U.K. government underestimated smart meter cost, claim


London, U.K. – (METERING.COM) — May 18, 2009 – The U.K. government has underestimated the cost of a nationwide smart meter rollout and the real cost could be at least almost 50 percent higher, according to financial advisors Ernst & Young.

Last week the U.K. government announced plans for a rollout of smart meters to residential and small business customers (see U.K. smart meter rollout outlined). The cost is estimated between £7.7 billion to £9.3 billion, with the government’s preferred option – the central communications model – at £8.1 billion. However a report in The Times quoted Ernst & Young as saying that the true cost is likely to be about £13.4 billion.

Tony Ward, power and utilities partner in Ernst & Young, was quoted as saying that the government’s figures appeared to underestimate the scale of the additional technology and infrastructure required to support the smart meters.

“Very big and complex projects of this sort always cost more than anticipated,” Ward said, citing problems of gaining access to all 26 million U.K. properties to install the meters and big upfront costs for purchasing equipment and software, as well as hidden costs, such as providing finance for the project.

Ward also said there were big questions about how the rollout would take place and the technology to be used, adding that the government’s figures appeared to rely “on an assumption of absolute efficiency”.

However, a spokesman for the Department of Energy and Climate Change defended the cost estimates: “We are confident in our cost estimates. They were arrived at after work with industry experts and external economists and clearly show the benefits of smart meters more than outweigh the costs.”