The deadline for installing smart meters into every home in the UK by 2020 has been put back to 2024.
The government had insisted the 2020 deadline for the rollout was achievable – even though energy firms warned that the technology would not be ready in time.
Officials said the likes of British Gas, Eon and Scottish Power will now have until 2024 to install the meters.
The rollout has been plagued by problems including delays in connectivity and issues arising with the batch already in use.
The Government also now predicts that only half of households will have a smart meter by 2020.
It also says the cost of the initiative will rise from £11bn in 2016 to £13.5bn, although total savings will also rise from £16.73bn to £19.56bn.
Citizens Advice, the consumer group which has been calling for the 2020 deadline to be extended, welcomed the decision and said it was in the best interests of customers.
Gillian Guy, chief executive of Citizens Advice, said: “This new deadline gives suppliers time to fix ongoing technical problems and make sure customer service isn’t sidelined as the rollout continues.
“We’ve seen some energy companies use aggressive techniques to try to persuade people to have smart meters fitted as soon as possible to meet the existing timeline.
“It’s also apparent that the cost of the rollout is escalating, and the public are picking up the tab through their energy bills. People will still benefit in the long run, but today’s cost-benefit analysis shows focusing on speed hasn’t worked.”
The number of homes with smart meters has risen steadily over the past few years but the speed of growth has slowed more recently as problems emerged.
Older generations of meters not working when a household has switched suppliers, with the data no longer being sent in real time to suppliers has proved to be one of the biggest issues.
Infrastructure is being installed to ensure the older meters work and that technology is in place so newer versions can connect to the shared networks.
However, a recent study by auto-switching service Look After My Bills found some meters were still “going dumb” and homes in the north of England were more likely to get inferior meters.
Lily Green, head of research at Look After My Bills, said: “At last the Government has faced up to the truth and admitted that the smart meter rollout is years behind.
“It’s been an open secret in the energy industry that the smart meter deadline will be pushed back.
“Suppliers are miles off from installing smart meters in all homes, with around 35 million homes still without a smart meter.”
Lawrence Slade, chief executive of the sector’s trade association, Energy UK, said: “Suppliers have been working tirelessly to meet the 2020 deadline and offer all households a smart meter so that as many customers as possible can benefit by saving energy and money – as millions of smart meter owners have already reported.
“The energy sector is committed to working with the Government and other partners to complete the rollout so we will now consider the proposals in detail to ensure they are deliverable and do not place unreasonable costs on consumers.