BEAMA calls UK AMI plan ‘big mountain to climb’

Delayed deadlines were prudent, consumer benefits clear

Published Dec. 10, 2014 Smart Grid Today By Karen Haywood Queen

Although the UK’s £11 billion (US$17 billion) smart meter rollout will start six to eight months later than originally planned, most of the country’s 53 million smart meters still should be installed by the end of 2020, British Electrotechnical & Allied Manufacturers Assn (BEAMA) CEO Howard Porter told us last week. BEAMA represents 350 firms that make grid technology, he added, including many UK firms plus a who’s who of global smart grid gear brands, according to the group’s website.

The AMI deployment is “a big mountain to climb,” said Porter, who was similarly optimistic when he spoke recently at the Smart Grid World Summit in London. “But we’re still on track by the end of 2020 to have the vast majority done. The level of cooperation among the different stakeholders is unprecedented,” he added.

The UK is working to cut GHG emissions 20% by 2020 from 1990 levels as part of the Climate Change Act of 2008. The UK AMI rollout differs from other deployments by calling for every home in the nation to have a smart meter and a consumer interface with an in-home display (IHD) of energy use, Porter said.

“The UK rollout is the most complex, arguably, in the world,” he added as he walked along the Thames near his London office. “The fact that we have a fully deregulated market with at least 20 different retailers makes it complex.”

Critics have questioned whether the rollout can be completed on schedule and have raised concerns about costs.

About 900,000 smart meters are currently in use in the UK, according to the Data Communications Co (DCC), and the current timetable calls for installation to begin, under DCC oversight, a year from now. DCC will provide the AMI infrastructure needed for smart meters to run consistently for all consumers, regardless of their energy supplier, Porter explained.

The recently proposed start of service could be April 2016, DCC said in a report it publicized last month. Now, the firm wants feedback on whether a July 2016 or October 2016 start is more appropriate.

The later go-live would allow more time for testing and would “reduce the impact of unplanned operational issues on consumer experience and cost.” The change would add up to £90 million (US$140 million) in added costs, the DCC report said.

The timetable slipped partly because a communications system, called the Great Britain Companion Specification (GBCS), that defines the messaging between the meters and DCC needs more work and testing than originally envisioned, DCC reported. Design, build and pre-integration testing will likely take until Aug 31 instead of the original plan of April 10, it added.

The organization is proposing to extend the next phase – system testing – by at least two months.

Delaying progress now to solve problems is better than pushing ahead, said Porter, who spoke recently in the House of Lords and to Parliamentary committees on the meter rollout. The three main political parties continue to be forceful in support of the rollout, he added.

“I … agree with the government, that it’s good that these systems are vetted now to make sure the systems are working as opposed to rushing ahead and finding out in the first year that things are not working – then having a longer delay to get on track,” Porter said.

Cost concerns are understandable, he added. “A number of other IT projects in the UK have gone up in price considerably,” and so it is appropriate that people are watching to make sure added costs do not grow to a level that puts too much pressure on consumers.

Critics have said the estimated £215/home (US$337/home) cost for smart metering equipment is too high. Most of the UK’s 27 million homes have two meters, one for gas and one for power.

But the government has precluded energy suppliers from charging up front for the meters. “It would be madness,” Porter said, for energy retailers to charge consumers up front. “I imagine they will amortize it over the lifetime of the meters, over a 10-year basis.”

Some retailers may even absorb up to half of the meters’ cost, he said.

Benefits of smart grid

Critics have put consumer savings from AMI at 2%/year. Porter cited an independent research study by VaasaETT this year that found an average savings in power use of 9%/year over three years.

That study qualitatively reviewed findings of six British and European consumption feedback studies with over 28,000 participants, and research from an another six British studies.

Extrapolating from the data, the UK average residential customer with both gas and power using an in-home display (IHD) would save £111/year (US$174/year), BEAMA told the press this year.

With smart meters and the IHDs showing energy use, consumers will get more accurate bills and have the chance to monitor and cut energy use, Porter noted.

QUOTABLE: You’re getting better service. You have the ability to control your energy and save energy by managing your energy better. You will be able to save considerably more, radically larger savings, than the amortized annual cost of the smart meter. – British Electrotechnical & Allied Manufacturers Assn CEO Howard Porter in an interview last week

Full deployment of smart meters also will allow more consumers to switch to paying in advance for energy use, Porter said, noting 3 million customers use pre-pay today. In the future, there will be “smart ways of paying” including via mobile phones, Porter said.

Use of IHDs challenged

Some stakeholders criticized the planned IHDs, saying that by the time the rollout is complete, most consumers will be able to get the energy use data directly onto their smart phones. But that data will be only historical data via the energy supplier – not real-time use data, he added.

Skipping IHDs would also leave out energy users who do not have smart phones or who do not fully use them, Porter said. Some 2/3 of UK residents now have a smart phone, Deloitte Consulting said in a mobile consumer report this year.

Plus, smart phones would need a consumer access device (CAD) either within them or in the home to securely link to the smart meter for real-time data, he added. Consumers certainly could have energy use information sent to their mobile phones via an app, but for real-time data, the app would need to link to a CAD.

“Currently all the work done with IHDs supports the technology we have,” Porter said. “Throughout the rollout of smart meters, the technology will change. We’ve had discussions with the government and important consumer stakeholders and the IHD is the only way to inform the consumer.”

Each energy retailer will provide its own smart meters and IHDs, all of which have to be compatible with the technical specs of the AMI.

Better integration coming

In the next 10-15 years, smart meters combined with smart appliances and other technology will let renewables such as solar panels be fully integrated into the grid, he added. “I have PVs on my roof and the system is physically wired in to my house. The energy I don’t need is put back into the grid but there is no smart use of that.

