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Smart Meters: Not So Brainy

The government’s investment in smart meters—to help monitor and regulate energy consumption in homes—is a waste of money. Pro or con?

Pro: Not So Effective

The U.S. is in the process of deploying $3.4 billion of federal Smart Grid Investment Grant Program funds, matched by $7 billion of state, local, and ratepayer funds for technological improvements to our electricity grid. The largest portion of these funds is to install smart meters, electronic versions of the old analog (dial-based) meters, along with systems that allow those smart meters to communicate. While smart meters can provide detailed "information" about energy usage, they won’t necessarily be compelling enough to spur consumers to save energy.

So what will we get back on this investment? The installation of a smart meter and communication system in a typical home can cost up to $500, which is about the same as that home’s electricity bill for several months. Smart meters provide value to the utility providers—they facilitate automatic billing, for example. While having efficient utilities to service us is beneficial, that alone is not enough. This investment to digitize our metering systems needs to be the core enabler for replacing fossil fuel-based sources of electricity with renewable sources. True, wind and solar energy will be major contributors toward this end over time, but the single cheapest and quickest means of reducing pollution and our carbon footprint is energy efficiency.

Our Smart Grid investments must motivate behavior by creating greater economic incentives. While doing good for society is some incentive, we all know that economic incentives work wonderfully. For example, to encourage consumers to install solar panels, we could offer to "buy back" any energy the panels generate in excess of what the consumers use for their own homes. Aligned financial incentives (and disincentives, such as charging higher rates for consumers who don’t conserve enough) are essential to deliver a return on the Smart Grid Investment Grant Program. This is what truly will stimulate us to behave differently—in our purchase and use of major appliances, in our management of equipment in our workplaces, and in our day-to-day behavior.

Con: Built-in Reminders to Conserve

Knowledge is power. In the case of smart meters, it’s a more efficient use of power. The U.S. government was galvanized to invest in smart meters by the sheer numbers: Smart meters save consumers $60 to $180 per year, according to the Energy Information Administration. As Nobel Prize winner Al Gore said, "Energy efficiency is ‘the single largest solution to the climate crisis,’ and the smart grid will ‘play a crucial role’ in achieving that efficiency." But don’t take our word for it. A recent DOE study showed that when consumers can track their energy usage through smart meters, their usage declines as much as 15%.

If just half of U.S. households cut their demand by 10%, the electricity savings would be greater than today’s total U.S. wind and solar power output. The Energy Information Administration’s Clean Energy Calculator indicates that the amount of CO2 emissions avoided would be equal to taking approximately 8 million cars off the road. And with the addition of dynamic pricing, programmable appliances, and other incentives, the potential for savings could be significantly greater.

Extrapolate this savings across 338 million meters in the U.S., and you get more than $40 billion (back of the envelope calculation: $120 average savings x 338 million meters = $40.5 billion). Considering the $3.8 billion government investment in the smart grid, the data show a clear return to ratepayers. At SmartSynch, we also believe that using existing public wireless networks to build this grid—rather than costly private networks—will make the government money go even further.

Other major infrastructures, such as the telephone network, Internet, transcontinental railway, and interstate highway system, have moved to digital, and the time for electricity—the most integral network powering modern life—has finally come.

Opinions and conclusions expressed in the Bloomberg BusinessWeek Debate Room do not necessarily reflect the views of Bloomberg BusinessWeek,, or Bloomberg LP.

Reader Comments


If consumers see immediate savings from conserving energy, they are more likely to adopt energy saving measures on a daily basis. Smart Grid billing could contribute to that process.


Another gift of public funds to big untilities disguised as enviromentalism.


