Industry codes in the energy sector have come in for a bad press in recent years. Everyone from the Competition & Markets Authority (CMA) through Exeter University to Ofgem and the department for business, energy and industrial strategy (BEIS) have pointed to the vast tomes of material and complex webs of bodies involved.
These arguably create a barrier to competition and innovation, as incumbents are the only ones resourced to keep track of all that is going on and the self-governance arrangements can limit the ability of outsiders to participate.
However, in the current crisis, industry codes have demonstrated what was always meant to be one of their core strengths – that they can be flexible and adapt without the need for the protracted processes that are necessarily involved in changing licences and legislation. So, while the regulators have given broad assurances around their intention to be pragmatic and have signalled where they see the priority areas for industry focus, code bodies have been able to push through concrete changes to help keep industry afloat.
Last week, Ofgem sent an open letter to code and central system bodies setting out the same broad prioritisation messages that it had already delivered to the rest of industry. It is not quite clear why that belated action was considered necessary, although the various code bodies do seem to have responded in different ways to the crisis.
Elexon has already put through a number of urgent code changes to the Balancing and Settlement Code (BCS) to address issues like credit cover and removing penalties around performance on data feeding into settlement – important for suppliers struggling to cope with a new context. It has also set out clearly which existing code modifications will be delayed, recognising the challenges for parties in engaging in the process at this time. This includes, for example, the complicated “meter splitting” proposal to facilitate customers taking part of their supply from a second supplier (such as through peer to peer trading) – important for the transition but clearly not a short-term priority.
Finally, Elexon has been looking ahead at how the atypical usage profiles being seen now might impact on settlement calculations for next year and a commitment for this to be considered in November before the parameters for next year are finalised.
The Xoserve website sets out the changes to the Uniform Network Code (UNC) being managed through the Joint Office run by the gas networks to deal with Covid-19. It seems to have been slightly slower off the blocks but there are four urgent changes that should now have just gone through the final stages of the process. This includes allowing estimated reads from larger sites the use of an “isolation flag”, where a customer has effectively ceased taking supply; and the removal of “ratchet charges”, where sites have a significant unexpected increase in demand.
The changes here serve as a reminder of some of bizarre features of gas settlement which relies on the concept of AQs (an estimate of the customer’s annual demand) with the difference between that and actual demand across the system being termed “unidentified gas”, the costs of which are then spread across industry. The current crisis leaves the industry in a position of having negative unidentified gas. One aim of the modifications is to provide more accurate data to enable shippers and suppliers to better manage the current situation, but with more work needed on how the arrangements will be monitored and what the exit arrangements will be.
ESO makes significant move
Back with electricity, National Grid as ESO oversees a number of technical and charging codes. They don’t provide any overview of the Covid-19 impacts but a lot of attention has been given to how they keep the system in balance with much reduced demand. An urgent Grid Code modification has just been tabled that would allow the ESO to require DNOs to disconnect embedded generation as a last resort – quite a significant step. Separately, back in March ESO asked Ofgem to agree to put back the date for one of the charging modifications linked to the contentious Targeted Charging Review which Ofgem agreed to, noting that this would help stakeholders who would be stretched at this time in terms of their ability to engage on such issues.
For other bodies such as Gemserv (which runs the Smart Energy Code and several others) and Electralink (which provides data transfer services for the DNOs) there is no sign of any change to business as usual – apart from a move to virtual operations.
One signal the Ofgem letter was sending was that the code bodies should not simply be carrying on as normal. The regulator has made it clear that it does not expect current KPIs for timescales on modifications to be met – and stresses that its own decisions on modifications will need to be prioritised. Code bodies can help industry by following Elexon’s example and setting out clearly revised timetables for modifications that are not a priority in the current climate. Ofgem’s letter also signalled a delay to the ongoing BEIS and Ofgem review of industry codes. One aim of that review was to make code bodies more proactive (“managers” not “administrators”) including responding to changes in the wider environment and prioritising the changes put forward. There will be lessons from how the bodies have handled the current crisis that should feed into that review.
No more data block
Finally, another under-valued feature of the code bodies is the way that they are responding to some of the challenges around open data that were set out by the Energy Data Taskforce. At this strange time that data can provide an interesting window into what is happening in society at large.
Elexon again leads the way with a fascinating summary of how electricity demand has reduced – not just at an aggregate level, which has been much quoted, but showing by region how it dropped first in response to the recommendation to work from home where possible (on 17 March) and then to the official lockdown (from 24 March). While there will be a range of other factors in play, of course, it does seem that the residents of Yorkshire, for example, took much less notice of the initial advice than did the residents of London.
Insights such as this ought to be helpful to those trying to understand the spread of the virus and to work out how we move out of lockdown. At a recent webinar event I chaired for Sustainability First there was an offer from a number of industry bodies to help BEIS work out how energy data could be used more broadly in managing the crisis. I hope that government will take them up on that offer.
What happens in the world of industry codes often carries on beneath the radar. Few organisations have the time to follow all the different debates but they can be of huge importance. That has been a concern over the years as it risks reinforcing current industry structures. However, what the last month has shown is that the codes process can be agile and responsive when it has to be, but that needs code managers who are proactive and able to take a broader view.