Elexon and Balancing and Energy Settlement in Great Britain with Peter Stanley (CEO @ Elexon)

Hi. It's Ed, and welcome to another episode of Transmission.

Today, we're joined by Peter Stanley, who is the chief exec at Alexon.

The conversation is gonna start off looking at a day in the life of Alexon. So what are the kind of key processes that it that that it undertakes within the industry?

The conversation, given the amount of data they process and the the the codes that they administer, is gonna be a little bit technical at times. We've tried to capture those acronyms where they've come in. But if we've missed one, please reply in the comments and we'll make sure that we explain, what is actually covered. And when I think back to the episode, the thing that has really stuck with me is just how much work is going on within a Lexon, both around its kind of governance and processes to change the way it operates in order to be able to deliver benefits for consumers within net zero. And with that in mind, let's jump in.

Hello, and welcome to another episode of Transmission. Today, we are joined by Peter Stanley from Elexon. Peter, welcome.

Thank you for having me.

And we are gonna get straight into your background, who are Elexon, and what is your role within the market?

Well, great to be here. So I'm the chief exec at Alexa. Been with Alexa now for just over nine years, actually.

And prior to that, had a long career in the energy industry via, National Grid. So I actually had twenty eight years at National Grid, both here and in the US, with a very heavy bent around technology, and business transformation, which has been amazing, bringing that to Alexa. So it's actually our twenty fifth anniversary, this year in August, in fact, and, we've come a long way, I think, since, back in the two, early two thousands. So we were started as a single purpose vehicle, predominantly there to administer the, balancing and settlement code.

And that fundamentally started to change back in about two thousand and fourteen with the, energy market reform review that came in, where we took on the energy market reform settlements for the low carbon contracts company. So that really started to diversify us into things like capacity market, into contracts for different settlement, and that's a role that we still continue today.

Since then, though, we've we've seen sort of progressive, sort of progressive extension of our role in relation to wholesale markets and and the balancing mechanism, And that's largely been due to the way that the energy market itself is starting to change, particularly in light of things like renewables coming onto the network. And I'm sure we'll talk about that a bit more later.

Most recently, we've been, managing on behalf of Ofgem, the market wide half hourly settlement program, which is a major program transforming the industry, as you know, in order that we can both, from our perspective, shorten settlement period, timescales from fourteen months to four. But equally, that's what's going to make half hourly, billing available to customers in order that they can start to take advantage of time of use tariffs, more dynamic pricing.

As I said, the, the market itself is changing as a result of renewables, and flexibility now is is becoming incredibly important. And, again, I think we'll come on to talk about that a bit a bit later. But one of the most recent roles we've undertaken is what's called the market facilitator role, and that is to, facilitate local distributed flexibility markets for distribution system operators. But not only that, it's also to make sure that we can, encourage new market entrants into flexibility by aligning both national and local markets.

And this is a fantastic intro because we're gonna come on to a lot of those topics, but I wonder if we just make it really, really basic to begin with. You've obviously, in your role, you cover settlements a lot, but would it be possible just to describe what settlement actually means?

Sure. Of course.

Yeah. This is always a little bit tricky, and I always use my own mother as an example as if she can understand it. Okay.

So when I talk about the balancing and settlement code, it really is a code that all participants within the wholesale markets need to sign up to. It's a multi party contract, and it's there to ensure that we have a level playing field across wholesale markets and incentives in place for what we would call self balancing. So that is basically saying, if you're a supplier and you're supplying, whether it be businesses or domestic consumers with energy on the electricity system, you then need to forward procure the energy from a generator or some other source in order that you can, make that energy available.

And if you if you trade short, you will then get the cost of, the NISO having to balance that in real time, to make good your your short trading position. And if you trade long, then you, you you benefit from that. And what we do is calculate all the short and long positions in the in the wholesale market and then the total costs of what NISO is having to spend in order to balance the transmission system in real time. And then we redistribute that cost in what we call, imbalance settlement.

So imbalance being the trading position. And and that, in a sense, provides incentives for people to self balance.

But it also ensures that, you know, real term costs of balance of the network are carried by industry.

Okay. So so it's it's a really fundamental part of the system. So part of what you talked about there is the balancing cost, so work taken by Nissan and the overall cost of running the system. But just on the settlement portion, you're talking about if you're a supplier and you have, say, whatever, a million meters, and they use x amount of energy. So you're checking to make sure that that supplier has bought that amount of energy ahead of time, and then you're seeing whether there's a difference between the amount it's bought and the amount it's used and therefore to work out whether, in your words, it's short or long.

Yes. Correct. And and to do that, we take, meter readings from every every meter in the country, whether domestic meter, domestic meter, or whether it be a wholesale meter. In the current operating model for the industry, we take that aggregated from suppliers as as a total metered consumption position.

