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Central Government, Tax and Revenue Management

UK smart meter project expected to bust budget

By Alice Kok | 18 May 2009

The UK Government has underestimated the cost of a nationwide rollout of smart electricity and gas meters by as much as £6.4 billion (US$9.7 billion), according to the accounting firm Ernst & Young.

Last week Ministers gave a green light to install 47 million new gas and electricity meters, which can monitor energy use in real time, in every British household.

They said that the project could be completed at a cost of between £7 billion to £9 billion, or an average of £269 to £346 per household.

Ernst & Young has rejected that estimate, arguing that the true cost would be at least 49 per cent higher, at about £13.4 billion, or £515 per household.

Consumers are expected to shoulder the bulk of the extra cost in the form of higher bills, although the industry claims there will be offsetting savings. Tony Ward, power and utilities partner in Ernst & Young, said that the Government’s figures appeared to underestimate the scale of the additional technology and infrastructure required to support the smart meters, which it is hoped will help to cut carbon emissions by promoting energy efficiency.

“Very big and complex projects of this sort always cost more than anticipated,” Ward said.

He cited problems of gaining access to all 26 million UK 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.

“We very rarely see one that comes in at the original estimate,” he added.

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