How smart meters can help you save money on your electricity bill

Ever wondered why a digital electricity meter is called a “smart meter”? It’s because it can help you save energy and reduce your bill! Niklas Hirmke from Ostrom explains why everyone in Germany should switch their old analogue meter to a smart one. 

Everyone knows those dreaded letters from the electricity supplier asking for the current meter reading. With a flashlight in your hand, you go down to the dusty cellar to get the meter reading among the cobwebs. Not a very pleasant experience! At the same time, however, politicians and companies use the word digitisation in nearly every second sentence.

In the energy industry, traditional electricity suppliers are shying away from the topic of digitisation. Yet, a world in which smart meters are the norm would be the most efficient solution for everyone involved. Here’s why. 

What are smart meters?

‍Analogue electricity meters - most German households have them. Square boxes, with a rotating counter disk, whose revolutions are recorded and collected by an analogue counter. Compared to our otherwise innovative and modern gadgets like smartphones and laptops, analogue electricity meters seem very outdated. Customers have to read the meter manually and report it to their electricity provider. The electricity consumption is visible to the consumer at the earliest with the annual, or the final, bill.

In contrast, smart meters can send real-time data to the electricity supplier and network operator, securely and encrypted. This requires connecting the modern metering device to a smart meter gateway so that the system becomes an intelligent metering system (smart meter). In this case, the electricity supplier and the network operator automatically receive the electricity consumption data and customers no longer have to send meter readings manually.

Some smart meters transmit the measured consumption data directly to the metering point operator. If a smart meter is connected to the household's WiFi, customers can first see their consumption themselves and then approve transmission to the electricity supplier.

Thanks to connected apps, consumers may even be able to track consumption data in real-time. For this purpose, the electricity supplier, for example, must provide an app for data collection. Smart meters must be certified by the German Federal Office for Information Security to ensure that the transmission of household-related energy consumption data is secure and protected.

Why Germany wants to roll out smart meters

‍On January 31, 2020, the German Federal Office for Information Security signed off the legal obligation for the rollout of smart meters by the responsible metering point operators. Initially, all private households with annual electricity consumption of more than 6.000 kWh are obliged to install them. 

The goal is to provide a technical infrastructure that makes the transition to renewable energies possible. As well as introducing variable electricity tariffs (for instance, making electricity cheaper at night when fewer people are using it), smart meters also enable the control of decentralised electricity generators such as photovoltaic or wind power plants. Smart meters also allow people to get a clear overview of their electricity consumption and control it intuitively. Manual meter readings will gradually become a thing of the past. 

However, it may still take some time before this happens. The problem is not only the hesitant rollout of smart meters in households, but also the old and entrenched structures of the grid operators. In order for them to break out of their habits, stricter legislation needs to be implemented, that obliges network operators not only to do the minimum required, but to push the rollout of smart meters.

By 2032, all metering points in Germany with an annual consumption of more than 6.000 kWh must have a smart meter installed.

The following picture shows that Germany has a considerable way to go in terms of smart meter coverage:

Before the decision by the German Federal Office for Information Security, there were hardly any smart meters in German households. By comparison, Scandinavian countries have an almost seamless coverage of smart meters. Spain and Italy are also pioneers.

Why customers will benefit from smart meters

‍The lack of transparency from traditional electricity supplies can sometimes bring nasty surprises and expensive additional payments, as customers are not always aware of how much energy they use. 

With smart meters, this problem is a thing of the past. Thanks to the exchange of electricity consumption data, customers will see their electricity consumption on a daily basis via an app – as long as the electricity provider makes an app available.

The advantages of this long overdue renewal are numerous:‍

• Customers can identify power guzzlers in the home and automatically switch appliances on and off thanks to smart home technology. Household appliances are only supplied with electricity when they are actually in use.
• Variable electricity contracts enable customers to take advantage of fluctuations in electricity prices. Electricity is significantly cheaper at night than during the day, due to society's lower electricity demand at night. Likewise, solar power is cheaper at midday. Smart meters make these differences in electricity prices visible, and variable tariffs ensure that customers can use the fluctuations to their advantage.

The graph clearly illustrates the daily load curve and how prices fluctuate:

Source: Wikipedia

However, smart meters can only reach their full potential with variable electricity tariffs - and a variable tariff can only be fully effective if smart meters become the norm in German households.

Ostrom is one of the few suppliers in Germany offering electricity at cost without any margins - and it is a big supporter of the smart meter rollout in Germany. Switch to an Ostrom tariff to take control of your electricity costs, or check out Ostrom’s website for more tips on how to start saving money on your electricity bill.