But post half hourly settlement, and maybe we'll come on to talk about that in a little while as well, in a half hourly settlement world, we'll be receiving five hundred billion meter reads per year. So that's based on forty eight half hourly settlement periods per day summed up over the course of the year for thirty million meters. And so we'll be taking in vast amounts of data in order to, as you say, ensure that people's trading position is correct. And if not, we can allocate the costs appropriately to those suppliers or generators.

Okay. And we have talked just a little bit about domestic there. That's obviously most familiar for people. But, obviously, this also applies up to very large industrial clients as well as very large generators. So your two gigawatt gas plant is giving you meter data?

Yes. Correct. Yeah. So whether that be at a we we would call that industrial commercial, whether it be a domestic meter level, then we take all of those readings in. Yeah. And we we reconcile those across the whole industry to make sure that all energy is accounted for.

Okay. And I think we then wants to ask a question around a day in the life for Lexon, and it feels like as long as all all kind of flows of data is going okay, there's there's not too much to do.

Yeah. Exactly.

Yeah. So, I mean, there's so we haven't delved into the specific roles, but, you know, there is a, what you might say, a typical day in the life of which which is multifaceted in a sense of all the different roles we fulfill within that, wholesale market. So we've touched on settlement, which is probably the easiest thing to sort of get your head around in terms of, you know, what we're there to do with imbalance settlement on the financial side of things. But we we manage the entire life cycle for entrance into the market. So that's right from initial registration where a supplier may come in and want to be part of the market. We we would do what's called registration and qualification to make sure that all their assets are registered within our systems, and all their metering systems are compliant.

And we would then, through the life of them taking on new customers, manage, their different meters, or they would manage them now through our systems in order that we've got a really accurate record of who who owns what. And then as we saw a lot of in twenty twenty one when we saw the really spiky electricity prices and a number of suppliers, unfortunately, going into administration. We also manage the exit from the market working very closely with Ofgem, something we call the supply of last resort model. So so we manage the entire life cycle of that.

When they're in the market, we also have a key role in what we would call performance assurance. So we also make sure that the quality of the meter data that's coming into settlement is accurate, and there are certain obligations for a supplier to make sure that their meters are being read frequently, that they've got accurate meter reading so that the the movement in our, settlement reconciliations, we'd call them, over over a period of time, are as accurate as they can be. And, again, there are no, no, effectively, no accounted for energy that is going missing that other members of the market might pick up.

And then as you as we've talked about already, we've got the settlement process, that happens on a daily basis. So we process on an annual basis as a result of imbalance settlement just over five billion pounds worth of imbalance payments. And those payments are going through every day, and they're also then being corrected from that very initial settlement run that we do, we call r one. And then, right the way through to the fourteen month period where we'd hope by then all the meter readings from what we call done meters are in the system and accurately accounting for their, their consumption over that period.

So there's a fourteen month period of reconciliation, which then shifts that settlement position. So every day, we're accounting for all that energy in forty eight half hour settlement periods, and we're doing that across four settlement, runs through to final settlement. Okay. We also then run dispute processes, for instance.

Okay. Let's let's let's pause on dispute process. So just to get those figures right, so there's there's half a billion per day?

No. No. There's, we we process five billion pounds worth of payment per annum.

Per annum.

Okay. And that that obviously fluctuates depending on season and consumption and constraints on the system. So we'd expect to see much higher imbalance payments, for instance, if there was a very, tight position on the on the grid, and Yeah. NISO were having to procure very expensive energy, for instance, in interconnectors or very high gas peaking prices. We'd see that imbalance price shoot up there, and then we'd be making those payments per day. But as I said on the EMR side of the business, we're making payments, collecting money, and paying out money in relation to capacity market and contracts for difference to the tune of just over three billion per annum. So, again, there's a whole another run of payment processes that are going on as a result of those those contracts for subsidizing against their strike price.

So a huge number of activities going on from assessment processes for meters to the payment side through to the reconciliation, which is checking the the kind of that it's it's it's appropriate.

You mentioned dumb meters, and I think maybe this is maybe going back a little bit. Do you remember that some of the news stories you used to see that said missus x receives bill of one billion pounds? And I think back back in my days when I when I used to, be involved in some of the suppliers, it used to be the context that you could read a meter once, someone misreads it, and then they read it again the next time, and they read it slightly back. And some of the meeting processes assume that the whole meter had gone around the world the world completely, and therefore, there was a billion pound kind of misread.

Is is that is that still is that was that ever true? And is that being solved by removing what you call dumb meters?

