Unlocking pricing innovation with Half Hourly Settlements

 |  30 November 2022

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From October 2025, all UK energy retailers will have to conduct half hourly settlements (HHS) under the Electricity Settlement Reform mandated by Ofgem, Great Britain’s independent energy regulator. This market-wide transformation is a key cog in a smarter, more flexible energy system. Ofgem predicts that HHS will enable £4.5bn of consumer benefits over a 20 year period.

HHS also enables benefits for energy retailers. With many retailers keen to make the move to HHS sooner than the 2025 deadline, we'll share why this major industry change really matters.

Why do we need Market-wide Half Hourly Settlement?

While energy suppliers are obliged to purchase electricity from the wholesale market at 30-minute intervals, most UK consumer energy bills are settled using daily reads or usage estimates – a process that takes 14 months. While this process has been the norm for decades, it is inefficient because it creates an imbalance between the amount an energy supplier buys and how much their customer base consumes. Inefficiency increases cost, and this is ultimately reflected in energy prices.  

Modern smart metering technology brings a wealth of data, such as from half-hourly readings, and this makes a half-hourly settlement model possible. By measuring energy in 30-minute blocks, HHS will remove a lot of the complexity (and inaccuracy) around portfolio energy usage estimates, thus enabling greater accuracy and new innovation around energy pricing and billing.

How does this benefit energy retailers?

One of the most powerful tools for optimising business operations and increasing profitability is data, and that’s what HHS will bring in abundance for energy retailers. The modern, intelligent energy systems required to ensure retailers comply with HHS will also increase their ability to capture and manipulate huge quantities of data within each half-hourly settlement block. This information can also be synthesised into incredible insights, for example, where improvements for operational efficiencies can be gained and where improved commercial decision-making could enhance margins or reduce risks.  

There’s also a direct knock-on effect for consumers. With better data, energy retailers will have greater pricing flexibility and the ability to develop new product structures that are more aligned to individual needs, such as next-generation ‘time of use’ tariffs. Through such products, consumers can reduce energy bills by concentrating their usage into more cost-effective time periods. Suppliers can better, and more quickly, monetise this consumption shift through settlement, dynamically returning a share of the savings to consumers. Lower energy bills equals a better customer experience.

When do we need to start preparing for HHS?

The short answer is now. HHS is mandated from October 2025, however there will be a number of changes energy retailers need to make to ingest and analyse the deluge of data that HHS will bring. Furthermore, the opportunity of HHS means that many energy retailers are already underway with acquiring and integrating the software, systems, and processes to manage and comply with HHS regulations. Starting now enables them to better understand usage and begin forecasting at the HHS level. Moving early will help retailers maximise gains, set the market direction and possibly even the rules.

Who can help with HHS?

For detailed information on HHS regulations and plans, Elexon and Ofgem are the best places to start. However, to operationalise energy retailers will need good tech to not only comply with, but also maximise the opportunities HHS brings. And that’s where Flux comes in.

As a smart meter native technology provider, Flux is already enabling HHS in other territories. Indeed, in Australia Flux is delivering 5-minute settlements (5MS) – a solution that exceeds rather than just meets the required minimum regulatory criteria. Like all technology, there will be solutions in market that enable energy retailers to comply with regulations, and others that go well beyond.

Building modern, smart energy systems

Flux is here not just to help energy retailers comply with regulatory checkboxes, but also to enable rapid, potent innovation that builds modern, smart energy markets. Yes, we can help you be ready for HHS, but more importantly we can help you use it to grow new value.

We’d love to chat to you to understand where you are on your transformation journey and how we can support you. Speak to our team today to schedule a demo of our innovative, future-focused solutions.


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