UK regulator Ofgem approves 'game-changing' settlement modification

London — UK energy regulator Ofgem has approved a potentially significant change to the Balancing and Settlement Code that allows electricity meters "behind the boundary point" to be used for settlement purposes, BSC manager Elexon said Feb. 26.

The boundary point is the location at which complex, multi-use sites connect to a distribution network. Assets behind this point, including embedded generation, demand response providers, battery storage and EV charge points, cannot currently trade in the balancing mechanism or intraday wholesale markets.

If they could, a wave of investment would likely follow, industry commentators said.

"It is good news that Ofgem has approved this ground-breaking change as we believe it is an important step forward for the energy transition and progress to net zero," said Elexon's chief executive Mark Bygraves.

"Recognising the role smaller assets can play in keeping the system in balance can improve the business case for building such assets, and give further support to innovators," he said.

Elexon will now make necessary system changes to allow data from behind the boundary point to be used in settlement from June 30, 2022.

The proposed change was initially raised by demand response provider Flexitricity and the new Virtual Lead Party, created to allow independent aggregators of assets to trade in the Balancing Mechanism.

Chief Strategy Officer at Flexitricity, Alastair Martin, said the company planned to "make heavy use" of the modification "to bring new, flexible energy resources – home heating systems and electric vehicle charging – right into the heart of the electricity system."

Rupert Redesdale, Policy Manager for the Decentralised Energy Trading Association, said the modification would be a game changer for battery storage.

"The income from trading stored electricity will make the installation of batteries really attractive. A humble meter will be the keystone in eventually allowing all battery owners to profit from balancing the grid, which will allow a smarter greener grid to be developed," he said.

Trading behind the meter

"There is not a massive amount of capacity behind the meter right now, largely because the business case has not been good enough," Aaron Lally, Managing Partner at Vest Energy, told S&P Global Platts.

With access currently confined to ancillary services, industrial sites have been dissuaded from investing by the risk of saturation of the services, Lally said.

"If, however, those assets are able to trade in deep, liquid intraday wholesale markets and the balancing market, sites can build a 10-year business case for investment," he said.