Nick Rubin looks at the transformations and challenges that exist in the electricity market and considers ways of unlocking the benefits to end consumers. This insight article was written as part of Nick’s attendance as a guest speaker at the BIEE’s Oxford Research Conference in September 2018.
Nicholas Rubin and Mark Bygraves set out in the following video of Elexon’s view on placing Consumers at the Heart of the Energy System.
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.
- Elexon insights: white paper on multiple providers (Published: April 2018)