MHHS is one of the biggest mandatory changes to the GB energy markets and will be a key enabler of the flexibility required to support the transition to Net Zero.

Date

februari 20, 2024

Categories

Industry

Author

Enstra Consulting, Joyce De Smit

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Industry

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Market-wide Half-Hourly Settlement (MHHS)

MHHS is one of the biggest mandatory changes to the GB energy markets since retail competition was introduced in the late 1990’s and will be a key enabler of the flexibility required to support the transition to Net Zero. The change involves widespread use of half hourly consumption data from Smart Meters, which will enable a move away from synthetic load profiles in wholesale operations to actual usage profiles, enabling settlements between parties to be quicker and much more accurate at an individual meter level. The MHHS Programme was initiated in 2022 and is being led by Elexon with the aim of having all of the industry changes operational during 2026. Ofgem’s draft MHHS Impact Assessment estimates that the total net benefits for GB consumers will range from £1.6Bn to £4.6Bn.

Business & IT Changes

Electricity Supply Businesses will need to change their business operations to align with a new industry Target Operating Model (TOM). They will also need to re-think their approach to customer acquisition, pricing, registration, demand forecasting and billing. Wholesale settlement will also be impacted with new obligations and reduced timescales. The introduction of Half Hourly Settlements will also enable Suppliers to offer smarter Time-of-Use Tariffs and introduce new complementary “behind the meter” services such as Smart Electric Vehicle (EV) charging. Electricity market participants will require new or redeveloped software solutions capable of interacting with a range of new centralised components and services such as the Data Integration Platform (DIP) and Balancing & Settlement Code Central Services (BCS).

So, what should Energy Suppliers be doing about MHHS?

Working closely with Microsoft during the development of this integration has allowed us to stay at the forefront of technological innovation without diverting resources towards building infrastructure from scratch. By leveraging the latest advancements in no-copy, no-ETL integration, along with the robust capabilities of Fabric, we have been able to concentrate on enhancing MECOMS to better serve the needs of utility companies and their customers.

Energy Suppliers will need to re-engineer their businesses …if they want to remain competitive

This is because:

  • Suppliers will need to change their existing operating models to maintain their Licenses to operate
  • Only Suppliers that can optimise balancing in the new world will be competitive
  • Only Suppliers that successfully innovate will thrive in the face of greater competition

A. Operating Models will need to change

Suppliers will need to change their existing operating models to maintain compliance with their Ofgem License Obligations.This will mean changing their business processes to align with the MHHS Target Operating Model (TOM).

In parallel with this Suppliers will need to upgrade their IT Solutions to enable them to interoperate work with the Data Integration Platform (DIP) – the DIP is the new message orientated event-driven middleware component that will support the flow of events and messages between industry participants. This new platform will deliver a cloud-native, serverless service which will provide the resilience, availability and scalability required to enable Programme Parties to move to half-hourly Settlement. The MHHS Programme appointed Avanade, with its Microsoft Azure infrastructure solution, as the Data Integration Platform Service Provider (DIPSP).

In 2021, Elexon began the Helix Programme to re-develop BSC Central Systems to support MHHS, and to re-engineer the accompanying processes and procedures which unlock the benefits of MHHS for Suppliers. MHHS will require the creation of four new services:

  • Load Shaping Service which will calculate energy consumption and load shapes using validated actual Settlement Period level data.

  • Market-wide Data Service which will aggregate data for smart, non-smart, advanced and unmetered supplies for Imbalance Settlement and other purposes such as network charges and flexibility offerings

  • Volume Allocation Service (VAS) which will use data from the MDS to calculate energy volumes for Balancing Mechanism Units. The VAS will replace the legacy Supplier Volume Allocation Agent (SVAA).

  • Industry Standing Data – a system which will be an enhanced version of the Market Domain Data and Line Loss Factor services, but with fewer manual processes to maintain it.


B. Optimising Balancing will be essential in the new world

Suppliers will need to enhance their demand forecasting as the increased adoption of Time of Use (TOU) Tariffs will result in consumers changing their consumption profiles away from traditional and more predictable consumption patterns. Much of this may require modelling of likely consumer behavior ahead of the customer engagement and much of this will vary dependent on external conditions (e.g. weather) Suppliers will also need to improve their capability to monitor available generation to take into account consumers who might export power from their Electric Vehicles (V2G) or their local batteries or wish to take advantage of local energy surpluses in embedded generation.

In order to do this effectively Suppliers will need to leverage Artificial Intelligence (AI) and Machine Learning (ML) capabilities that can quickly adapt to real time changes in the greater number and mix of variables. Effective data analytics and real time data processing with dynamic data models will be essential for improving performance in this area.

C. Innovation will be the key to thriving in the face of Greater Competition

  • Existing competitors will take advantage of the MHHS changes and the dramatically increased volumes and granularity of data to start offering a broad range of new products and services such as Time-of-Use (TOU) Tariffs and “behind the meter” offerings. A number of Energy Suppliers (e.g. Octopus & Ovo) have already introduced new products and services such as demand response payments and Smart Electric Vehicle (EV) charging in advance of true cost reflectivity and are making headway in market share and understanding of consumer needs and behaviors. Many will soon be launching Smart Battery (home/office and EV) and Solar PV management services.

  • Only Suppliers that can rapidly develop innovative products and services will be able to compete successfully with their peers and the powerful new entrants.   

MHHS: Competitive Threat or a New Opportunity?

So, whether MHHS is a Competitive Threat, or a New Opportunity for Energy Suppliers will depend on their ability to re-engineer their businesses appropriately.

Johan Vandekerckhove - Chief Commercial Officer Ferranti -

Johan Vandekerckhove

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