New cost estimates of a national smart meter rollout in Australia


Canberra, Australia — (METERING.COM) — September 16, 2008 – The inclusion of a home area network interface in the national minimum functionality and a reduction in the benefits accruing from smart meters are among the conclusions of a revised cost benefit analysis of smart metering and load control in Australia.

While the main conclusion of the earlier analysis remains – that a distributor-led rollout of smart meters would best satisfy the objectives of the state energy ministers, through the Ministerial Council on Energy (MCE) – the revised estimates of the benefits are between Aus$4.1 billion and $6 billion over 20 years, while the cost is estimated between Aus$2.7 billion and $4.4 billion. Thus the net benefits delivered by smart metering are estimated at between -Aus$299 million and $3.3 billion nationally (excluding the HAN interface), rising to -Aus$260 million and $3.7 billion when the costs and benefits associated with the HAN interface are included.

These new figures result principally from adjustments to the assumptions about the quantity of meters expected to be replaced and thus a reduction in the avoided meter cost benefits, which have fallen by between 15 and 24 percent compared with the earlier estimates. In the earlier analysis the distributor-led rollout was found to yield net benefits estimated between Aus$179 million and $3.9 billion over the twenty-year period.

As in the earlier analysis the net benefits of smart metering are not unequivocally positive for all jurisdictions in Australia. Only in New South Wales, Victoria and Western Australia are positive net benefits indicated on the basis of the estimated avoided meter costs and business efficiencies alone. In Queensland, demand response benefits would be important for a positive net benefit outcome and in this state, as well as in South Australia, Australian Capital Territory (ACT), Tasmania and the Northern Territory, it would be necessary for the costs of rollout to be at the lower end of the range estimated together with the benefits at the upper end of the estimates to achieve a positive net benefit.

The other main recommendation of the revised analysis is the inclusion of an interface with a home area network in the national minimum functionality, as it would facilitate provision of an in-home display by retailers and thus direct load control of appliances. However, how the interface is ultimately used will be determined by the commercial considerations of both retailers and distributors.

The cost benefit analysis forms part of an initiative endorsed by the Council of Australian Governments (COAG) in April 2007, for a staged approach for a national rollout of smart meters to areas where the benefits for consumers outweigh the costs. It was initiated by the MCE and was undertaken by a consortium of consultants including NERA Economic Consulting, CRA International, KPMG and Energy Market Consulting associates.

The revised analysis follows a public consultation on the initial analysis.

Based on a review of the initial analysis in June the MCE committed to continue smart meter deployments in Victoria and New South Wales and to extensive pilots and business cases in most other jurisdictions to confirm the benefits, costs and risks, as well as to establishing a consistent national framework for smart meters.