Code managers launch sandbox services for innovators

Elexon and Electralink have both launched new services to help innovators secure temporary code derogations as part of Ofgem’s revamped regulatory “sandbox”.

The energy regulator recently reopened the scheme, whilst allowing companies to apply at any time they wished rather than within set windows as was previously the case.

The new services will enable companies to secure derogations from the Balancing and Settlement Code (BSC) administered by Elexon and the Distribution Connection and Use of System Agreement (DCUSA) administered by Electralink.

Elexon chief executive Mark Bygraves said they have always worked with innovators – both new entrants and old players – to find flexibility with the current codes to allow them to trial new products and services. However, in cases where this was not possible then a full modification was required.

“The whole point of the sandbox process is that a time-limited and scope-limited derogation can be granted to give it a try first without the need to put in place a modification and change the actual code,” he told Utility Week. “Depending on how the trial worked that could then lead to a mod down the track.”

Bygraves said Ofgem will act as the “funnel” for the applications process, working with managers to decide which codes are relevant at the beginning, as well as having the final say on which derogations to approve at the end.

He said the role of code managers will be to work with innovators to establish exactly what derogation they require as well as identifying the associated benefits and risks. The derogation process will work in a similar way to modifications, with code panels scrutinising the proposals before making recommendations to Ofgem.

Bygraves said the process is also likely to take around the same time – four to six months typically – although it will be much less onerous due to the more limited scope.

Neil Barnes, deputy director for future retail markets at Ofgem, said: “The impacts of Covid-19 have given us further insight into what a low-carbon future might look like, with more people working from home, and greater reliance on renewable generation due to lower levels of industrial demand.

“We think this is the right time to launch the updated energy regulation sandbox, helping innovators test and launch new products, services and business models. The first sandbox showed us that innovators often need relief from code rules, so we welcome Elexon’s pioneering work in developing their sandbox tool.”

Elexon said any BSC derogations that are granted by Ofgem will apply to the applicant only and that the regulator is unlikely to approve a similar derogation for another company unless there is a distinguishing feature. Applicants do not need to be a BSC party but will need to sign up by the time their trial begins.

The code administrator had already introduced arrangements several years ago to allow companies to secure derogations from the BSC via the modification P362 but said no applications had been received in the meantime as they were not being passed through by Ofgem until now.

A similar sandbox service has also been launched by Electralink for the DCUSA.