Ofgem should maintain focus on a timely implementation of its market-wide half-hourly settlement. |
305. The Review also supports the findings of BEIS' and Ofgem's Smart Systems paper (2021). Ofgem should maintain focus on a timely implementation of its market-wide half- hourly settlement. Half-hourly settlement is a key requirement for the smart tariffs that support flexibility services and is already in place for larger consumers (industrial, commercial, and public sector). However, most domestic customers are settled on a 'non-half-hourly' basis using estimates of when they use electricity, based on a profile of the average consumer usage and their own meter reads (taken over weeks and months). While we welcome Ofgem's market-wide half-hourly settlement reforms, we ask Ofgem to maintain or bring forward if feasible its implementation date in light of recent increases to customers' bills. Ofgem analysis predicts that market-wide half-hourly settlement (MHHS) will bring net benefits for consumers in Great Britain of between £1.6 billion and £4.5 billion over the period 2021-2045.245
306. The Review also recommends that the wider reformation of markets within REMA should focus on rewarding flexibility, in line with the Government's objectives for retail markets. The existing suite of balancing services is complex and increasingly unable to meet the operability challenges of a low carbon energy system. A more decentralised electricity system has also led to fragmented processes and inadequate coordination across markets. There is a need for improved alignment of procurement processes across distribution, transmission and ESO ancillary services as well as improved coordination across parties. Similarly, it is important that the energy retail market supports an efficient and flexible energy system and incentivises consumers to participate and benefit from the system transformation. As part of wider reforms to the energy retail market, Government will need to address remaining barriers to the development and uptake of new supply proposition, including smart tariffs.