Certainly, replacing those with smart meters should overcome that challenge of reading them because, obviously, with a smart meter, there's no requirement for a consumer or to actually to to send that that meter reading in, and you'll probably know yourself that it's very rare now that you get a meter reader come out to your house to take those readings. So smart metering does, to a large extent, remove that that problem. I can't speak for that, actually, because just to be clear, the sort of billing we're doing from meters is not actual consumption billing directly to consumers, whether that be industrial, commercial, or whether that be domestic. So that those transactions for actual energy consumed is something that suppliers deal with directly with their customers.

Okay. Okay. And just, just a one one last one on the so then the life of Lexan, that fourteen month period that you're talking about. So that is effectively saying that if there's a metering problem on the system, so a meter's kind of misreading somehow, is that saying you've got forty months to get that fixed before it kind of falls off or goes past this kind of line in the sand, and then after that point, nothing gets changed?

Yes. It does afford the opportunity within that fourteen months, and it is a feature of both, as I said, the fact that some meters are not read that frequently, and therefore, we haven't talked about this yet yet, but it is another part of our role, which is is basically measurement class or or meter profiling. So if you take a meter reading, let's say, three months apart or even a year apart, we actually construct the profiles that then convert that total energy consumption into a half hourly consumption in order that we can we can reconcile that back to what was traded within the half hour within the wholesale market.

So, yes, it does two things. One, it allows you some time to get the meter readings in so that they're accurate meter readings rather than just these estimated readings from profiles. And as you say, if we do experience an issue with a particular meter, we're able then to spot that and to correct it back into settlement before this final run. I mentioned earlier the dispute period. When you've you've gone past that fourteen months, you're into what's called a dispute period. If an error is found, then then there is an opportunity to go through a disputes process to correct that. And after that, as you say, then that kind of that's that.

Okay. Great.

I think that's quite a long it's quite a long, period as you've highlighted.

We just to pick up on the kind of spotting the meter errors, you can imagine with domestic meter errors, it's very difficult for us to spot that. It's just like a needle in a haystack because it wouldn't really make that much difference in terms of wholesale market. But where we do experience that is what we would call, the CVA market. So the large generators or those connected to the transmission system where these meters are are are measuring very large volumes of energy.

And we have had situations where we've had either problems with people cutting cables so that the meter readings are not getting back, so they drop to zero. And you can imagine if that was for a wind farm, that's a sizable amount of lost energy. And we have had situations where people have maybe rewired a meter but put it in backwards. So a meter that should have been measuring consumption is actually measuring production or the other way around.

And we now have some quite sophisticated machine, learning systems now that actually detect that pretty close to real time in order that the total volume can be managed quite effectively. Otherwise, these things can build and build and build within that fourteen month period.

Yeah. It feels like Alexa is kind of almost like the industry case study for some something where machine learning could be or AI driven fact finding or machine learning could could drive kind of huge benefits in terms of just the depth of data that you're trying to process.

Yeah. For sure. The one thing I mean, I talked about the evolution of alexon, for over the last twenty five years, but one of the things that we've seen, which is taking off rapidly now, particularly if you think about half hourly settlement and the amount of the granular data we're getting from individual meters. But, also, when we think about the the energy assets, I'll call them, that are participating in these wholesale markets, they're increasingly aggregated much smaller assets such as e home EV chargers or heat pumps or, rooftop solar, for instance.

And for that for those sorts of assets to participate, you need to aggregate them in very large numbers. So whereas we would have seen, let's say, twenty five years ago, a coal fired power station with somewhere between two to five thousand megawatts, We're now seeing a sizeable, you know, fifty megawatt type intervention from thousands of, smaller domestic and and sort of distribution connected assets. So you can imagine the way that the the data volumes themselves have also grown. So it's not just about meters. It's also put those meters and those assets participating in different markets. I think, as an example, I think this last year, twenty twenty four, for the first time, we saw aggregated EVs appearing in the capacity market, for instance.

We're seeing the registration. As I said earlier, we register the assets, but instead of very large, assets small numbers of large assets, we're now seeing vast quantities of assets being registered in our systems for participating in wholesale markets, and that in itself requires an ability to make sense to manage and to reconcile many, many more transactions that are happening, often now behind the traditional settlement meter. So we're seeing a lot of flexible flexibility, for instance, happening behind the typical meter. And and quite recently, we've been bringing in some modifications to the code to take account of that increasing activity in order that we can ensure that imbalance stays true as a result of these deviations in any of the supply and demand. Okay.

Interesting. It's you know, we see we see the cost of kind of panels or batteries becoming so cheap now for certain groups that that kind of behind the meter activity is definitely changing. We do like to call out any any kind of term where it's not kind of fully explained. And when you're referring to very large, industrial clients or large generators, you mentioned CVA.

