18 March 2019

How Siemens’ smart approach to Pay as You Go will disrupt the heat market

When the pay as you go mobile phone was launched in the late 1990s it revolutionised the market, opening mobile communication to the masses.

It meant people couldn’t run up expensive bills and were in control of when, and more importantly, how much credit they added to their phone. In 2001, 70% of the population had a PAYG phone while this has fallen to 30% today[i], as the smartphone revolution took over.

Pre-payment in the energy sector isn’t new – but going out to the shop to top up credit isn’t always convenient and running out of credit has a more significant impact than just not being able make a call. But in an age where 78% of adults use a mobile phone and 76% of adults use their smart device for web and data access[ii], why don’t more people have the option to top-up their heat online?

Much of the reason lies behind the traditional fixed infrastructure in the home for pre-payment – it hasn’t caught up with the digitalised world we now live in. However, this year, Siemens will launch a Smart Pay as You Go solution for the heat market in the UK and I’m delighted we’re going to present that at Scotland Build at Glasgow’s SEC this week (20-21 March 2019).

This is an industry first.

As market leader in metering technology and solutions, we have developed an accurate, secure and reliable system which replaces “thick” metering equipment – the expensive, in-house display (IHD) – usually found in a property which will also deliver significant reductions in CAPEX, OPEX and REPEX costs for heat network operators, whilst also improving the experience for the household. Quite an undertaking! 

The result is a market-disruptive innovation that directly addresses the need to reduce the cost of district heating by providing a scalable, cost-effective solution, while also creating a strong platform for growth.

But why did we decide to challenge the accepted, established and traditional metering technology?

Here’s the background: the metering evolution through ‘thick’ and ‘thin’.

When we talk about traditional thick metering, we’re referring to the fixed, prepayment meters found in homes. When a customer’s credit runs out, the supply stops – not a particularly user-friendly method of delivery. This type of technology relies on bulky equipment and usually means a trip to a shop or post office for the customer to top-up their credit, which is not always convenient.

Moving on we get to the thick but (semi) smart solutions. Similar to the traditional approach, but basic calculations are performed by the meter itself, with smart balance and top-up interactions carried out through an IHD or piece of hardware.

These hardware elements lead to large upfront costs for the network operator.  They also mean a technology lock-in which removes flexibility and could complicate future network enhancements.  For the customer, this hardware can also be complex to use.

Finally, we have thin smart metering which uses centralised back-office systems to manage payments and balances in the cloud. This introduces new levels of flexibility to the customer as the equipment isn’t fixed in the home and can be used by many suppliers – what we call ‘open protocol’.

Siemens SPAYG

Siemens’ cloud-based, Smart PAYG is a thin metering solution which uses mobile technology so customers can view balances and top up credit via their smart phone.  It is accessible through an intuitive app that manages all top ups through a single central wallet – offering a simple process for the customer and a 30% reduction in cost to serve for the network operator.

A sea-change in heat. Who benefits?

SPAYG introduces a positive transformation in pre-payment solutions for heat network operators by providing a simple and low-cost system that eliminates the need for investment in traditional, expensive thick-client hardware and introduces a digitalised system using cloud-based technology.

The move away from a traditional hardware approach also means significant total lifetime savings for network operators.

Dependent on the size of the network, savings can reach up to £1 million over the first 10 years and could be up to several million over 30 years compared to current approaches. These savings come from a reduction in costs for installing the technology to run the meter and because service visits and administration is vastly reduced.

With the Energy Technologies Institute reporting in 2018 that for district heating to play a role in decarbonising the UK energy system, it must deliver schemes more cost effectively, this solution could have a significant impact.

And not forgetting the customer…

SPAYG provides a far improved customer experience. The ability to top-up remotely allows for greater flexibility and control for the customer and introduces a level of convenience entirely unachievable with thick metering models.

The customer is shown their current consumption and expenditure via the app and has a range of payment channels, which also includes Paypoint to support cash transactions as well as credit and debit and PayPal for online top up. The app also provides ongoing reconciliation in terms of credit and a messaging system can also be added so people can be alerted when credit is low.

Perhaps the most important advantage SPAYG offers is the protection to vulnerable customers. It effectively replaces the bad old days of ‘no credit, no supply’ with the ability to protect these customers from disconnection by automatically activating friendly credit.

Journey towards regulation.

The current, unregulated heat market means that if a customer is supplied through a heat network there is no flexibility to compare or switch. But as district heating journeys closer to regulation an open protocol solution is key to providing the flexibility to support the potential for switching as well as the move to the smart microgrids of the future.

The next level.

We’re at an exciting point in our journey with Smart PAYG. We’re proud that we’re the first to develop an intuitive solution for heat. Where we are today is just the start for us. Taking a smart approach is a market-disruptive innovation to directly address the need to reduce the cost of district heating by providing a scalable, cost-effective solution, and one that creates a strong platform for growth. Watch this space!

Find out more about PAYG heat metering: https://news.siemens.co.uk/news/siemens-develops-smart-pay-as-you-go-service-to-revolutionise-district-heating

Visit our website on our Energy Solutions for District Heat: www.siemens.co.uk/heatenergyservices

[i] https://www.ofcom.org.uk/__data/assets/pdf_file/0022/117256/CMR-2018-narrative-report.pdf p57

[ii] https://www.ofcom.org.uk/__data/assets/pdf_file/0022/117256/CMR-2018-narrative-report.pdf p63

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