Can Elexon crack open the energy ‘supplier hub’ model? Sign up to hear its proposals

Industry settlements company Elexon has suggested customers need no longer rely on a single electricity supplier to provide all their power (the so-called ‘supplier hub’ model).

It has published proposals that could quickly allow customers to use several suppliers, for example with a dedicated supplier for electric vehicle charging. It is seeking responses and on 5 June it is hosting a webinar on its proposal. Sign up for the webinar here.

In April, New Power spoke to Elexon about its proposal and the following article was published in the May issue: 

Elexon thinks it can cut through up to a decade of industry evolution otherwise required to give customers access to more than one electricity supplier and half hourly settlement. In a new White Paper, the settlements company said it should be able to triangulate data already being added to the system for other reasons, to allow customers to buy power – either from a separate source like a community energy project, or for a specific purpose like electric vehicle charging – alongside that from their regular supplier.

At present, in the UK model, each customer has a single supplier that is the ‘hub’ for all customer interactions (building in to the bill network charges, for example). What is more, charging domestic customers on the basis of real-time half hourly data is a rare exception; instead, they are assumed to use power during the day (and as the price varies) in accord with one of a handful of customer profiles and these are aggregated to settle supplier bills.

Both these arrangements may change in the long term. Ofgem has begun to look at half-hourly charging for consumers and opened a debate on whether to change the ‘supplier hub’ model. But both changes will take years (half-hourly settlement is expected in 2022/23 and changes to the supplier hub may take up to a decade) and require wholesale changes in IT systems.

Elexon thinks it can sidestep the process to allow new market models to be in play by the turn of the decade, using changes already under way including those that will allow GB to join new European balancing platforms.

Instead of waiting for customer meter data to become available, the proposal would use existing metered data flows: export from community energy projects; import or export from electric vehicle chargers, etc. A new type of organisation, known as a ‘customer notification agent’ would track half hourly trades from these organisations and pass that information to Elexon so it can adjust supplier volumes for the period up or down accordingly. This also ensures suppliers are not ‘out of balance’ – supplying more or less than they contracted, which carries a penalty.

Jon Spence, senior market advisor at Elexon, told New Power he thought the new proposition would be useful for community power projects. They can already be a ‘second supplier’ for scheme members but currently only if they use the same supplier. The new system would offer choice and the ability to switch.

He also thought peer-to-peer traders would be high on the list of interested parties, although he said he expected to see apps and other platforms developed to aggregate those trades at domestic level.

If the change goes ahead suppliers will not have to take part. If they do, they will incur some costs, for example with new data flows to manage. But some suppliers may see the ability to split out parts of the supply as a customer service that allows them to differentiate their customer proposition in a crowded market. It may represent an opportunity for small suppliers, as it will require changes in supplier billing systems – traditionally a problem for large suppliers with large unwieldy billing engines and processes. Ofgem has already made it clear it wants to see separate supply volumes listed on a customer bill, even if the supplier is not taking payment for the second supply.

Elexon is canvassing opinion on the proposal. If it gets support – either from industry or other interested parties like app developments, community suppliers, etc – the route to implementation is likely to be an ‘issue group’ that would thrash out the concept, followed by code modification proposals. Changes would be required in the Balancing and Settlement Code, and possibly to codes that government distribution charging, industry data flows etc. Spence said that initial discussions would likely last some weeks and an interest group would require some months to formulate proposals. Code modifications would also take some months.

Spence said he thought the option was unlikely to be a permanent solution or to be used for the bulk of consumers. It would be an interim arrangement that would allow business models to be investigated, and would probably be used for relatively small groups of customers. Meanwhile permanent structural changes in the industry will be discussed and implemented and smart meters rolled out.

Read the full white paper here

Sign up for the webinar here.

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