Guides - What Is a Smart Meter? Benefits, Costs, How They Work and Whether You Need One

What Is a Smart Meter? Benefits, Costs, How They Work and Whether You Need One

If your energy supplier has been nudging you to get a smart meter installed, you’re in good company. Millions of UK households are in the same position, and plenty of people are still unsure what to make of it. Do you have to say yes? Will it actually save you money? Is there a catch?

This guide covers everything worth knowing, written plainly and without the sales pitch.

What Is a Smart Meter?

A smart meter is a digital energy meter that sends your gas and electricity readings directly to your supplier automatically. No manual submissions, no estimated bills, no meter reader knocking at the door.

Most installations include an In-Home Display (IHD), a small portable screen that shows what your home is spending on energy in near real-time, in pounds and pence or kilowatt-hours (kWh). Think of it a bit like a fitness tracker for your home. Instead of counting steps, it counts energy use throughout the day.

What a Smart Meter Actually Does

• Sends readings to your supplier automatically, typically every 30 minutes
• Shows live energy costs on your IHD
• Eliminates estimated billing
• Opens the door to time-of-use tariffs and EV charging plans
• Tracks gas and electricity separately
• Works in both standard credit and prepayment (pay-as-you-go) modes

Smart Meter vs Traditional Meter at a Glance

SMETS1 vs SMETS2: Why It Matters More Than You’d Think

This is probably the most misunderstood part of the whole smart meter story, and it’s caught out a lot of households.

SMETS1 was the first generation. The problem? These meters were tied to whichever supplier installed them. Switch to a cheaper deal elsewhere and your smart meter often stopped working entirely, reverting to a basic dumb meter. You’d be back to submitting manual readings, which rather defeats the purpose.

SMETS2 is the current standard, and it works differently. These meters connect through the national DCC (Data Communications Company) network, so they keep working regardless of which supplier you’re with. They’re also more secure and built to support future energy products.

If you’re not sure which you have, check the label on your meter. It should say SMETS1 or SMETS2. You can also log into your supplier’s account portal, as most now display meter type. Worth noting: many SMETS1 meters have already been remotely upgraded to connect via the DCC network under the government’s migration programme, so they may now function as intended.

How Do Smart Meters Work?

Electricity usage is recorded almost in real time. Gas is captured in half-hourly intervals. That data travels securely to your supplier and to your IHD.

The analogy that works best here is mobile banking. Your banking app moves financial data between your phone and your bank without you thinking about it. Smart meters do the same thing with energy data.

What Network Do They Use?

Smart meters do not use your home broadband or Wi-Fi. They run on a dedicated 868MHz wireless mesh network managed by the DCC, and all data is encrypted to the GBCS (Great Britain Companion Specification) standard, which has been independently certified by GCHQ. Your energy usage data is considerably more secure than most people assume.

Rural properties or homes with unusually thick walls can occasionally have signal issues. If that happens, the meter keeps recording usage as normal. You just submit readings manually until the connection is restored.

How Often Do Readings Get Sent?

Most suppliers give you a choice, typically every 30 minutes, daily, or monthly. Half-hourly data is required if you want access to time-of-use tariffs.

How to Read a Smart Meter

Electricity

1. Press any button to wake the display
2. Scroll to the reading labelled kWh
3. Note the figures before the decimal point

So if the screen shows 04872.6, you’d submit 04872.

Gas

1. Press the button to activate the display
2. Find the reading in cubic metres (m3)
3. Record whole numbers only

One practical tip: take a photo before submitting. It takes two seconds and protects you if a billing dispute ever comes up.

The In-Home Display: More Useful Than It Looks

The IHD is the small screen that comes with your smart meter. It connects wirelessly to your meters and works up to around 10 metres away, so it’s easy to keep in a kitchen or living room.

It shows your current usage in pounds and pence per hour, daily and weekly totals in kWh and pounds, and uses a traffic-light system where green means low usage, amber is moderate, and red is high.

That traffic-light system sounds simple, but it’s surprisingly effective. Switch on a tumble dryer and watch the display jump to red. It makes the cost of individual habits tangible in a way that a monthly bill never does. A lot of households quietly trim their bills just by watching the IHD for a few weeks, without changing tariff or supplier at all.

Can Smart Meters Actually Save You Money?

Honestly, the meter itself doesn’t save you anything. The savings come from two places: how you respond to the data and which tariff you move onto.

Behavioural Changes

UK government data suggests households that actively engage with their IHD reduce electricity use by around 2 to 4% and gas by 1 to 2%. For a typical home spending £1,800 a year on energy, that’s a saving of £36 to £72 annually from awareness alone. Not transformative, but not nothing either.

Time-of-Use Tariffs

This is where things get genuinely interesting, particularly for EV owners and businesses.

With a standard meter, you pay the same unit rate around the clock. With a SMETS2 meter recording half-hourly data, you can access flexible tariffs where electricity price shifts throughout the day:

• Off-peak overnight (roughly 11pm to 6am): 7 to 12p/kWh
• Standard daytime: 24 to 30p/kWh
• Peak evenings: can push above 35p/kWh

Products like Octopus Agile use this model. Shifting your dishwasher, washing machine, or EV charger to midnight instead of early evening can cut those appliances’ energy cost by over 60%. That’s a real saving, not a marginal one.