Yes. So CVA is central volume volume allocation.

And so, typically, the way that the wholesale market was set up is that you've got large generators that are putting energy onto the, usually, the transmission, network, and then that gets stepped down via, transformers down into distribution networks at what we would call grid supply points. And then the energy would then be distributed down to homes or embedded demand within distribution networks, which we tend to refer to as supplier volume allocation. And so we account for energy at both this central volume allocated and supplier volume allocated, and then we reconcile the two to make sure that energy produced equals the energy consumed.

So it's a it's a an acronym for the way that we account for those. But what I would say is, again, another area of complexity that we now face is that that world where energy was generated on the transmission network and then distributed down to supplies is no longer the case. So what we're seeing, as you know, is increased amount of, generators and production accounts now sitting embedded in distribution networks. And, you know, we see large scale, you know, and heavy and heavy industry users happening at the at the national level as well.

So the accounting of that energy in both the transmission and local dispute level is becoming more complex. K.

I think people are starting to get an idea of just the the machines that sit behind all of this process that feeds out just kind of one bill at the end is not quite as simple as it seems at first sight. Just to ask a question about the transition to net zero then. So the grid is changing. We are the type of generators we have are changing. The level of imbalance we have on the system is changing. What does that mean for a Lexon? Does your job get harder, or does it get easier?

The fundamentals are still there. But as I said, there is increasing complexity, particularly reconciling the number of assets and the number of smaller players that are now being encouraged into the market, which is great because we're seeing greater competition. We're seeing challenges to traditional forms of generation. You mentioned batteries. We've talked about electric vehicles, increasingly rooftop solar. So this is from a net zero perspective, this is all very interesting. Perhaps come on to talk a bit about why and how what role flexibility is going to play in that.

But coming back to your fundamental question, yes, it's more complex, but the nature of the role pretty much is a very similar similar role. What what's complicated things is this this blurring between the CVA and the SVA world in the in the way that our systems have historically managed the, the algorithms to calculate imbalance. So some five years ago, we embarked on a replatforming of the systems within alexon, something we called alexon connect, which creates a platform using cloud native microservices in order that we can fully scale for the sort of growth in data that we talked about, but also the complexity and the algorithms that are required to calculate these many, many more complex interactions.

So if we hadn't done that five years ago, we'd be pretty stuck now because we're only seeing that complexity grow. Fortunately, we're in a pretty good position to be able to absorb some of these changes.

Okay. And and so you're managing that kind of the reconciliation and settlements that that that sit within the kind of mass change of generators and suppliers.

In terms of balancing actions that get taken, that's run by NISO. Yeah. So how do you work alongside NISO to make sure that's delivered and accounted for?

So the relationship predominantly in relation to imbalance is one of data. So as you as you currently say, Nissan were the ones that are having to take the actions in real time, and the sort of complexity that we've talked about for them is how do they make sure that they understand what is dispatchable in real time, and how do they have confidence that what they've contracted for is going to actually be there and available to them when they need it in order that they can control frequency response. So from their perspective, they've seen a significant increase in the number of products, particularly around ancillary services, that they're now drawing on.

One One of the ones you're probably familiar with is things like inertia. So when we take off the big power stations, we get a loss of inertia on the system, and therefore frequency becomes, a little bit bit more sketchy and and flaky in terms of being able to, the time required to be able to take action to maintain, frequency at a at a constant level. So so the complexity for them is in that. They are obviously also taking many, many more actions.

Good example is since they've introduced their optimizer through their open balancing platform, they are now getting to automate and understand many, many more smaller assets can come on and fulfill their needs within the balancing mechanism, and then that data comes through to us. So what we see is a growth of data, and we see these complex interactions. But our relationship with NISO outside of things like crisis simulation or what happens in the event of a a major power cut or how do we restore the market, where we we clearly have to collaborate and work very closely together.

Generally speaking, we rely heavily on the data flows coming out of the back end of what actions they took.

Yep. And I let's let's do that. Crisis management. What happens when things are difficult? What happens when it's a very, very cold snap or certain units are offline? How does the role of a Lexon change?

So all the time that that we have a cold snap and they're taking actions and that that is effective, then there is no real change. What what it does do is changes the nature of the actions that they take and therefore, you know, potentially who the money is flowing to and from as a result of the imbalance action.

If the situation got really dire and they were in a situation where they needed to protect the grid by rolling blackouts, for instance, then there are very set procedures under what we would call section g of the balancing and settlement code in order to make sure that we can account properly for the restoration of those those regions. And if we're in a situation where we experienced a major national blackout, it's very likely that amongst other scenarios, we'd be looking at market suspension, where instead of having imbalanced price calculations done by half an hour, we'd move to a single price for imbalance at the point where we would then restore restore the market.

