This spring, Ofgem is set to decide on whether Elexon or the Future System Operator – the forthcoming National Energy System Operator (NESO) – should take on the market facilitator role, which will support the coordination of trading relationships in the distributed flexibility market.
The government estimates that the UK will need 30GW of flexibility by 2030. To achieve this target, two key issues need to be addressed: The creation of clearer and more easily accessible flexibility markets, and how the sector can encourage widespread consumer take-up of products and services that enable them to provide flexibility.
On the market access side, the goal is to make it far easier for flexibility providers to offer their services. They need to access multiple markets including transmission-level balancing services, the Balancing Mechanism and the local balancing services markets managed by the six distribution system operators. Different registrations are required for each market, which causes a lack of coordination, alongside insufficient clarity and transparency.
The market facilitator will tackle this by developing simpler, clearer processes to bring together buyers and sellers of flexibility. Among its key duties will be putting in place ‘stacking’ and ‘primacy’ rules for market operators and participants. Stacking rules allow for better revenue forecasting by determining whether a single flexibility asset can deliver multiple products. Primacy rules will provide clarity on issues, such as which flexibility purchaser takes precedence when the same asset is called on to provide a service. As an independent body with more than 20 years of experience and expertise in wholesale electricity market arrangements, Elexon has the credentials to take on the role.
The commitment of consumers to provide flexibility is critical, as illustrated by a stark fact from the Climate Change Committee’s research, which states that 62% of the actions required to achieve Net Zero will require some form of consumer or societal behaviour.
Regardless of whether Elexon takes on the market facilitator role or not, we will play a big role in supporting the development of flexibility markets. Once we cut over to the new settlement timetable for Market-wide Half Hourly Settlement (MHHS) in December 2026, Elexon will be processing much more granular data on consumers’ consumption throughout the day.
In line with our open data principles, Elexon will be working to ensure that specific half-hourly data that we process will be available in compliance with consumer privacy standards, and the consent model that Ofgem is working on. We will also continue to support the testing and trialling of innovative offerings, as our new platform for managing Balancing and Settlement Code (BSC) services is flexible and supportive of a variety of retail propositions, be they based on a household- or asset-level.
However, there is no guarantee that large numbers of consumers will take up these offers. For example, competition was introduced in retail supply in the late 1990s, yet significant numbers of consumers still do not switch frequently enough to continually benefit from savings.
More needs to be done to raise awareness among consumers about the benefits of providing flexibility. The more engaged consumers with smart meters are taking opportunities to gain the benefits, including signing up for tariffs where they get free, or lower-cost electricity when there is plenty of renewable power available. More than 2.2 million consumers have also signed up for the demand flexibility service this winter. However, they are outnumbered by the millions of other people who will be unaware of these opportunities and will need some convincing to sign up. Those consumers will need support in understanding how flexibility products and tariffs work, especially in cases where their bills may increase if they use electricity at peak times, compared with off-peak periods.
As a sector, we need to ensure that less engaged consumers are not left behind as flexibility markets develop. Research by Citizens Advice shows a significant number of consumers do not feel that their needs have been properly considered in the design of flexible energy products and services. There is a need therefore to design inclusive flexibility products and services that meet the needs of a diverse range of consumers, particularly for people who are less comfortable using apps and technology, and for some people with a physical or mental health condition, or illness.
In its Call for Input ‘Smoothing the Journey: engaging domestic consumers in energy flexibility’ last August, Ofgem called for an attractive, simple, and seamless customer journey for providing flexibility. Turning this into a reality will require widespread commitment from companies and policymakers across the sector, and as Ofgem stated, some form of policy intervention may be needed to support it.
Elexon will continue to be part of the conversation to progress this, as we frequently look to offer our support and expertise to Ofgem and the government on energy policy development. Our management of the BSC and the MHHS Programme as Senior Responsible Owner has also been widely recognised for its inclusivity. We are also recognised for the collaborative approach we take when working with the industry.
With both MHHS implementation, and the market facilitator working to improve flexibility markets on the horizon for the middle of this decade, there is an opportunity for companies across the sector to work together with Ofgem to enable far larger numbers of people to transition to being flexible energy consumers (and prosumers) in the coming years. Without this, any goals for achieving much higher volumes of flexibility provision in the future will be out of reach.