It ain’t what you do…

Market-wide half hourly settlement is finally set to become a reality in 2025. But Ofgem’s long-awaited green light for the programme will not achieve a fully flexible energy system on its own. In her latest column exclusively for Utility Week members, Maxine Frerk discusses what else needs to be done to underline the message that timing matters.

Readers of a certain age may remember the song “it ain’t what you do it’s the way that you do it”. Or in energy perhaps we should say “when”.

Just over a month ago Ofgem published its final decision on a move to market-wide half-hourly settlement which will mean that customers’ bills will increasingly reflect the time at which they use energy (not just how much). With more intermittent renewable generation timing will become increasingly important – and hence also the opportunities for demand side response and other forms of flexibility such as storage.

Ofgem’s decision is welcome even if the planned implementation date of 2025 still seems a long way off – bearing in mind that the idea of half-hourly settlement was first identified as a necessary shift by Ofgem in its Smarter Markets strategy back in 2011.

Of course, suppliers can already apply half-hourly settlement on an elective basis and customers on the Octopus Agile tariff recently benefitted from negative prices when there was surplus renewable energy on the system. It clearly doesn’t make sense to be paying wind not to generate if customers could make use of it.

If that shift at a market level is still some years away what can be done in the interim to prepare the ground and build awareness among consumers that timing matters? Even if the expectation is that for many consumers this will all be automated, they still need to recognise why timing might be important.

A month ago National Grid launched its Green Light Signal, a low energy smart lightbulb that glows green when powered by renewable electricity (driven by an app that takes account of the electricity generation mix in your area). While probably mainly of interest to energy geeks it could help build awareness that when you do things matters.

But no – you say – I am on a green tariff with 100 renewable energy so I can put my washing on when I like.

Wrong. There has been quite a lot of coverage around greenwashing and the fact that under Ofgem rules a tariff is counted as green if the energy is matched by an equivalent number of REGOs. But REGOs can now be traded separately from the underlying energy and can be bought pretty cheaply. It is for that reason that Uswitch has set up an accreditation scheme (which I was on the panel for) to highlight green tariffs that provide real support to renewable generators through the use of Power Purchase Agreements (PPAs).

One reason that REGOs are of limited value was highlighted in the interview with EnergyTag founder Toby Ferenczi last week. The problem is that under Ofgem rules (which reflect a wider EU set of rules) the matching of REGOs is done on an annual basis. So, as a supplier wanting to offer a green tariff (or to comply with your Renewables Obligation) you can effectively pick up lots of REGOs that relate to renewables generated on a windy day and none for days when the wind isn’t blowing.

A recent paper by Imperial showed that on 3 March only 0.6GW of wind was generated in contrast to 18GW later that month. If suppliers had to have REGOs to cover their green tariffs on 3 March they would have attracted a hefty premium – and helped provide renewable generators with the finance they need.

What Toby is arguing for is full half-hour by half-hour matching. That will be difficult to mandate as the REGO framework is enshrined in EU law. However, that doesn’t stop suppliers – and larger customers who want to show that they are genuinely committed to using 100 per cent renewables – from matching on a voluntary basis – and the EnergyTag technology enables that by time-stamping the REGOs in effect. Ofgem could usefully consider what guidance it gives around the claims for green tariffs to take this development on board.

A similar point has been made by WSP in relation to the carbon reporting by companies. At present the BEIS requirement is that companies simply report their total electricity usage and multiply it by a standard conversion factor. No account is taken of the timing of the usage and the fact that the carbon intensity of the grid varies very significantly. Moving to a system of carbon reporting that takes account of not just how much is used but when it is used would provide an additional impetus for companies to think about demand side response and storage as ways to reduce their carbon footprint.

Finally on this theme, a report published this week by CSE and Sustainability First on the PIAG project (Public Interest Advisory Group on smart meter data) argues that Ofgem and BEIS need access to aggregated / anonymised half-hourly smart meter data to understand what is happening in the market as the energy transition progresses. At present the key BEIS energy demand statistics – both the sub-national energy statistics which provide a geographic breakdown and the NEED database which links individual anonymised consumption with the energy efficiency measures installed – simply present an annual picture of demand. In a world in which “when you do it” is as important as what you do, BEIS will need to find ways to extend current statistics to show how demand varies over the year and within day. That understanding will be needed to underpin a range of policy decisions going forward as well as being key to local area energy planning.

So having taken the big step of committing to a move to market-wide half-hourly settlement, Ofgem and BEIS need to look at the full range of their policies and activities and ask how the application of a “timing” lens might impact them. As a part of that we need to help consumers at large understand that if they want to be green – as so many of them seem to do – then it ain’t (just) what you do but when you do it that matters.

Maxine spent 15 years at Ofgem, latterly taking on responsibility for all aspects of the regulation of distribution networks. Since leaving Ofgem she has been working as an independent consultant for a mix of regulated company and consumer / community group clients.