So there are particular scenarios and rules laid out in the balancing settle balancing settlement code, which we practice and rehearse with, with Nissan in order that we would know how that would work. It's true to say also that the panel itself we haven't talked about the panel in terms of, Elexon's governance, but, there there is a panel, an industry panel, that we work very closely with, which have a a a key governance role in the way that these rules are changed over time. They have a key role in terms of how we come out of a market suspension situation and then how we account for the energy that was delivered where there wasn't a market to support that.

Mhmm. Okay. No. Super interesting. And in terms of just moving on from the sort of crisis management part into one of the bits of news that came out, I think it was last year. I'm I'm almost certainly gonna be wrong. But, the the market facilitator role that Alexon is now moving into, what does that what does that mean?

So this this was a decision by Ofgem back in, I think, twenty ninth of July. I can remember it, actually. Okay. Of last year?

Of of last year. Yeah. So we've been working with Ofgem for well over a year on both this this new role of market facilitator and also the relationship of the market facilitator to some of the underlying digital and data capabilities that will be needed in order to both support flexibility markets, but also to ensure that there is a, a level playing field, if you like, and real clarity around the rules of such markets in order that, new entrants can enter and understand how they actually derive revenue from those markets. So we've been talking to Ofgem for a little while on this, and there was a consultation that was issued early part of last year where they were seeking views on whether Alexa would be right to undertake this role.

So so what is that role? So so the ENA had an open networks program where they were seeking to align distribution system operators' way of procuring flexibility for managing their own constraint needs within the DSOs or within distribution network areas. And they've been seeking to drive harmony and alignment in the way that those products are defined, the way that they are procured. So for instance, the time scale in which they procured, the characteristics of the products themselves.

And it's it's been quite difficult, I think, to get alignment across all the different distribution networks partly because they all have very different needs. So if you're operating a distribution network in Central London, it's very different to the sort of network you're trying to manage and balance within, let's say, the North of England. And therefore, these differing needs were leading to different requirements for the products themselves, and they have grown up quite organically in that sense. There has been quite a lot of good work done under the open networks program to bring some degree of alignment, But it's seen, I think, at this point as being a barrier to many flexibility service providers to enter the market because they can't immediately see, for instance, how they can revenue stack a product across multiple markets.

They have to register in individual different markets in order to be able to participate, and they the requirements for that are different, which they have to then understand.

So what we've seen with service providers is they've tended to gravitate more to national markets because the scale of those markets are bigger. It's a single purchaser in the Nissan, and therefore, they've seen a much easier route to monetize, if you like, at scale.

What the market facilitator is there to do is to lower those barriers and to create much stronger alignment and standardisation, not standardisation to the point where you stifle innovation. And that's obviously a key key thing that we need to get right, but it's about making sure that the volume of those markets can be fully realized. And a big part of that is also making sure that these local distributed flexibility markets align with national markets in order that you can participate in both. As you might imagine, that brings in all sorts of other questions around things like primacy. In other other words, you know, when does an asset that's capable of providing flexibility have a greater need to be in a national market, let's say, for security of supply or whether it should be, because of where it's located, be more valuable to the system to provide support to a particular DSO. This is a really interesting new role for Alexon.

It's a it's an area where, from a flexibility point of view, we'd already entered going back as far as twenty nineteen when we introduced some modifications that enabled what we called wider access at the time, and that was to allow flexibility products to enter into the balancing mechanism.

We've subsequently, this year, introduced further rule changes that allow flexibility to enter into wholesale markets. That was late last year, I think, November. And we we continue to look at wholesale market development to encourage flexibility. But until we took on this role or we we were nominated to take on this role back in July, we hadn't really been looking at what that meant in terms of DSO and local constraints.

So really interesting new area, and we talked earlier about the need to reconcile these thousands of transactions that are now happening. From our perspective, it's really important to see local distributed flexibility and national flexibility as part and parcel of the whole energy system because we need to have visible all of these transactions, whether they're behind a meter, whether they're at the distribution level, or whether at the national level in order that we can ensure that suppliers and generators are not being penalized from imbalance positions created as a as a result of large scale flex actions.

And if you wanted to to kind of, take a look at one of those reforms mentioned, something called p four one five, around allocation of trading kind of behind a meter, There is another transmission episode with Paul Transtrom from NLX, which we can definitely put in the show notes that people can take a look at, which I think will be worth doing. If I just kind of if I take the market facilitator role and I go forward five years, is the kind of pitch to optimizers or owners that there will be almost like this seamless world of being able to provide both services to the sort of TSO, so an ESO, and also the DSO. Is that is that the kind of the world that we hope we will see?

