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
