Ofgem’s decision in April to implement market-wide half-hourly settlement (MHHS) marked one of the biggest changes to the energy sector since privatisation. MHHS will play an important role in progress to net zero.
Using near real-time half hourly meter data will enable a new breed of flexibility products through the ability to aggregate household demand. Elexon’s systems will be key to unlocking this.
The current IT systems which Elexon uses to manage settlement have remained largely unaltered as the retail market has developed. These systems have served the industry well and have maintained high levels of accuracy with little need for significant investment over that time.
However, they are ageing and they need to be replaced so that we can deliver value from MHHS and respond more quickly to the changing needs of customers and the energy market. We also need to be more adaptable in delivering Balancing and Settlement Code (BSC) changes.
In January, we delivered the first major component of our new cloud platform, Elexon Kinnect. This is the customer solution, which is an online portal that allows BSC parties (companies signed up to the code) to electronically undertake market entry. Parties that are active in the market can also ‘manage their BSC account’ online. This is a first for any energy industry code.
Essentially, the customer solution removes the need for tedious paper form-filling, which companies usually have to complete for code processes. Before now, some processes such as registering as an authorised BSC person (an employee at a BSC party authorised to act on behalf of their company and undertake certain BSC processes and activities) or registering new assets could take days as forms were subject to multiple process hand-offs. In many cases, these processes now take just minutes.
Re-development of the central systems has many benefits for BSC parties and Elexon. For example, architecting our services in the cloud allows us much greater flexibility when making changes to the BSC. Currently changes can take around a year to implement, with at least a third of that time spent on testing that current systems can manage the change.
For example, the code modification P375, a major change allowing activity of smaller asset owners to be visible in settlement, was approved by Ofgem in March 2021. However, due to current systems configuration it won’t be implemented until June 2022.
With cloud technology we can dramatically reduce implementation timescales through the use of modular technology. We can also give better support to innovators by being able to offer multiple concurrent BSC Sandbox trials. In the future, if a decision was taken for settlement to be completed every 15 minutes (instead of the current 30 minutes) Kinnect could manage it without any degradation in performance, whereas the current systems could not easily do so.
Access to detailed wholesale electricity market data will be essential to fully develop a smart electricity system. For that reason, and to ensure that we help to deliver net zero, we played a major role in the Energy Data Taskforce. We quickly acted on its recommendations, becoming the first code body to explicitly embed ‘open data’ principles in a code.
To that end, following Ofgem approval, we implemented the modification P398 last month, which requires that all data held by Elexon is assumed to be openly available for no additional charge, unless the BSC Panel says otherwise.
We are also looking forward to playing an important part in the new Energy Digitalisation Taskforce, which will accelerate digitalisation of the energy system, to transform industry structures and enable emerging net zero compatible business models and markets.
The next stages for Kinnect include transferring the Settlement Administration Agent activity (the IT system which calculates daily settlement runs) to the new platform and developing an analysis and insights solution to replace the Balancing Mechanism Reporting Service (BMRS).
BMRS is the go-to data source for statistics on the wholesale market, with around 55,000 regular users. However, we cannot add new data and functionality quickly on BMRS as it is an ageing platform.
The analysis and insights solution will draw its data from the Kinnect platform, ultimately using market-wide half hourly data when this functionality is delivered. It will use best practice on data visualisation from the finance sector (particularly that provided by hedge funds) to completely re-imagine data provision for the wholesale and balancing markets and Elexon’s customers.
The new solution will provide more up-to-date and detailed data. Users will also find it easier to perform their own analysis. To be sure that we are building the data service that users need, we are involving them directly in its development.
More than 150 people across the industry have volunteered to help with the development and testing of the software. We will launch the first version of the analysis and insights solution this October.
It will be the first of many, because just as the data needs of our customers evolve, so too must the software. We look forward to working collaboratively with users in the coming years to continually improve the service, taking advantage of the flexibility and adaptability of the cloud technology that Kinnect brings.
Electricity settlement plays an essential role in the energy market. All electricity companies and consumers rely on Elexon being able to accurately calculate the monies owed by, or owed to, BSC parties.
As the electricity system becomes more complex, with a wider variety of generation, demand-side response providers and the rise of ‘prosumers’, that complexity will only increase. So too will demand for data to support innovators and developers of new products and services that seek to deliver net zero.
Therefore, the optimum time to invest in replacing the BSC systems is now. Ultimately, our new platform will result in a much better user experience, speedier change and better value for money for BSC services, for all of our customers regardless. Kinnect will be key to delivering MHHS implementation and will position Elexon to deliver other major changes to support net zero.