Yes. Absolutely. That. Yeah. I'm not that's what I refer to as alignment of markets and real clarity on things like baselining so that everyone's got the same baseline methodology or that it is easy to understand, and you understand how you can have an asset participating in multiple markets Yeah.

And and at scale. And for us, the key part of that is also making sure that the revenue streams are properly reflecting the value that that flexibility brings to the to the system. So, often, we hear talk about flexibility in in two ways. So if you're a supplier and you're acting as an aggregator, you'll hear a lot around the importance of time of use tariffs and encouraging consumers to shift their, their energy consumption to a time when there's lower prices, and, obviously, consumers benefit in in that.

And, locally, you'd also expect the system to benefit by flattening off the peak. But what that doesn't do without having a concept of dynamic tariffs is really give the sorts of price signals you might need where customers might need to be dynamically interacting or dynamically shaping their demand in order to satisfy a very specific system need contributing to either optimizing costs overall for consumers or, in fact, for a security of supply issue. Yeah. And and so when you when you roll forward in five years, as you said, I think one of the things that we'll see is this shift to much more dynamic tariffs that will be rewarding consumers for being prepared to shift their behavior in order to maximize the revenue coming back.

And I think that will also be important for for aggregators, as we call them, or flex service providers. But to do that, again, you're looking at much more of an interaction between wholesale markets and tariffs, and how you then optimise the revenue to come through to make it worthwhile.

Mhmm. And and then in order to enable some of the time of use tariffs for consumers that you've just been mentioning, another program that Lexan has been working on, market wide half hourly settlements. What's the background to that, and when will we start to see the impacts of it?

Right. So, this year is a significant year for us on market wide half value settlement. It's been a program that we've been running now for a few years, largely through, developing the operating model itself, how in other words, how this is gonna work across industry with, over two hundred participants suppliers who are participating in this shifting from these dumb meters, as we said, to smart meters and how that then flows through into their own billing practices. But there's also a huge amount of system development that needs to happen at the same time, both in terms of suppliers' billing systems, but also back in alexon. So we've had to adapt our systems to move to our be able to ingest these five hundred billion, meter readings per annum and then, bringing those back into imbalance settlement and into our own system. So it's sort of fundamental impact to particularly our, well, our our settlement processes, and our settlement systems.

One of the benefits of that, of course, is that it brings this forty months, reconciliation time down to a shortest four month. So it means cash flow predictability.

Also happens much more close to real time, which is a real benefit.

So we've through the system development stage, we completed that, last year, and we've, since early last year or spring last year, we've been in a process working with industry around what we call system integration testing. So that is really testing every aspect of this of the supplier systems, of central body systems, so SEC, REC, DCC.

And so I've gone into jargon mode Yeah. We'll we'll we'll then and the Lexon.

We'll come back to sec sec rec and DCC Yes.

Bodies. So this is truly a sort of a cross industry initiative where we're testing these processes. We're testing their systems functionally, from a nonfunctional perspective, operational performance, as well as things like what happens if things go wrong, how do you recover, and how do we run our service management processes across the entirety of industry to recover. Hugely complex program and one that we are due to complete the system integration testing in in September this year. Okay. And then we're we will be going live with migration to this new operating model with a small cohort of suppliers initially from October this year. And then over the course of October twenty twenty five through to May twenty seven, the whole industry will migrate across to the new half hourly settlement model.

Okay. Twenty five to twenty seven, but October this year for a small cohort of suppliers.

Yeah. Although they are quite large. So, when you look at the meter migration impact for consumers and, in fact, for industrial and commercial consumers, what we've predicted is, based on the migration profile, is that eighty percent of the market will be migrated in the first twelve months from October. So by October twenty six, eighty percent of all the MPANs will have been migrated across within a long tail for the twenty percent between October and May twenty seven.

An MPAN is a meter point administration number?

It is.

So if anything, that represents a meter that sits in a home.

Yes. So when you say they're migrated across, a lot of people don't have smart meters. So how how would that work?

That's a good question.

So, yes, I think only sixty percent of the market currently or sixty percent of all of the meters are smart meters, and that number continues to rise, obviously. So we we will still be getting non half hourly meters as we call them and those reads coming in. One of the benefits though of having such a mass amount of granular smart meter data is we can move away from having a very small number of what we call meter profiles or measurement classes where we can say a domestic meter would look like this sort of profile. We can now use smart meter data itself to be able to calculate many, many more, profiles in order that we can even make that we can make even those non half half hourly meters, closer to accurate settlement.

Mhmm. So we're gonna get better and better at estimating the usage on certain Indeed. Types of sites. And and just to just before we go on any further, you did mention sec, rec, and DCC.

For many people in the industry, that will not mean much. Right. So what are sec, rec, and DCC?

