Claiming the throne of the energy transition with Half-Hourly Settlement
MHHS (Anarchy) in the UK: Claiming the throne of the energy transition with Half-Hourly Settlement

The European energy sector is undergoing a period of accelerating change: To meet net zero goals, the phasing out of conventional power plants must move forward fast. But are renewables fit to replace them? The UK is just one out of many countries where renewable energy sources still need to show further extraordinary growth to replace fossil fuels. At the same time, to cope with the intermittent nature of renewables they also need more flexibility, for instance in the form of storage and demand management. Making order out of chaos is generally seen as the British way, so in their energy sector, they also strive to make order out of the increasing complexity of the energy transition.

Mandatory Half-Hourly Settlement, or MHHS in short, is set out to be part of the solution, as it will soon become an industry standard in Great Britain. The UK as a whole has already successfully integrated a substantial amount of renewable energy into its electricity mix, by modernizing its grid and tapping into flexibility offered by demand response, battery storage, and dynamic pricing programs. However, as the country continues to push forward, some problems are becoming apparent, particularly the lack of adequate settlement mechanisms for behind-the-meter (BTM) distributed energy resources (DERs).

To enable asset-level settlement for BTM resources in Great Britain, P375 - a major modification to the Balancing and Settlement Code (BSC) - is already in place, as we explained in our most recent article. Expanding granularity beyond the asset level into the level of time, the introduction of MHHS is now another piece of the British puzzle, as it requires all electricity suppliers to settle their customers' consumption on a half-hourly basis. This change will be possible with the widespread installation of smart meters, which automatically record and transmit consumption data every 30 minutes. 

 

But first things first: How was settlement done up until today?

Traditional settlement in the UK and other countries has relied on metering at the "boundary point," which works well in a centralized system but falls short in a world of DERs. The main issues with boundary point settlement are:

  • It fails to accurately reflect the performance and value of individual behind-the-meter (BTM) assets, as their contributions are lumped together with all other demand and generation at the site level. This reduces the incentive for customers to invest in and optimize their DERs, as the financial rewards are diluted.
     
  • It poses risks for aggregators and third parties who coordinate BTM assets to provide grid services. Aggregators can face significant imbalance charges if the actions of the BTM assets in their portfolio are counteracted by other on-site loads outside of their control. This imbalance risk creates a major barrier to entry and limits the pool of flexibility that can be harnessed.

The limitations of boundary point settlement make it harder to fully recognize and reward the value that individual DERs can provide to the grid. This is particularly problematic when measuring times are only once or twice per year, as it becomes even more challenging to accurately attribute the contributions of specific assets and incentivize their optimal use.

Moving to more granular, asset-level settlement behind the meter with P375, the major modification to the Balancing and Settlement Code (BSC) will help address these issues and allow for more flexibility coming from BTM resources. 

 

MHHS allows for dynamic tariffs

But asset-level settlement is merely the first step - there needs to be also an expansion of scope into the dimension of time. This is why ‘Mandatory Half-Hourly Settlement’ will be introduced in Great Britain. Providing shorter intervals between measurements, MHHS opens up opportunities for implementing dynamic tariffs that can be helpful for peak shaving, grid balancing, and supporting a higher percentage of renewable generation.

These dynamic tariffs can be triggered in various ways:

  • Time-of-Use Tariffs follow a fixed daily and/or seasonal schedule but are more granular than the old day/night tariffs, based on current supply and demand realities such as solar generation patterns.
     
  • The operator can send simple signals to consumers to reduce consumption, even using methods like text messages, which have been successful in past implementations.
     
  • As True Dynamic Tariffs, where the operator can signal price changes based on real-time market data to the consumer’s energy management system, which then optimizes device-level adjustments to manage net consumption and generation.

Combined with asset-level settlement, operators can offer asset-specific dynamic tariffs for smart EV charging, heat pumps, battery storage, etc., enhancing the flexibility and efficiency of energy consumption even further. 

 

Information is power

MHHS will empower consumers by providing them with detailed information about their electricity usage patterns, allowing them to identify areas where they can reduce consumption and save money on their energy bills. And all this aids MHHS to create a more efficient and more competitive energy market. Suppliers will have access to more accurate data, enabling them to offer tailored tariffs and services to their customers. Increased competition will ensue, driving down prices and improving customer service, ultimately benefiting all consumers.

Not to mention that this initiative will support the UK's transition to a low-carbon economy by encouraging the adoption of renewable energy sources and smart technologies, such as electric vehicles and battery storage systems.

 

The rules for rulers

But, of course, introducing such a measure does not come without its challenges. Firstly, there is a need for widespread installation of smart meters. They are needed because they automatically record and send data about energy use every 30 minutes, which is essential for MHHS to work. While half of EU countries can already boast a rollout of over 80% and more, the UK still stands at a meager 57%. The UK government has now set an expansion target of at least 74.5% of homes and nearly 69% of small businesses by the end of 2025.

However, a Smart Meter rollout alone is doing nothing without effective data management. Moving to half-hourly data collection will significantly increase the amount of data to be handled. Just imagine: Per meter there will be 48 meter readings each day, which means 17520 readings a year. Now sum this up for many millions of meters. Robust systems will be needed to store, manage, and analyze this huge amount of data securely while ensuring user privacy. The existing infrastructure must also be upgraded to handle this increased data flow smoothly.

Additionally, implementing MHHS requires significant investment in upgrading the current systems across the board. This involves metering systems, data management platforms, and the overall electricity grid.

 

Long may they reign

Elexon, the organization responsible for managing the British Balancing and Settlement Code (BSC), leads the MHHS implementation. The strategy starts with developing a Target Operating Model (TOM), which outlines how the new system will work. To guarantee that this transition goes over smoothly, a collaboration among 180 organizations across the sector is required to get everyone prepared for the changes.

Naturally, strong governance and oversight are also vital in this operation. Ofgem, Great Britain’s energy regulator, oversees the program to ensure it stays on track. This involves setting milestones, monitoring progress, and addressing any issues that come up during the process.

While the implementation of MHHS will require significant investment in infrastructure and technology, the long-term benefits are expected to far outweigh the costs. By embracing granular data collection and dynamic pricing, Great Britain can better manage its energy resources, drive down costs, and support the integration of renewable energy sources, ultimately benefiting consumers and the environment.

Other countries are (hopefully) closely observing how the Brits, yet again with innovative initiatives such as BTM and MHHS, are reclaiming the throne of the energy transition. To a century of efficient, competitive, and low-carbon energy in Great Britain and everywhere else!