This is a scam. If smart meters are a worthwhile investment, the utilities should pay for them. My power company is a regulated monopoly, and they are guaranteed a profit. Ratepayers are already paying for new meters in my area. Not only that, but they are asking state regulators to approve a planthat will allow them to raise rates to cover revenue lost from energy efficiency. In other words, if I conserve, they will just raise the rates to keep revenues the same. The smart meters will put meter-readers in the unemployment line, so subsidizing these meters will increase unemployment. Has anyone considered the big brother implications? Do you really want the utility (or government?) monitoring your electrical use in real-time? I believe these meters can also remotely disconnect doubt they will do this if you don't pay the bill, but what about for rolling blackouts? There has been some concerns about the accuracy of the meters too--some people have seen their bills jump significantly after installation. Finally, my 'old' meter is made in the USA. I believe the new meters are made in Mexico.


Here in the UK, I read in my copy of 'The Times' yesterday that British Gas has just announced it's to go ahead and install smart meters in a million homes this year, without waiting for the end of the government's pilot project.

It does seem that homeowners who have had SolarUK solar hot water systems installed have reported electricity savings too--this is because they have bought electricity monitors, which make them realise that they often use energy unnecessarily. These meters, along with other simple measures such as changing lightbulbs to energy saving ones, are great complements to solar energy systems. They do help to change behaviour in that they force us to think twice before using household applicances.


1 - Meters from some manufacturers are made in Mexico, but 2 of the 4 major meter vendors still manufacture in the USA.
2 - Publicly owned municipal utilities and member-owned cooperative utilities often pay for Smart Grid investments using good 'ole simple payback or NPV calculations without needing to raise rates (or taxes).
3 - If the utility disconnects non-paying customers more quickly and more inexpensively, then the rest of the paying customers are no longer subsidizing the non-payers.
4 - Meter reading jobs are often entry-level non-skilled jobs in the utility. Most utilities are looking to promote people out of non-skilled jobs to something more valuable in the organization, like a technician that can actually install, troubleshoot, and repair meters or other distribution equipment.
5 - Meters are calibrated at factories and most PUCs\regulatory boides require testing programs that use standards traceable back to NIST. The newer meters are more accurate than the older vintages. There are several other reasons for bills to increase suddenly. Perhaps, one of the causes is that the old meter installation was wired incorrectly thereby capturing a fraction of the consumer's actual electric usage. When the new meter was installed and the wiring corrected, the customer saw the real value of what they were using. They'd been getting a discount before that, which the utility is usually within their legal right to back-charge for (although most don't).

David O'Brien, Commissioner Vermont Dept. of Public Service

I agree with Mr. Johnston. As a ratepayer advocate whose primary responsibility is to ensure that consumers are treated fairly I have been very frustrated by the national Smart Grid discussion. A common misunderstanding starts with energy efficiency.

Today energy efficiency means a charge on everyone's bill to offer subsidies to individuals and businesses to install more efficient light bulbs, appliances, equipment etc. The argument is the saved kilowatt hours via subsidy are cheaper than generating and transmitting electricity. In a perfect world yes, but in reality there are all sorts of variables including free ridership etc. that undermine the true return on investments in efficiency. Further, the kilowatt hours saved are solely electric savings and most often not peak kilowatt hours.

Our electric system is sized to meat the absolute peak demand plus a 5% or so reserve margin. Our peak nationwide, despite record expenditures on efficiency, continues to rise and therefore demand more installed generation and more transmission, all paid for by consumers. The peak continues to rise because consumers pay the same unit price for electricity regardless if it is off or on peak. No other commodity in society operates that way.

Further, if you want to address carbon, you want to shave peak because each unit of generation that comes on as you move toward peak gets dirtier and dirtier, andof course expensive. If you really want to reduce carbon, you want to transfer space heating and transportation use to electric. Even in the case of coal fired electric generators there is a net reduction of emmissions if cars are charged from that source. Of course over time as we continue to improve control over stack emmissions at the source that equation improves even further.

On the utility side of the meter there are countless operational efficiencies from distribution automation that should reduce costs to consumers, provided regulators are earnest in going after those savings.

So bottom line, smart grid means just that, the efficiencies that are a natural part of the digital evolution are brought to the electric grid. That grid today is hugely inefficient because capacity is built without any price pressure from consumers. Yes ratepayers are paying for the meters, lik they do in one form or another for utility costs. Better to pay the $500 and drive efficiency than pay a hidden premium for decades to come.

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