Ofgem announces that it has given the green light to a flexible half-hourly settlement targeting the retail market and providing essential aid to the net-zero effort.

The net-zero goals set by the UK Government, as per the Paris Climate Agreement, has set us on a course to significantly reduce our carbon emissions. This means that the future of how we produce and use electricity will have major changes.

Electricity demand is increasing as a direct result of the changes already made to meet our emission goals, for example, electric vehicle sales had gone up by 180% in 2020 compared to the previous year. This means these consumers have replaced fuel (petrol or diesel) for electricity, increasing grid demand. More changes will increase demand such as heating solutions which will switch to electricity, pumps or green gas.

The electricity market will need to adapt, become smarter and more flexible to provide the electrical systems required for the future. As such upgrades are required, Ofgem has announced a green-lit half-hourly settlement across the retail market to start the system’s transition. This is an essential component to net-zero and providing consumers with the lowest costs for their electricity.

What is the Half-Hourly Settlement?

The half-hourly settlement will allow for a signal to be sent to suppliers. This will provide an accurate indication of a consumer’s electricity usage and the daily cost to provide for these consumers from their smart meter. Consumers will have a choice about the level of data they share for privacy purposes or be able to opt-out of the settlement.

Half-hourly settlements have already been used for medium to large business consumers, however, this settlement will allow for a market-wide implementation by including small business and domestic consumers.

Suppliers will be incentivised to offer new tariffs or products for the half-hourly settlement to their small business and domestic consumers. While providing flexibility to the supplier and national grid, the consumer will be billed accurately from their consumption and will be encouraged to use V2G or battery storage technologies to further reduce their bills.

More information on V2G:

Electric Vehicles Could Help Save The National Grid £900 million

Ofgem says:

“half-hourly settlement will save consumers an estimated £1.6 billion to £4.5 billion by 2045.”

The settlement will provide flexibility that will allow for the industry to make a cost-effective reduction to its carbon emissions, contributing to net-zero goals. By effectively using the existing infrastructure that was in place for medium to large business consumers, there is a reduced requirement for a new generation to be built. This saves the industry on emissions and money.

The full implementation is expected to be complete by October 2025 to allow for periods of testing. This ensures there is minimal disruption and that all issues are resolved before it is live for consumers.