Half hourly settlement: bringing energy innovation to the masses?
PA Consulting’s energy expert, Ted Hopcroft, discusses Ofgem’s target to introduce mandatory market-wide half hourly settlement (MHHS) and how this could lead to innovation in energy services, in a report for Utility Week.
The report examines how the stark threats posed by climate change mean there’s a burning platform to drive innovation in energy services forwards. But are suppliers ready to support the nimble settlement processes required to make sure these innovations are available to the mass market?
The report goes on to say that in parallel to suppliers looking to build longer and deeper relationships with their customers, potentially including the provision of assets such as EV chargepoints, battery storage and heat pumps, the market is also moving towards next day switching and even the possibility of automatic switching for customers on particular deals. “Suppliers and service providers will need to navigate this dichotomy,” says Ted.
More fundamentally, however, it is far from clear that many consumers are ready for the exciting new world of flexible energy. It has taken years to install smart meters in 50% of GB homes, with suppliers reporting that consumer resistance is the single biggest factor impeding rollout. “If consumers will not accept a passive device, then there will clearly be challenges in getting them to accept that an energy company will control when their EV is charged, or their dishwasher switched on,” says Ted.
Load shifting on EVs, for example, has been cited to save consumers around £100 pa, but this is unlikely to sway the owner of a new £73,990 Tesla S, Ted adds. He goes on to say: “This might put a dampener on the more innovative propositions, but there should still be scope for consumers to take simple decisions themselves on when to use energy.”
Despite the huge challenges ahead, experts are unanimous that MHHS has the potential to be a gamechanger in the race to net zero. “HHS is a big step forward towards a future flexible energy system that could help support the UK’s path to Net Zero,” explains Ted.
Ted explains that Ofgem’s high load shifting scenario predictions of customer savings of up to £4.5bn by 2045 are undoubtedly bullish, but even under scenarios where the load shifting achieved is lower, there are still expected to be significant direct benefits. He continues: “They include the need for less generation capacity and network reinforcement to meet peak demand, more accurate forecasting and matching of supply and demand, and reductions in carbon emissions as lower demand can be satisfied with less polluting generation.”
The report explains that Implementing MHHS will be a challenge for the industry, but it will play a vital role in providing the foundation for a more flexible electricity system and is key to unlocking the many benefits of smart metering. Ted concludes by saying that “HHS has great potential, but there is a long road to its success.”