Unlocking the benefits to end consumers
Conference Blog No. 7 by Nicholas Rubin, Elexon
UK Government’s commitment to decarbonise the economy along with developments in disrupting and decentralised technology and business models is driving a great pace of change in the way electricity is produced and consumed. For consumers we see new services and business models emerging such as peer-to-peer energy trading, home energy storage, smart tariffs (Time-of-use tariffs), Vehicle-to-grid (V2G) services, and ‘energy as a service’ when energy is bundled with other services and even goods.
We believe that common arrangements that enable access to and interoperability between central and local energy markets (new and existing) is the best way to maximise the benefits from these emerging opportunities for commercial and domestic consumers. In fact, it is essential that existing markets and the supporting industry arrangements are adapted to accommodate new technology and business models. Indeed, we believe that timely updating and expanding existing shared processes and infrastructure will provide a cost effective and interoperable way of enabling a common marketplace.
Enabling positive changes to benefit consumers faster
Several important initiatives to enable greater participation by consumers are already taking place with Government, Ofgem and industry support. As one example, the roll-out of smart meters and the ELEXON-led design of Half-Hourly Settlement (HHS) under Ofgem’s Significant Code Review are well underway. These initiatives are recognised as enablers for a simpler and more accurate meter-to-bank process and of new technologies and services such as demand side response, storage and smart time-of-use tariffs.
In addition, Ofgem is starting to look into the ‘Supplier Hub’ principle. Our current energy system typically requires each customer to have one supplier at a time – this arrangement is known as ‘Supplier Hub’. This needs to change if we are to enable consumers to also buy some of their power from their local community energy project or have the electricity for their electric vehicle provided by the car company, or even enter into peer-to-peer trading, which allows market participants to buy energy from (and sell energy to) participants other than their primary suppliers – in short, a multiple supplier model.
Under Ofgem’s review of the Supplier Hub principle the required transition to a multiple supplier model may take five years or more to be implemented. These changes are very complex and would require a substantial collective effort from the entire industry. Any reform would also need to take into account the impact on all customers, including vulnerable customers and those who have less interest or ability to participate.
How can a multiple-supplier model be enabled faster?
Multiple supplier arrangements do exist; however, they are generally designed for large, non-domestic applications. A community energy scheme across multiple suppliers for domestic consumers, for example, would not currently be supported. In view of those likely lead times for major reform across multiple codes and licences that govern the industry arrangements, ELEXON published a White Paper that outlines how modest changes to ELEXON’s central systems can unlock benefits for consumers within the next few years without the need for licence changes, registration system changes or (at the extreme) primary legislation. These will be of real benefit to consumers, suppliers and innovative trading platforms. We are now working with Ofgem and industry to assess and develop our proposals further.
For anyone interested in reading more, we have a detailed White Paper on ‘Enabling customers to buy power from multiple providers’.
Who is ELEXON?
ELEXON provides essential central services that ensure smooth operation of the GB electricity market. We administer the Balancing and Settlement Code (BSC) – rules governing the ‘meter to bank’ process, including imbalance prices calculation every half hour, – and CfD (Contract for Difference) and CM (Capacity Mechanism) payments.
Nicholas Rubin, Market Architect, ELEXON.
I have over 10 years’ experience working with utility businesses in the electricity and gas industries. My primary experience is in relation to the development and communication of regulatory policy and the commercial arrangements that govern the operation of the electricity and gas wholesale and retail markets, and for distributing electricity.
I have a track record of advising stakeholders on the industry arrangements, providing insightful commentary on issues that affect utility businesses and helping to develop effective solutions.
Amongst other things, over the last eighteen months I have worked on projects aimed at simplifying the requirements for the central registration of generating plant (including storage) and reform to embedded generator benefits.