MHHS – ‘behind the scenes’ of how the industry will revolutionise the way consumers interact with their electricity supply.
The UK electricity sector has been changing rapidly over the years and a promising future lies ahead. New technologies have created opportunities for new and existing participants. As we are moving towards a smarter and cleaner energy system we must ensure that benefits are shared across consumers and industry. Consumers and industry working together will indeed revolutionise the energy system!
Smart meters, in conjunction with new business propositions, will enable consumers to better manage their energy consumption. Visibility of their energy usage allows them to make more informed decisions, thus encouraging lower spending on utilities.
On behalf of Ofgem and in collaboration with industry expert groups, Elexon is leading work on designing the Target Operating Model (TOM) for Market Wide Half-Hourly Settlement (MHHS). Major changes to systems and electricity sector rules will be needed to deliver this TOM. Energy regulator, Ofgem, will take the final decision on whether MHHS should be implemented. MHHS will help consumers get the most out of smart meter technology. It will help suppliers and innovators to design new offers such as more advanced bundled services and new more granular ‘time-of-use’ tariffs for the benefit of end consumers.
What is MHHS?
In Great Britain, electricity is settled in half–hourly (HH) time slots. Every half hour, the amount of electricity generated must be equal to the amount of electricity consumed. To ensure the system is balanced, National Grid deploys Balancing Services to increase or decrease generation close to real-time. After the day, Elexon compares suppliers’ and generators’ contracted and actual volumes and calculates a price for any difference. It then charges or reimburses parties accordingly.
While the largest UK companies have been HH metered and settled for many years, this does not apply to the majority of businesses and households. For those, roughly 30 million households and small businesses, they are currently settled by using non-HH physical meter reads and profiles to determine when they were likely to have consumed their energy. However, smart electricity and gas meters are becoming a household essential making customers lives easier. Once installed, they send HH meter readings to suppliers. In order to make this possible, Elexon proposed that the electricity industry should adopt MHHS and have been aiding in the Ofgem programme looking at how this could be achieved. Enabling this change to market arrangements will be the biggest multifaceted project to be carried out in the electricity industry since the privatisation of the market in 1990.
What are the benefits of MHHS?
Moving to MHHS will bring a number of benefits to consumers and present many opportunities to business and market operators:
- It will allow ‘time-of-use’ tariffs to be utilised, which reward customers for reducing their energy use during peak demand (and price) times. For example, they could save money by running their washing machine at times of the day when there is surplus electricity from renewables on the system. Shifting demand to periods when there is more low-carbon generation available in the system will also contribute to reaching the nation’s net-zero ambition and reduce system losses.
- It means that smart meters, through MHHS, could also evolve consumers into ‘prosumers’, to allow them to engage in peer-to-peer trading when they buy and sell electricity to and from each other.
- It could also facilitate innovation in making the energy system more flexible and ‘greener’. Having a more granular level of consumption data would allow innovators to come up with more compelling business cases for a number of market initiatives such as electric vehicles and smart appliances.
- MHHS will also deliver quicker and more accurate electricity Settlement.
Where are we now?
Ofgem estimates total net benefits for consumers of MHHS of between £1.6bn and £4.6bn over 25 years to 2045. It is expected that in spring 2021 Ofgem will make its decision on whether to introduce MHHS.
In the meantime, Elexon are leading industry workgroups to develop the framework for IT system design for MHHS, and the changes needed to electricity market rules, so that it can be introduced.
We also believe that Elexon can fulfil the role of programme manager and system integrator for the implementation of MHHS on behalf of Ofgem. This activity would include coordinating and monitoring the implementation activities of around 180 organisations across the sector including major electricity suppliers.
To find out more about this project please visit the relevant Elexon webpage.
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