Telefónica and Arqiva scoop £2.1bn UK smart metering contracts

Capita preferred bidder for £175m Data and Communications Company contract, CGI IT UK for £75m Data Services Provider contract and Gemserv for the £10m Smart Energy Code Administrator and Secretariat contract

Telefónica and Arqiva scoop £2.1bn UK smart metering contracts

Telefónica UK and the SmartReach consortium, which includes Arqiva and BT, are the successful preferred bidders for the three Communication Service Provider (CSP) contracts that make up part of the Government’s £12bn Smart Metering Implementation Programme (SMIP). The Department for Energy and Climate Change (DECC) informed the successful preferred bidders today (14 August 2013).

The CSP contracts are split into three geographic regions: northern GB, including Scotland; central GB, including Wales; and southern GB. The final shortlisted bidders for the contracts were: Telefónica UK (O2); Vodafone with Silver Springs Networks; SmartReach, which includes Arqiva, BT, BAE Sytems Detica, Sensus and EDMI; and Airwave Solutions with Trilliant bidding for just the northern contract.

Telefónica UK has won the Central and Southern regions CSP licenses, which are worth £1.5bn over 15 years and are still subject to contracts being agreed. Telefónica’s proposed communications solution is based on its cellular network in the UK, which it says is ready to support the requirement of smart meters. This will be backed up by the use of mesh technology to connect meters in areas without cellular coverage.

SmartReach’s contract for the Northern CSP region is said to be worth around £625m over the 15 year lifespan of the contract. Its solution is based on Sensus technology that has been successfully deployed internationally in more than 16 million smart meters and devices. It is capable of supporting the evolution of smart services more broadly and can communicate with smart meters across Great Britain, including locations deep inside buildings that other communications technologies have struggled to reach, Arqiva said today.

Smart metering programme

The programme calls for the installation of ‘smart’ meters in 53 million UK households and small businesses by 2019. The smart meters will enable customers to monitor and control their electricity and gas consumption in real time. Accurate readings will be sent back to a central hub (the Data and Communications Company - DCC) for processing and then forwarded to the energy suppliers.

SMIP requires a huge IT and communications technology investment. Besides the smart meters it needs smart communication sensors, M2M modules, an intelligent communications network and it needs to be secure to protect the data being transmitted. It also needs to be made secure against cyber attacks from hostile sources, which could potentially cut peoples’ power off.

Data and Communications Company license

SMIP is overseen by the Department for Energy and Climate Change (DECC). Three further contracts are being let in addition to the communication contracts. One is for the Data and Communications Company (DCC), which will oversee SMIP. It will communicate with all the smart meters and is responsible for the contract management of the services. G4S and Capita were the final bidders for the DCC with Capita coming out on top today.

Providing final contract negotiations are successful, Capita’s smart meter communication licence would become effective from September 2013 and the arrangement is expected to generate revenues to Capita of some £175m over 12 years (with an option to be extended for a further 6 years).

Capita says it will work alongside energy suppliers who will install new smart gas and electricity meters in 30 million British homes and, subject to contract, with a number of other providers, to implement and run the data and communications infrastructure and service.

Data Services Provider contract

A second contract is for the Data Services Provider, responsible for storing and managing the data collected by the smart meters. Three companies made the final shortlist: HP; IBM; and CGI IT UK - CGI (Logica as was) with SAP and QinetiQ.

DECC has selected CGI IT UK as preferred bidder for the £75m data service provider licence to develop and operate systems that send messages between smart meters and utilities.

Finally, a third contract has gone to Gemserv, which was selected as the preferred bidder for the £10m Smart Energy Code Administrator and Secretariat contract, requiring it to maintain the industry code governing the use of smart meters across the energy industry, including guidance on issues such as privacy and data protection.

Contract roll out

The contracts are expected to be finalised in September 2013. The start date for the introduction of smart meters was due to be summer 2014, but DECC announced in May this year that this was being put back to Autumn 2015 to give energy suppliers more time to complete the smart meter roll out. The project is now expected to go live in 2020.

The programme has not been without its critics, some of whom have attacked it over data privacy issues, but who have also been critical of its complexity and some of the cost benefit analysis work.

When engineering consultant Mott MacDonald originally costed out the programme in 2007, it reported that the net present value would be a £4bn loss. Somehow the Government turned that around into a net present value of £4.9bn.

Critics who gave evidence to Parliament’s Smart Meter Select Committee in May 2013 argued that the UK’s reliance on mostly wireless technology, such as the mobile operator’s phone networks, was more expensive than the power line carrier technology being adopted in Spain and Italy, for example.

They have argued that it will not save much energy as the UK’s generally moderate climate means it uses far less energy for heating to combat harsh winters than Scandinavia say, and far less on air conditioning unlike countries with very hot climates. The use of better energy saving devices will reduce energy consumption better than smart metering, critics claim.

Written by Wireless magazine
Wireless magazine

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