Market Half Hourly Settlements (MHHS): the new normal

Managing and balancing electricity systems in the UK is becoming increasingly challenging. With energy consumption projected to rise due to the growing adoption of electrification in heat and transportation, and as we face the complexities of integrating intermittent generation sources like wind and solar PV, we must consider intelligent management solutions. How can we better manage energy? And how can consumers play a larger role in controlling their energy use?

Flattening the energy curve

The first step is 'flattening the curve' of energy consumption, which aims to reduce peak periods of use. By taking this a step further and gaining a better understanding of the amount of electricity being generated and when it is consumed, we can provide valuable insight into how these two levers can be maximised.

Currently, within the Great British electricity market, the smallest unit for recording and entering electricity consumption into settlement is in half-hourly (HH) periods. Traditionally, only the largest B2B customers would record their consumption in this way, however, expanding the scope of half-hourly settlement has been a primary objective for the industry over the past decade.

In June 2016, Ofgem published their decision to implement UK Market-wide Half Hourly Settlement (MHHS) for all energy retailers across the entire electricity retail market.

Time of Use Tariffs (ToU)

Time of Use (ToU) tariffs, which offer different prices throughout the day, week, or year, have been utilised for large B2B customers for several years. However, implementing these tariffs has historically involved significant manual oversight, negotiation, and access to large and complex data sets. For smaller B2B customers and B2C segments, ToU tariffs have often been created using high-level, inaccurate data, spread across 'profiles' that are assumed to have similar consumption patterns.

With the capabilities of smart meters, and the implementation of Elective Half Hourly Settlements (EHHS) some retailers have begun offering improved ToU tariffs (i.e., suppliers network costs and better forecasting), however the uptake of these tariffs has been slow due to cumbersome industry processes, and a persistent lack of consumer confidence in energy retailers.

The good news is that MHHS aims to facilitate greater availability and adoption of these tariffs. Both Ofgem[1] and the Department of Energy Security and Net Zero[2] are continuing to invest in research and technology to monitor consumer attitudes and develop tariffs that are more closely with customer needs.

Driving customer behaviour and the art of the possible

The forthcoming Market-wide Half Hourly Settlement (MHHS) rollout provides both potential growth and cost-saving opportunities for energy retailers across all their customer segments. With access to increased amounts of customer consumption data, energy retailers can leverage this information in several ways.

Growth opportunities for large B2B multi-site customers include, for example, enabling energy supplier's sales teams to leverage a more strategic approach to account management. By using half-hourly pricing signals to analyse real-time whether their customers' multiple sites are on the right tariff, suppliers can more effectively identify profitable and unprofitable customers.

Similarly, for marketing users, the ability to target opted-in customers through personalised campaigns, which feature new tariffs, products and services enables the retailer to extract maximum lifetime value. By keeping customers engaged, these strategies also enhance customer loyalty.

With innovative tariffs, retailers can use data from opted-in customers to offer tariffs tailored to individuals or smaller segmented groups. For example, retailers can incentivise energy consumers to reduce consumption during peak hours, such as by charging their cars when wind generation is high or avoiding excessive appliance usage between 6-9pm. This approach not only helps consumers lower their energy bills and increase the use of renewable generation, but also allows the utility to provide a more customer-centric and tailored services.

[1]https://www.ofgem.gov.uk/sites/default/files/docs/2020/09/experiences_and_perceptions_of_smart_time_of_use_tariffs_0.pdf

[2]https://www.gov.uk/government/publications/smart-meter-enabled-tariffs-comparison-project-smarter-tariffs-smarter-comparisons