Sec is the smart energy code and is in place to govern the rules and standards, around smart metering and works very closely with the data communications company, the DCC, who actually DCC provide all the underlying communication infrastructure to get the meter data from your smart meter through to those in industry that need it. So think of it as a communication backbone, if you like, that they manage to the standards that the smart energy code, determines.

The RECCO is the Retail Energy Code, and they deal with all all of the rules for things like consumer switching, to make sure if you switch supplier that that gets managed appropriately. And they deal with the management, of the retail, the retail market as opposed to a Lexon that is concentrating on the wholesale market.

Okay. I think that's really useful for people to get just an idea of when we say change in one of these markets, just how many systems and many codes and many processes you'll come up against in that change. May maybe kinda taking yourself out of out of the UK for a second. If another market came to you and said, we're actually gonna move over from the way that we traditionally settled, and now we're gonna go to market wide half hourly settlement, What would your kind of advice be to them around, like, the the thing that has been the hardest to do within the the process we've managed in in GB or you've managed?

I think in terms of lessons learned, the really important thing that stood out for me, and it's not something I say I would do differently, but I think has been a real bonus, has been having this industry led. So as you said, it's an incredibly complex multiparty program across the you know, changing and transforming the entire way that we, we we calculate and bill.

And, also, that data goes into, as we said, the central bodies for the purpose of things like meter switching or customer account switching, all the way through to the way that that meter data is used. I think without having this being industry led and a real pull from industry where they've been passed you to determination of a realistic plan, there's always a danger that a central body could just say, well, this is the time frame we need to do it on in. It's quite ambitious, and then you find you end up with significant failures. And I think my well, my experience of running major programs of this sort of complexity is that if you try and run too quickly, even though you can see the value of getting there quickly, If you don't do it by taking people with you, it can fall down, become horribly complex very quickly, particularly where very large volumes of data are concerned.

Because if you don't get it right, it's the very high cost and also consumer confidence challenge that you then face as a as a result of trying to rectify that afterwards. So I'd say make sure this is owned, believed in, and driven very much by those that are required to change and also have a very great you know, very good relationship and strong relationship with, in this case, with the regulator where it's really important to make sure that that you've got the right balance between desire to move forward. And then on the other side of things, the compliance levers that you get through license arrangements to make sure that people can have feet held to the fire where appropriate.

Okay. And just that you said sort of don't move too fast on it. So just for context, how long have we been thinking about and executing market wide half hourly assessment?

I want to say since twenty twenty one, although the smart meter rollout process has probably been many, many more years longer than that.

I remember being involved in smart meter rollout back in years ago?

Yeah. Yeah. Yes. I think it has been. Yeah. Yeah. Yeah. So, yes. But, there are a whole different set of lessons learned so people may well want to go back to in terms of smart meter rollout itself.

But in terms of the operating model so you go back to twenty twenty one, that's when we were first talking to Ofgem about what the design of that would look like. And Alexon played a key role in in both the design options, if you like, for for the operating model for that, which, again, we consulted with industry on through Ofgem, as well as some of the underlying infrastructure. So something we call the data integration platform, which is the effectively, the the spine that passes this data through from the smart meters through DCC and then through to us and also to suppliers.

We did the original architecture design for that, again, working hand in hand with Ofgem in order that we had a design that everybody believed in and supported. And that that was kind of the first base, if you like, before we even embarked on implementing the program itself.

Okay. So we so we've done settlements, reconciliation, the future of settlements around half hourly settlement, how that is changing, how we implement big big plans in that space. One thing we've not covered is kind of the implementation of some of the BSC in terms of things like registration. And this primarily being a battery podcast, we should talk about how long does it take to kind of go through the BSC to sign up to it. And if I was to say, I want to become a BMU tomorrow, what do I do?

That's a really good question.

I I think the timeline is largely determined by the ability to get through the registration qualification processes. So we we have an online process for registering, BMUs, and then there are qualification activities that both we would go through and and you would have to go through. I think if you're on if you're a relatively small business with relatively few assets and you're on top of those assets and you can do your bit of the process, I think it it moves through quite quickly. I mean, just to give you an example, you mentioned p four one five earlier, which was the modification we put through in November last year that allows aggregators to trade in wholesale markets in addition to the BM.

So we have had a number of applications for parties that were already what we call virtual lead parties operating the BM now wanting to be these virtual trading parties within wholesale markets. And I think as of today, in fact, three more I think two more qualified today. So we have five come through since November, and we have, I think, twelve in total within the queue. So another seven more to process.

So I'd say what's that?

Three months probably to get it was probably about three months to get the first two through, a few weeks later to get the remaining ones through. And it probably won't be much longer before the remaining seven go through that process of qualifying for for the wholesale market.

