Utility Week

10 | 29TH JUNE - 5TH JULY 2018 | UTILITY WEEK Interview It is a far cry from 1990 when the cur- rent market arrangements were designed at the time of privatisation and then again in 2001, with the introduction of Neta (New Electricity Trading Arrangements). Back then, the system was based on a handful of large, centrally connected power plants. Today, a lot of generation is small scale and distributed. "It is turning the electricity market upside down," says Bygraves. "My goal, and that of my leadership team, is to ensure the market arrangements we are responsible for are not only enabling change and innovation, but further change and further innovation." Over the past three years, Elexon has been working on three top priorities: • maintaining "business as usual" high standards and service for the market; • becoming more customer-focused; • engaging further with senior executives and energy players to understand the new challenges they face and what they need from Elexon. That approach, he says, has been paying off. "We are engaging more than ever and trying to be more proactive in coming up with solutions for industry. But we're not complacent – we use the results of our surveys and sessions to improve and move issues along." B eing at the heart of the workings of the energy system, Bygraves gets to hear a lot of industry views, although he is conscious Elexon is just one part of a chain. "We are just a part of the jigsaw, yes. But that still makes me determined to address the part that we are responsible for – operating the wholesale electricity balancing and settlement arrangements and enabling new participants. In fact, the evidence is that there are a whole number of parties joining all the time. "But, coming back to our priorities, we quickly need to ensure the market arrangements can accommodate all these dynamic new business models. "Let me be stronger. What is not acceptable for our sector to say is that the market arrangements are preventing this innovation." Bygraves sees three key challenges to this vision for change. • developing the BSC to be "flexible enough" to allow the changes; • ensuring the suite of systems that underpin the bal- ancing and settlement arrangements can support the new services and needs of industry today; • making sure those mechanisms, designed 15 years ago and that "remain perfectly good for today's incre- mental change", are suited to the services and types of user of the future. "I am determined that we will have that system. And, very importantly, we are engaging with industry on those system changes." Enabling consumers to have multiple providers – potentially moving away from the current sup- plier hub principle – is just one of those system changes. "Ofgem is saying that the supplier hub could be looked at, as part of a significant code review, which is an Ofgem-led process. But we believe that we could ena- ble multiple providers far quicker if this is desired. And that's an important point – far quicker than unpicking the supplier hub. We think we can do this by 2020, and all volumes. And Elexon believes it has identified how this could be achieved, and all without changing the infrastructure at the customer's premises." T he solution, it believes, could build on work it is already having to do to meet the obligations of new European require- ments, Project TERRE (Trans European Replacement Reserves Exchange). Com- ing into force despite Brexit, in December 2019, it requires that market arrangements are opened up to a larger number of participants. "Under TERRE, we need to have the enabling systems available so smaller generators can offer their services into the balancing mechanism, and these systems could be extended to accommodate the sort of activity that we describe in the white paper. "As TERRE was so imminent, we'd faced a choice – do we build it effectively on the old systems, or do we use that money to build it on new systems? It made sense to choose to do it on new systems, and to avoid paying for changes twice. "With these new agile, flexible, digitalised platforms we can accommodate more services as the market devel- ops and as our users' requirements change." And the plans would be "scalable", he says, as no- one has a crystal ball to see exactly what changes and developments will lie ahead in the long term. B ut as well as providing these mechanisms, the CEO would like to see all the central code bodies and processes streamlined, pointing to Elexon's strategy to "simplify and consolidate complex and fragmented services" for the benefit of the industry. "I think industry rightly feels already challenged by the amount of change that it's facing. Having said that, I've got every confidence that collectively we can find the solutions. "And 'collectively' is important. We believe the central market services arena that Elexon and other code bodies occupy is far too fragmented. "There are 11 codes and nine code bodies in the energy and gas sector. As we are created by industry, for industry, we look at those fragmented arrangements and we see a benefit in greater collaboration – consolidation even – between those organisations." Bygraves says it was therefore "surprising" to find another code being created, the Retail Energy Code, which will also require its own administrator. Part of an Ofgem-led programme to enable faster switching, it will subsume other retail codes over the course of time. Elexon intends to participate in the process to appoint the administrator for this code and claims it has received unanimous support from the industry to be part of that process. And it will propose providing those services on a not-for-profit basis, as with the BSC. That, he says, is quite important, as there is a frustration among some in industry that providers of central monopoly services should not be making a margin out of such services. "If we were to take this on we would apply the same high standards of service as for the BSC plus there would be synergies, all of which, in my view, would be benefi- cial to industry users. "We've certainly had a lot of positive feedback. But I accept that allowing us to participate is not the same as saying 'we want you to win'." Elexon will be talking about these initiatives at its annual meeting on 12 July. Key speakers include Victoria MacGregor, director of energy at Citizens Advice, Lord Hutton, chair of Energy UK, and Dan Monzani, director of energy security, networks and markets at the Department of Business, Energy and Industrial Strategy. "What is not acceptable for our sector to say is that the market arrangements are preventing this innovation"

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