VERT approved ESO investments in the smart metering project

An important stage has been reached in the smart metering project – today, the National Energy Regulatory Council (VERT) approved investments of EUR 147 million planned by Energijos Skirstymo Operatorius (ESO). The Council announced in its statement that the cost-benefit analysis carried out by ESO was positive, which means that the benefits which smart metering will bring to consumers outweigh the costs of project implementation.

ESO plans to make substantial investments in the period from 2021 till 2023. Also, the VERT obliged the company to create a benefit monitoring system, which would ensure the monitoring of the effectiveness of the smart metering project being implemented.

The installation of smart meters is a major transformation in the Lithuanian energy sector, which will bring benefits to the population and the national economy, and contribute to a more efficient management of the distribution network.

As per the cost-benefit analysis, investments in smart meters will pay off through the various benefits to be created. For example, a more accurate capturing of electricity consumption will reduce unlawful consumption, which is estimated to save about EUR 3 million each year. In addition, meter maintenance will be optimized, and ESO employees will no longer need to periodically check meter readings.

“The smart meter project is very important not only to the company, but to the entire country as well. We see that customers who have such meters installed are more concerned with their electricity consumption, using electricity more efficiently and thus reducing bills, enabling the market to create and deliver new services to the public, and allowing the operator to make the network more efficient”, said Augustas Dragūnas, Director General of Finance and Administration Department, at the meeting.

According to calculations, the price of electricity will stay essentially the same after the installation of smart meters, but their created benefits will allow saving energy. Since 1 January of this year, the average electricity price for household customers has been 10.317 cents per kWh (exclusive of VAT). VERT has calculated based on the cost-benefit analysis that the installation of smart meters will change the electricity distribution component by about 0.05 cents per kWh in the tariff.

Currently, the average electricity consumption in Lithuania is 152 kWh per month. Assuming that electricity usage will decline by up to 5 percent (about 7.5 kWh less) after the installation of smart meters in Lithuania, the final monthly bills of household consumers should decline by about 71 cents. The best practices of other European countries and consumer surveys are very valuable in planning the process of installation of smart meters. More than 100 surveys conducted across Europe revealed that consumers appreciate the possibility to save. Consumption results of Lithuanian consumers who had pilot smart meters installed for them showed that automated metering allowed them saving up to 6% of electricity.

All European countries have already started the installation of smart meters or are implementing pilot projects. Approximately 44 % of European electricity consumers had smart meters at the end of 2018. According to calculations, more than 70 % of European electricity consumers will have smart meters by the end of 2023. Lithuanian households should also be among them, because smart meters planned to be installed by ESO should meter about 90 % of electricity used. The plan is to have smart meters installed for residents, who use more than 1000 kWh of electricity per year, and all businesses by the end of 2023.

About the smart metering project

Having approved project investments with VERT, a wide range of financial, social and economic benefits to consumers, the distribution network and market empowerment was calculated and approved. They can be divided into three main categories:

Long-term benefits to residents – meters enable more efficient use. As many as 450 000 consumers in Europe took part in 100 pilot projects in different countries. The review prepared by the European Smart Meters Industry Group (ESMIG) estimates that, depending on the involvement of consumers in pilot smart metering projects, their savings ranged from 5% to 8.7%. During the pilot project carried out by ESO in 2017, customers used up to 6% less electricity.

Benefit to Lithuanian economy – meters enable market and new services. Having installed smart meters and capturing consumption every 15 minutes, competition will be enabled, i.e. independent suppliers will be able to better compete for customers - compete in terms of services, their quality, prices or other individual solutions. A similar transformation took place in the telecommunications sector twenty years ago. The installation of smart meters can be expected to help achieve market competition and dynamics, which will bring the greatest benefit of choice to every Lithuanian consumer.

More efficient management of the distribution network. Having installed smart meters, ESO will be able to remotely see where and what consumption is illegal, and to promptly take action to stop such activity. Maintenance of the quality of the electricity network will become simpler, investments in the network will be better targeted, also optimizing costs of meter maintenance, the taking of meter readings and other costs currently incurred by ESO.