You cannot access these tariffs without a SMETS2 meter providing half-hourly reads. It’s a genuine barrier worth knowing about.

Smart Meters for Businesses

For businesses, the value of smart meter data goes beyond household-style awareness.

Many commercial premises already have AMR (Automated Meter Reading) meters. These send readings automatically, but they don’t offer the two-way communication, real-time display, or access to flexible tariffs that a proper smart meter provides.

Businesses consuming more than 100kWh per day are typically placed on mandatory half-hourly settlement, meaning they’re billed on actual consumption every 30 minutes. Smart meter data makes that billing accurate and auditable.

There’s also a procurement advantage. When an energy broker can see your actual half-hourly consumption profile, they can negotiate meaningfully better contracts on your behalf. Without that data, suppliers estimate your usage pattern, which almost always works in their favour, not yours. The Energy Saving Trust has further guidance on business energy use if you want to explore this further.

Are Smart Meters Safe?

Yes, they are. The health concerns that circulate online aren’t supported by credible scientific evidence.

Smart meters emit radiofrequency (RF) signals that fall well below the limits set by ICNIRP (International Commission on Non-Ionizing Radiation Protection), the body that establishes global safety standards for electromagnetic exposure. A few useful comparisons:

• A smart meter’s RF signals are far weaker than those from a mobile phone in active use
• Your home Wi-Fi router and microwave both produce stronger RF output than a smart meter
• Smart meters transmit briefly and intermittently, not continuously

Both the Health Protection Agency and Public Health England have reviewed the evidence and found no credible health risk. The NHS also addresses this directly in the context of radiation exposure and health.

On privacy: under GDPR, you control access to your granular half-hourly data. Your supplier receives billing data automatically. Sharing detailed usage profiles with third parties requires your explicit consent.

Are Smart Meters Compulsory?

No. Suppliers are legally required to offer smart meters as part of the national rollout, but you can decline. No fines, no penalties.

That said, saying no does close off access to time-of-use tariffs, EV smart charging plans, and some energy products that are increasingly built around smart infrastructure. It’s worth weighing that before deciding.

If you’re not ready, just tell your supplier. You can always book installation later, and it remains free.

What Happens During Installation?

Installation is free and takes one to two hours for both meters.

A qualified engineer books an appointment with you, replaces your existing meters, and briefly interrupts your power supply, usually for around 20 minutes. They set up your IHD and walk you through how to use it. Your tariff and account details stay exactly as they are.

No structural work. No charge. Your IHD typically activates within a few hours of the engineer leaving.

What Does Martin Lewis Say About Smart Meters?

Martin Lewis broadly supports smart meters, but with caveats that are worth taking seriously.

His position: smart meters improve billing accuracy and remove the guesswork from estimated charges. They do not automatically reduce bills. Savings depend on what you do with the data and whether you move to a better tariff. He also flags that consumers shouldn’t feel pressured into installation, and that SMETS2 is meaningfully better than SMETS1 if you’re given a choice.

It’s a balanced view that cuts through the hype in both directions.

How to Tell If You Already Have a Smart Meter

• Your bills show actual reads rather than estimates
• Your supplier has stopped asking you to submit readings
• There’s a small screen device somewhere in your home
• Your meter displays SMETS1 or SMETS2 on its label

If your bill still shows “estimated reading,” your smart functionality may not be active. Contact your supplier to check.

Frequently Asked Questions

What’s the downside of a smart meter? 

Signal issues in rural properties, occasional display faults, and with older SMETS1 meters, the risk of losing smart functionality after switching supplier. SMETS2 has largely resolved the switching problem.

Can a smart meter work without Wi-Fi? 

Yes. It uses a dedicated national DCC network, completely separate from your broadband.

Do smart meters increase bills? 

No. They may reveal that your actual usage is higher than estimated. That’s the bills telling you the truth, not the meter adding to your consumption.

Can I have a smart meter with solar panels? 

Yes. Smart meters can record both import and export, making them compatible with solar and battery storage systems.

What is a prepayment smart meter? 

A smart meter in prepayment mode lets you top up credit via an app, online, or at a PayPoint. No physical key or card required. Low credit alerts appear on your IHD.

What happens to my smart meter if I move house? 

The meter stays with the property. You register it with your new supplier. At your new address, you can request installation if one isn’t already in place.

Should You Get a Smart Meter?

For households that engage with the data, especially those interested in time-of-use tariffs or EV charging, the financial case is solid. For businesses, accurate half-hourly data strengthens your position when negotiating energy contracts.

They’re not compulsory. They’re not perfect, particularly if you’re in a low-signal area or were issued a SMETS1 in earlier years. But for anyone who wants more transparency over their energy costs, a SMETS2 meter with an active IHD habit is one of the most practical steps you can take right now, without spending a penny.