Understanding Smart Meters: What They Are and Why They Matter

By capturing energy data with fine-grained detail, smart meters enable more accurate billing, improved load management, and enhanced visibility into usage patterns. Over time, as the energy system evolves toward flexibility and dynamic pricing, this data becomes increasingly valuable to both consumers and suppliers.

In the UK, smart meters are being rolled out not only to residential customers but also to non-domestic sites (including businesses and the public sector), where they are mandated under specific regulations.

However, not all smart meters are created equal. There are two main generations in everyday use in the UK: SMETS1 and SMETS2. Understanding their differences is crucial to determining the reliability, flexibility, and future-proofing of your metering system.

SMETS1 vs. SMETS2: Key Differences

SMETS stands for Smart Metering Equipment Technical Specification, which is the set of standards that smart meters must meet in terms of how they measure, communicate, and interoperate with the wider energy network.

SMETS1 (First Generation)

• SMETS1 meters were the earliest type rolled out when smart metering began in the UK.
• They often use mobile (cellular) networks to transmit data or other proprietary communications methods.
• A significant limitation is that many SMETS1 meters could lose connectivity or revert to “dumb” mode (i.e. stop automatically sending data) when a consumer switches energy suppliers. In such cases, they revert to behaving more like conventional meters (requiring manual reads).
• To address this, many SMETS1 meters are being enrolled in the DCC (Data Communications Company) network, allowing them to behave more like SMETS2 in terms of interoperability.
• Practically, SMETS1 may have limitations on supplier switching, advanced tariffs, and certain third-party energy services.

SMETS2 (Second Generation)

• SMETS2 meters are the newer, standard devices being installed nowadays.
• They are designed to be compatible with all energy suppliers thanks to their built-in connection to the DCC smart data network. That means you should be able to change suppliers without losing the “smart” functionality of the meter.
• SMETS2 meters support more advanced functionality and better interoperability of energy data services, making it easier to use third-party analytics, dashboards, or integrations.
• Because of their more modern design, SMETS2 meters are less prone to losing connectivity or reverting to non-communicating mode when changes occur.

Transition and Enrolment

• Many SMETS1 meters are being retrofitted or enrolled into the DCC network so they can operate with more of the advantages of SMETS2.
• Energy suppliers are gradually phasing out SMETS1 installations, favouring SMETS2 for new deployments.
• If you already have an SMETS1 meter, your supplier may upgrade it or schedule a replacement at no direct cost.

Benefits of Smart Meters (for Consumers and Businesses)

Smart meters bring several advantages over conventional meters:

1. Accurate billing
   Because readings are based on actual usage recorded frequently, there’s less reliance on estimated bills. That means fewer surprises and more confidence in what you pay.
2. Near real-time insights
   Access to energy data at fine intervals (for example every half hour or more) allows consumers and businesses to see patterns, detect waste, and make adjustments. Having immediate visibility helps with demand management, shifting usage to off-peak times, and reducing peak charges.
3. Better tariff and supplier flexibility
   With more accurate data, suppliers can offer more innovative pricing plans and time-of-use tariffs. Also, SMETS2’s interoperability allows switching suppliers without losing smart functionality.
4. Support for energy efficiency and sustainability
   When you know exactly how and when energy is used, you can target improvements more effectively like automating controls, shedding load, or upgrading equipment.
5. Grid benefits and responsiveness
   From a system perspective, utilities can use aggregated smart meter data to manage demand, forecast loads, detect anomalies, and optimise network investment.

Limitations, Challenges and Considerations

While smart meters offer many advantages, there are important caveats to be aware of:

• Connectivity issues / “dumb mode”: Some meters lose communication due to signal issues or supplier changeovers, reverting to manual read mode.
• Meter failures or faults: Millions of meters have had connectivity or operational issues, leading to delays or inaccurate data. 
• Privacy concerns: Smart meters generate high-resolution data, which could, in theory, allow inferences about personal habits or occupancy patterns.
• Cost of rollout and infrastructure: The intelligent network, communications, and backend processing systems represent a substantial investment.
• User adoption & engagement: Merely installing a smart meter doesn’t guarantee savings; users need to interpret and act on the data.
• Legacy meter compatibility: Some older equipment or tariffs may not fully support advanced features (e.g. export meter reads or complex time-of-use rates) with older smart meters.

What to Look for When Choosing or Upgrading to a Smart Meter

If you’re evaluating whether to install or upgrade a smart meter, consider the following:

• Supplier flexibility / switch compatibility: A SMETS2 or DCC-enrolled meter allows you to change energy providers without losing innovative features.
• Data access and openness: Will you be able to access consumption data (e.g. through APIs or dashboards) to integrate into third-party analytics and energy management systems?
• Reliability of communications: Assess whether the local signal strength, network coverage, or communication redundancy (e.g. backup networks) is sufficient.
• Support for advanced tariffs: If you wish to adopt time-of-use pricing, export payments, or demand response schemes, ensure your meter is compatible with these modes.
• Installation and maintenance service: Check that the supplier or meter operator provides ongoing support, repair, and commissioning as part of the contract.
• Future-proofing: The meter should be compatible with evolving energy data platforms, innovative grid systems, and regulatory changes, ensuring it doesn’t become obsolete too quickly.

The Role of Energy Data in the Smart Meter Ecosystem

At the heart of an intelligent metering system is the flow of energy data. That data is captured by the meters, sent over communication networks (like DCC), processed by data agents and platforms, and then made available to suppliers, network operators, and consumers. 

This continuous stream of data enables:

• Granular billing and settlement
• Load profiling and demand management
• Predictive analytics, anomaly detection and fault management
• Energy efficiency identification and optimisation
• Integration with third-party tools, dashboards, and AI platforms

As the energy system becomes more flexible with distributed generation, storage, electric vehicles, and demand-side response, the importance of accurate, timely energy data will only grow. Smart meters provide the foundation for that data infrastructure.

Conclusion

Smart meters are a pivotal component of modern energy systems. By automating reads, delivering frequent energy data, and enabling two-way communication, they help bridge the gap between consumption and control. Understanding the differences between SMETS1 and SMETS2 is crucial SMETS2 offers greater interoperability, resilience, and future-readiness, while SMETS1 has more constraints unless it is retrofitted or enrolled into the DCC network.

For both residential and non-domestic users, adopting a smart meter opens up the possibility of moving away from estimated billing, unlocking new tariffs, and bringing energy usage into sharper focus. But the actual value lies in how that energy data is used turning raw numbers into insight, optimisation, and cost reduction.