“There’s no connection between the energy production from those PVs and the energy production on the grid,” Porter said. He envisions smart meters and associated technology enabling a system where excess energy produced by PVs at individual homes could charge EVs and power smart appliances on timers targeted to come on when the energy is available.

“This would help smooth out peaks and troughs linked to renewable energy sources,” he added. “If the market demands it, technology will be delivered at consumer-friendly prices.”

 

Climb a life insurance ladder and save

By Karen Haywood Queen • Bankrate.com

Published Oct. 15, 2014

Cartoon characters Lou & Stan standing between an 'insurance' ladder © Ziven/Shutterstock.com

People who invest in certificates of deposit are used to the concept of “laddering.” They buy CDs that mature on different dates to avoid being locked out of their cash or locked into a low interest rate for too long.

Compare life insurance quotes from reputable insurers

You can build a similar ladder with life insurance, planning extra coverage for when you’ll need it the most and tapering off coverage when your needs won’t be as great. This approach can save you money.

You can ladder life insurance two ways:

Life insurance needs can go up and down

Laddering is great because most people probably don’t need much life insurance at the start of their careers, says Mike Piper, a certified public accountant in Manitou Springs, Colorado.

“After they get married, have kids and/or get a mortgage, suddenly there is somebody who would be in financial trouble if they died. So they need life insurance,” adds Piper, the author of several personal finance books and blogger at ObliviousInvestor.com.

Later, that need for life insurance should decrease as your savings grow, your debt balances shrink and children leave the nest. By reducing the amount of life insurance during that stage of life, a policyholder could save hundreds of dollars a year in premiums, Piper says.

Potential sources of savings

Laddering shorter-term policies not only is a good way to bulk up coverage during key times of your life, but it also saves on premiums, says Greg Sanders, founder of Peachtree Insurance Advisors in Marietta, Georgia.

The annual premiums on 20-year and 10-year policies would be lower than for a 30-year policy in the same dollar amount because coverage on the 10- and 20-year policies ends while the policyholder is younger and presumably in better health, he explains.

At the same time, big policies don’t necessarily bring big savings. Buying one $5 million, 20-year policy instead of two $2.5 million, 20-year policies saves only $85 a year, Sanders says.

Laddering example No. 1: Lou, 30

Here’s how laddering would work for a 30-year-old man we’ll call “Lou.” He is a nonsmoker in average health and lives in St. Louis.

Cartoon character 'Lou' © Ziven/Shutterstock.com

If Lou were to buy a 30-year, $1.5 million term-life insurance policy, he might pay $2,050 a year in premiums, Piper says.

But with laddering, Lou might buy:

  • One 30-year, $500,000 policy with an annual premium of $730.
  • One 20-year, $500,000 policy with an annual premium of $475.
  • One 10-year, $500,000 policy with an annual premium of $310.

Those premiums add up to $1,515, saving Lou $535 a year during the first 10 years for the same $1.5 million in coverage, Piper says. That’s $5,350 for Lou, in addition to potential interest or investment returns.

As the two shorter policies expire, after 10 and 20 years, Lou would save even more because he would no longer be paying those premiums. But he would have less coverage.

Too young to ladder?

An argument might be made against life insurance laddering for people in Lou’s younger age bracket.

“If you’re 27 years old and need $1 million worth of insurance, just buy a 30-year term policy,” says Sanders. “Don’t try to split it up. You might save a little bit of money, but the savings won’t be worth it.”

He adds: “If you get into your 30s and 40s and don’t need that much coverage, you can always call and reduce your death benefit, and the insurance company will reduce the premium.”

But the laddering strategy can work well for those in their mid-30s and older who are buying life insurance for the first time, Sanders says.

Laddering example No. 2: Stan, 43

Consider the example of another consumer we’ll call “Stan.” He also lives in St. Louis, is 43, doesn’t smoke but is overweight and takes medication for blood pressure and cholesterol. He also would be considered in “average” health, Sanders says.

Cartoon character 'Stan' © Ziven/Shutterstock.com

Buying a 30-year, $1 million life insurance policy could cost Stan $3,221 a year, he says.

Instead, Stan could use laddering to purchase:

  • One 30-year, $250,000 policy with an annual premium of $912.
  • One 20-year, $750,000 policy with an annual premium of $1,522.

Those add up to annual premiums of $2,434, which would save Stan $787 a year for the same $1 million in coverage during the first 20 years. That’s a total savings of $15,740, which Stan would enjoy on top of any interest or investment gains, Sanders says. But, like Lou, Stan would have less coverage in the later years.

But needs may not change

A laddering plan presumes that life insurance needs will shrink, but unexpected issues often arise — such as boomerang children returning to the nest, a mortgage refinance that increases housing debt or the purchase of a second home, says Craig DeSanto, senior vice president in charge of life insurance for New York Life.

“What they initially thought they would need ends up changing over time,” he says. “If you’re going to execute a strategy like this, it’s really important that you buy term insurance from a carrier that allows conversions to permanent insurance to give you the option to keep the policy in place if your needs have changed.”

If you find yourself wanting to replace laddered policies with longer-term coverage that’s potentially more expensive, you might reduce your benefit to save on premiums, DeSanto says.

Don’t forget your policies

Let your heirs know about your life insurance ladder: how many policies you have and with what companies. “It’s important that they know all of the policies you have in place,” Piper says.

Finally, don’t forget you have more than one policy when it comes time to pay the bills on them. “You wouldn’t want to let one policy accidentally lapse by missing a premium payment thinking, for instance, that you already paid the life insurance bill last month,” he says.