And it's part of, registration process with the Lexan as well as kind of testing that the data is going to Nissan Yeah. And is dispatchable as well. So this kind of Yeah. That's all. Yeah. Delivery of data as well as registration Exactly.

Yeah. That's what I'd call the qualification process, proving that you can interact with exchange data, that your systems are capable of taking on that data and interface with the APIs, etcetera.

Okay. So to to wrap up kind of I've got three questions that I want to cover. So the first one is around the next twelve months for alexon part a, but also your vision part b for the sort of ten years after that. What does that look like?

So so this year, we're very focused, and we've talked about half hourly settlement. We're very focused on that milestone that we've got coming up in September, straight October this year to get that, live. So that's absolutely number one priority for us.

We also, for market facilitator, have that go live in December this year. So another really key area for us to get that all the governance arrangements in place, to get that out through consultation and then go live, which would be a real landmark for us to be able to spend then twenty six really working to stimulate, the the growth of those flexibility mark markets next year.

So a couple of key priorities. Long term vision, we we had a change in government last year. They've come in with a pretty bold manifesto around energy as you know.

The Nissan has now, come out with their, Clean Power twenty thirty and, plan. The action plan came out last year. We have a very strong purpose at Alexon around delivering a path to net zero, and therefore, the path to net zero, two thousand and forty, two thousand and fifty, aligns very nicely with this intermediate milestone around the ambition for CP twenty thirty. So in terms of where we're going next, we we are absolutely squarely focused on decarbonizing the electricity system, particularly now since we've taken on the market facilitator role as well as wholesale markets, bringing those two things together in order that we can play a significant role in in removing barriers to the rise of flexibility.

And that is not without its challenges. Alexon is very clear on the part that it's playing, but we also know along with other parts of CP twenty thirty that there are I think Finton Sly described it as a herculean task in terms of getting there. But what I sense is, Alexa and organizations that are playing a key role with the energy industry, have a real appetite to get after that and to deliver it. So our vision will be continuing to play a really central role within these markets on making sure that we are delivering our part to support climate change, to support net zero, and also, increasingly to ensure that at the same time, we're supporting an an agenda of growth.

So, when we talk about decarbonisation of electricity system, for me, that also means making Great Britain a really great place for energy intensive industry to come and set up, whether that be AI data centers or whether it be other, you know, green steel, hydrogen production in order that they can come to Britain, manufacture at the at the lowest possible cost, as well as, knowing that that energy is carbon free.

I think that's kind of the message that a lot of this kinda needs to keep on coming back to. I mean, certainly, when we think about forecasting future GB systems, we see things like negative pricing coming through, and it really kinda calls out. We need a lot of demand to come to GB and see it as an attractive place to connect, but also to run their systems, whether it's screen hydrogen, whether it's data centers. It's a it's a trend that keeps on coming up, so it's really good to hear that it's kind of firmly on your on your radar. So moving on to the final two questions of any Moto podcast, and this is where we're gonna move on from, maybe a company to a personal perspective.

So is there anything that you'd like to plug?

Yeah. Well, I was gonna raise a market facilitator, but I won't if if that's okay.

So my brother-in-law had a fairly major stroke, in the last part of last year.

Surfing, as it turned out. Very fit guy, similar age to me. And, fortunately, I managed to get him to the beach, get him off to hospital. He's now going through a major phase of rehab.

And, my two nieces are doing the fifty k, Southwest, Challenge Walk, I think it is, for which they've set up a Just Giving page. And the reason they've done that is to raise money to be able to give back to the rehab the neurological rehab center that they've been, that's been, treating him since, just before Christmas in Exeter. So if I'm gonna do any plug, it will be for that, please. It's a great course.

That's a superb a superb course, and we will put the link for that in the in the show notes, so people can find their way to the JustGiving page. And then final question is, is there anything that you think about? Is there any view that you hold that is contrarian so that you believe that the majority of the market doesn't?

Well, if that was in relation to wholesale markets, I'd be very rich now by probably trading off the back of it. No. The thing I'd say is that at Alexon, we we pride ourselves in the fact that we are trusted, we are independent, and we are neutral in relation to markets. And, therefore, we have very strong views on the way that we see that the market should develop, but we also recognize we are representing a an increasingly diverse set of stakeholders who have different perspectives of those same markets. And so we are very careful to make sure that we retain that independence. So probably not.

Probably not on the contrarian view. I think that's fair enough. Okay. Brilliant. Well, look. Thank you very much for coming on.

Thank you very much for sharing your time and experience with everyone listening to this. I think people will find it fascinating to kinda go beyond the initial sort of view of alexon and find out just kind of what goes on in the machinations that sit behind.

Great. Thank you.