompany new technologies. Remember when cellphones were supposed to give you brain cancer? They didn’t – and they don’t.
Some early smart meters used public spectrum similar to Wi-Fi, but almost all of them now use the same frequencies as your smartphone. So if you have a smartphone and don’t get sick from it, the same theory applies to your smart meter when it reports data back to the utility – it’s that simple.
Similarly, there was a remarkable phenomenon once known as Wind Turbine Syndrome – people said the windmills were making them sick.
But when Simon Chapman, a public health professor in Australia, looked into it, he found that not a single complaint had been lodged by people on land where the turbines were actually located when they received rent from the turbine company.
It turns out that the “cure” was money! So if people think smart meters are making them ill, the “cure” is for them to save money.
Smart Meters Are Harmful to Wildlife: Another claim that’s devoid of evidence. Unless you believe we should tear down every cell tower over a specific concern about smart meters, it’s unwarranted.
Smart Meters Are Dangerous: Specifically, this refers to the fear that electric meters are prone to catch fire. Well, one now-discontinued model in particular was allegedly responsible for an unusual number of fires.
But there are also fires associated with standard meters. After all, whenever you have electricity, there’s a fire risk. But a properly installed, modern smart meter that meets National Electric Safety Code standards doesn’t have any hazards that old-school meters don’t already have.
Smart Meters Infringe Civil Liberties: This one does have some factual merit – but only a little. You see, these meters not only reporthow much water, gas, or electricity you consume, but when.
They also report this data much more efficiently, easily, and immediately. The concern is that authorities might use the data to snoop on people or sell the information to other parties.
It’s true that law enforcement has used electric data in the past in order to identify indoor marijuana-growing operations. But on balance, this is a minor concern, easily remedied with legislation.
In fact, smart meters can actually increase your privacy. Under the old system, whenever a utility employee walks onto your property to take a reading, you can’t stop him.
How’s that for an invasion of privacy? With smart meters, human readers become unnecessary and utilities won’t be on your property unless there’s a malfunction.
Smart Meters Are Inaccurate: Some smart meter opponents claim that the new meters are woefully inaccurate and, far from saving consumers money, actually lead to higher electric bills.
There was indeed an issue with this several years ago. But today’s smart meters are really quite accurate. In fact, if they were as inaccurate as opponents say, they wouldn’t have privacy concerns!
Even if a consumer ends up with a “lemon” smart meter, there’s an easy way to guard against overbilling: Simply keep your old bills!
Electric usage doesn’t change much from one year to another unless there are big temperature differences. You should compare new bills to old ones and ask about any usage or billing discrepancies.
The real concern with smart meters isn’t overbilling, though. It’s that they might not save consumers as much money as they should!
But it’s still better than the old-school method…
For years now, consumers have gotten a raw deal from utilities. That’s because they’ve tended to be charged a flat rate per kilowatt hour – with that rate based on the utilities’ average cost of producing or buying the power.
But there’s no such thing as an “average cost.”
As you know, electricity tends to be more expensive during the day when there’s greater demand from businesses. By contrast, it’s cheaper at night. In fact, sometimes the nighttime cost of energy even becomes negative.
Unlike businesses, though, home consumers use most of their electricity at night. That means they should pay less per kilowatt hour than business customers. Smart meters make that possible.
But even in areas where utilities have introduced time-of-day pricing, they haven’t shared the full benefits with homeowners. Why? Two reasons…
First, much of a utility’s costs lie not in producing or buying the power, but in the electricity grid that gets it to customers. That cost is more or less fixed and it’s higher for homes than for businesses per unit of power sold.
Second, utilities aren’t installing all these expensive smart meters with the idea of losing money!
So if you have a smart meter now or if your utility proposes installing them, here are the real questions you should ask:
With smart meters, utilities should pay daytime rates for the power they buy from solar homes, but only charge nighttime rates when the home is taking power off of the grid.
If you get proper answers to these questions, you should welcome smart meters. You’ll probably save some money and you’ll help lower the amount of resources dedicated to electricity generation.
If you don’t get satisfactory answers, then it’s fair to ask what the utility is hiding and what’s actually in it for you.
To living and investing in the future,
Greg Miller
Greg Miller has spent over 20 years in the financial industry, working up from analyst, to portfolio manager, and eventually to an institutional investor, where he managed over $400-million worth of assets in mutual funds and private accounts.

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