Keeping It Voluntary: the Case of Smart Meters

A guest post by Mike Wilkinson:

If someone buys electricity, the seller needs to measure how much they’re using.  Smart meters do this electronically and they’re read automatically, making them a big step into the digital age.  How best should that step be taken?  By keeping it voluntary is what’s shown by comparing New Zealand’s smart meters with Australia’s.

The New Zealand Government more or less leaves companies to themselves to decide about smart meters.  Competition between electricity companies motivates installation.  There are now smart meters in over 50% of the country’s households and businesses, a figure growing by the day.  And since smart meters here are voluntary, they are installed only when companies want to use them.  They come at no additional cost to consumers.

The approach to smart meters in Australia has been very different.  In 2006, the Victorian State Government directed that over two million smart meters be installed in Victorian homes.  Since it was mandatory, this approach has been much more costly for consumers.  According to this Australian Productivity Commission report (see p. 383), it’s raised households’ electricity bills by over $100 annually.  Moreover, Victoria’s mandated rollout has contributed to uncertainty across Australia, delaying companies from installing smart meters.  In the rest of the country, only a few consumers actually have them installed.  This is in stark contrast to New Zealand, where the majority do.

The long term benefits of smart meters are indeed uncertain.  It isn’t clear which sort of technology is best for them and companies naturally disagree about how worthwhile they are.  New Zealand has been able to work through this – it has kept things voluntary while maintaining competition.  Meanwhile, Australia has shown how government intervention can make things worse by raising costs for consumers and creating uncertainty for companies.

Despite that uncertainty, one thing is clear: consumers in New Zealand are already benefiting from smart meters.  They allow many of us to see our electricity usage on a daily or even a half-hourly basis, almost in real time.  Worried you’re consuming way more electricity this winter?  Just look up your company’s website and see.  Gone are the days of waiting for an ‘estimated’ read at the end of each month.

Politicians occasionally show little respect for what’s occurring voluntarily when they suggest making certain things compulsory.  Labour MP David Shearer recently suggested that New Zealand’s smart meters were ‘plain dumb’.  He proposed introducing minimum standards for them, implying consumers should bear the cost of making those standards mandatory.  This comparison of New Zealand’s and Australia’s smart meters questions the wisdom of such an approach.

Smart meters could become very important in the future.  For example, if lots of people start plugging in electric vehicles for power at the end of each day, these meters could make all the difference for ensuring our electricity networks keep operating.  Whichever way they might be used, though, New Zealanders can be assured that they’ll benefit the most if our Government continues to keep things voluntary and competitive.

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