What is the market facilitator role?

The Government has set a target for clean power by 2030 and to reach that goal we need flexibility to play a much bigger role in managing electricity supply and demand.

However, given the complex nature of the GB energy system, local flexibility markets are currently fragmented and uncoordinated. To address this, in July 2024, Ofgem appointed Elexon as the market facilitator to support these markets.

Our role will be to:

  • work with Distribution System Operators (DSOs) and flexibility providers to develop more open, coordinated and transparent local flexibility markets, and support their growth
  • align the national flexibility markets managed by the Electricity System Operator (ESO) and local markets managed by DSOs (while leaving the operation of these markets to the network companies)
  • work with Ofgem and the ESO, ensuring a strategic, whole-system approach is taken to deliver against the ambitious clean power target.

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When will Elexon start to deliver the role?

Elexon is very pleased to have been appointed to deliver the market facilitator role as it will be crucial to the energy transition.

We will start market facilitator operations from early 2026. In the interim, we will work with the Energy Networks Association’s (ENA) Open Networks programme and Ofgem to transition into the role.

In particular we will be working with stakeholders on key elements such as market design and rules for market participants.

Enabling distributed flexibility

Distributed flexibility is adjusting behaviours to support balancing and operation of the electricity grid, as the energy mix diversifies, and electrification drives increased demand.

This means households, businesses and generators changing their consumption or output in response to a signal e.g. an instruction from a DSO.

The ENA states that in 2023, network operators tendered a record 6.4GW of capacity on Great Britain’s local flexibility markets, with 4GW contracted. This makes the the UK’s flexibility market the biggest in the world.

See the ENA’s announcement on flexibility contracting (July 2024)

Overcoming the barriers facing flexibility providers to enable distributed flexibility

Flexibility providers can include electricity Suppliers (aggregated consumer consumption), small scale low carbon generators, storage operators and businesses.

They have a common ability to increase or reduce either consumption, or electricity output, in response to price signals.

The current challenges they face can include:

  • insufficient visibility of where in Great Britain they can provide their services
  • lack of coordination and common processes for flexibility providers, e.g. for registering to participate in local flexibility markets
  • lack of transparency on decisions about which providers have been contracted to provide flexibility services.

Read more on unlocking local flexibility

Responsibilities of the market facilitator

The market facilitator will be responsible for activities such as:

  • setting stacking rules, which enable one asset to know if it can deliver multiple products
  • setting primacy rules for deciding which market takes precedence when the same asset is called on twice to provide a service
  • standardising flexibility market registration processes for participants.

Next steps for operationalising the market facilitator role

Elexon will begin market facilitator operations by early 2026 at the latest following the successful completion of a number of workstreams:

Milestone Workstream Status
Agree the scope and detailed design for the market facilitator Workshops led by Ofgem and involving Elexon and flexibility market participants to discuss the scope and the detailed design of the role, and associated governance arrangements.

These workshops take place from August to September 2024.

Ofgem plans to consult on the scope and detailed design of the role in November with a decision expected in early 2025.
Set up Elexon to take on the role Development of a BSC Modification to extend Elexon’s vires so it can take on the role.

Elexon is working to identify a party that will raise this proposal.

We expect that the change will be approved for implementation in November 2024.
Develop a governance and funding model for the role

Development of a BSC Modification on governance and funding for the market facilitator role. As the role is new, a governance model needs to be developed and approved.

Elexon is not-for-profit and does not carry any capital reserves. We have not budgeted to deliver the role, and so a funding model needs to be developed.

Following the outcome of Ofgem’s workshops, Elexon will identify a party that can raise this Modification.

We expect workgroups to start development of the change in early 2025.

Ofgem will also consult on in H2 2025 on the draft governance framework document for the role.

Approval of the Modification is targeted for late 2025/26.
Create licence conditions for flexibility markets to operate effectively. Licence conditions for the ESO and DSOs will be put in place by Ofgem requiring them to comply with the outputs of the market facilitator. Ofgem will publish informal and statutory consultations in H2 2025 on the NESO and DSO licence changes.
Open Networks programme to transition from the ENA to Elexon. Elexon working with the ENA to transition the Open Networks initiative to Elexon. This will maintain the growth of flexibility markets, in advance of us beginning market facilitator operations.

In September 2024, Elexon will become chair for the Open Networks Challenge Group. The group is responsible for shaping the direction of the Open Networks Programme, its priorities, and outcomes.

From September 2024 onwards, Elexon will also have representation on the Open Networks Steering Group. 

We will also engage in the working groups and take these over in 2025.

  1. Carbon reporting
  2. Settlement
  3. Baselining
  4. Primacy rules
  5. Dispatch/system operations
  6. Pre qualification
  7. Flex products and stackabililty

 

Related areas of work

Flexibility market asset register (FMAR)

As the Market Facilitator, Elexon will create the rules that underpin flexibility markets. However, digital infrastructure is needed to ensure interoperability between existing flexibility platforms, enabling them to communicate effectively.

In July 2024, Ofgem proposed that a flexibility market asset register is developed as the ‘single source of truth’ for all flexibility assets under 1 MW. It would be accessible to multiple users, including flexibility market platforms and market operators.

Ofgem proposes that the market facilitator is responsible for the initial design work for the FMAR. We fully agree with this as we have a long-standing view that this infrastructure is necessary and that the market facilitator should be involved in developing it.

Ofgem’s consultation closes on 23 September 2024, and it plans to make a decision in winter 2024/25.

Data sharing infrastructure (DSI)

In July 2024, Ofgem began a consultation on development of a minimum viable product for sector-wide data sharing infrastructure, and the governance arrangements needed for this.

The need for infrastructure to support wide-spread data sharing and interoperability was put forward in the Energy Digitalisation Taskforce’s recommendations (2021) and referred to as a ‘digital spine’.

Ofgem envisages the DSI as enabling ‘seamless sharing of data between entities’ and has proposed that the ESO develops an MVP for the DSI.

Ofgem’s consultation focuses on the initial, short-term, governance model, which will span from 2024 to 2028 approximately.

We will collaborate with whichever organisation Ofgem chooses to take on the role of developing the DSI MVP.

Ofgem’s DSI consultation closes on 20 September 2024, and it then wants stakeholders and relevant organisations to refine the detailed design of the short-term governance model. Ofgem will publish further information on an enduring governance structure at a later date.

Consumer Consent Solution

In August 2024, Ofgem published a consultation on developing a digital solution to allow consumers to share their energy data with trusted third parties to receive tailored services to manage their energy bills.

This solution will be important for encouraging consumer participation in the energy market, and helping them to choose energy deals which suit them. The solution will need to make it easy for consumers to understand where the record of their consent is held, and give them abilities to manage, and withdraw their consent on demand.

Ofgem identified ElectraLink, the Retail Energy Code Company (RECCo) and the Smart Data Communications Company as options for developing the consent solution, with a preference for the RECCo to deliver it.

Once Market-wide Half Hourly Settlement (MHHS) is fully implemented, Elexon will be managing 500 billion meter readings per year, and we have built a smart meter data repository capable of sharing granular information on electricity consumption which can support innovation in products and services for consumers. See page 21 onwards of our Digitalisation Strategy and Action Plan for further information.

We are fully committed to integrating our smart meter data repository with whatever consent solution is developed. We will work with whichever organisation Ofgem decides to appoint to develop the consent solution.

The consultation closes on 4 October 2024 and Ofgem aims to make a decision during Winter 2024/2025.

Useful links and background information