Plans for the implementation of Market-wide Half Hourly Settlement (MHHS) across the electricity retail market have been decided after three previous delays. Ofgem recently announced a roadmap to introducing MHHS by October 2025, after launching the Significant Code Review on settlement reform in 2017.
MHHS aims to implement a faster, more accurate settlement process for all market participants, facilitating the transition to a smart, flexible energy system. Smart meter data represents the backbone of this, with an ambition that smart meter data is utilised within the electricity settlements system to enable innovative functionality, services, business models, and consumer/prosumer propositions. These vital instruments of the energy transition include time of use tariffs, demand side response, local energy markets, and smart charging and discharging of electric vehicles (EVs).
Behind the curve?
March this year saw the highest number of plug-in EVs registered than ever before, with pure electric and plug-in hybrid vehicles taking a combined market share of 14%, up from just over 7% last year. National Grid’s projections estimate that there will be just under 10 million electric vehicles on British roads by 2025. To incentivise this growth, consumers must have confidence in the technologies and infrastructure that will deliver the financial benefits of engaging with the decarbonisation agenda, which relies on half hourly (HH) settlement.
As of Q4 2020, there were 23.6 million smart and advanced meters installed in homes and small businesses across Great Britain, with over a third of all meters in smart mode or advanced meters. Only a small proportion of these meters are HH settled and the required upsurge in smart meter data represents a significant increase in the volume of data collection and processing compared to the existing HH settled volume (almost a hundred-fold). The reference architecture for the required change in data integration will be proposed to Ofgem for approval this summer, but companies will be required to maintain existing processes and systems to serve the non-half hourly (NHH) market as well as integrating the new interfaces for MHHS data exchange.
Concerns have also been raised by those who have already adopted elective HH settlement for domestic and non-domestic customers. These innovators and companies want to ensure that their progress isn’t hindered by this industry-wide process and called for clearer price signals to drive customer behaviour change.
There is a real risk that the delay to MHHS could be hindering the wide-scale delivery of innovations that are dependent on HH settlement or restricting their full potential.
Coordinating change
The successful implementation of MHHS entails a complex and large-scale delivery programme, which has been awarded to Elexon. Elexon’s strength lies in how it communicates with parties, but MHHS will require communication and coordination with over 160 parties, including suppliers, metering and data services providers, distribution businesses, and the DCC.
The reference architecture for the required new style of data integration does not mandate changes to the architecture of energy companies’ internal systems, but the impacts and costs for companies to move to MHHS will be a further challenge as the majority of costs will fall on industry participants as they make changes to their own systems and processes.
At 618 Insight, we identify and realise operational efficiencies for clients operating in complex, regulated markets. We are adept at appraising and ensuring business processes are compliant to specific legislation while relevant to the commercial agenda.
It is essential to ensure that the implementation of MHHS is delivered efficiently to abate any disruption to innovation, minimise the costs that will be imposed on a wide range of parties, and unlock the opportunities that will decarbonise the energy system.
Is the implementation of MHHS by 2025 soon enough to incentivise the change needed in consumer behaviour?
