Ofgem approves Emergent Energy’s proposal to use the BSC Sandbox
Energy regulator Ofgem has approved the first proposal to use Elexon’s Balancing and Settlement Code (BSC) Sandbox. The BSC Sandbox allows innovators to trial concepts in a live market environment without having to meet all the usual BSC rules.
Ofgem’s decision follows Elexon’s consultation on a proposal by Emergent Energy to use the service. The BSC Panel then recommended the proposal for approval by Ofgem.
About the application
Emergent Energy’s objective in seeking this derogation is to allow customers located on Licence Exempt Networks (LENs) better access to other Suppliers, while maintaining and improving the accuracy of reporting, and the allocation of electricity consumption in the balancing market. Currently most customers on a LEN are served by a single Supplier, with customers served by a Third Party Supplier relatively rare.
The proposal is to submit a meter reading based on an aggregation of on-site customer meters that totals the value that would have been calculated using a differencing arrangement (a methodology currently provided for in the BSC). This enables each Supplier on the site to be settled for the correct amount of consumed or generated electricity without entering into a bilateral arrangement with all other Suppliers operating on the site. This should reduce the overheads associated with supplying customers located on LENs.
The benefits of this include making it easier for a range of Suppliers to offer competitive and flexible tariffs to customers on LENs. This promotes customer choice, including for those who wish to help the move to net zero in their choice of tariff.
Elexon’s assessment of the Sandbox proposal
Elexon undertook a detailed assessment of Emergent Energy’s proposal. The BSC Panel agreed that the derogation request met BSC Objective (c) namely: “promoting effective competition in the generation of electricity and (so far as consistent therewith) promoting such competition in the sale and purchase of electricity” as it felt the trial’s aim was to improve access to third party Suppliers of customers on LENs.
About the consultation
Elexon ran a consultation seeking views on the impacts on Parties relating to the implementation of a BSC Sandbox Application for Emergent Energy.
- BSC Sandbox Consultation: S2020-01 Emergent Energy
- Ofgem decision on Emergent derogation - 26 May 2021 (Size: 306.10 KB)
About the trial take and customers numbers
The trial is likely to start over this summer and will run for up to two years. This could be extended by an additional year, as a transition period if a BSC Modification related to the trial is raised. This means that if the trial is proving successful a Modification could be proposed so that Emergent Energy and other companies could benefit from the derogation on a permanent basis.
Up to 2,000 consumers are expected to benefit from the trail across a number of LENs. Emergent Energy will report progress quarterly once the trial is underway, and provide a final evaluation of the trial, a year after it ends.
Views from Elexon’s Chief Executive
Mark Bygraves, Chief Executive at Elexon, said:
“It is great news that Ofgem has approved Emergent Energy’s proposal to use the Regulatory Sandbox, which offers a safe space for companies and innovators to trial new concepts and ideas. To meet the net zero challenge we need to support new ways to decarbonise, and help consumers to play a more active role in the energy market.”
“Emergent Energy is the first company to benefit from a derogation specific to the Balancing and Settlement Code within the wider Regulatory Sandbox, but we are hoping it is the first of many, as innovators begin to look to trial new market models in the electricity industry, on the road to net zero.”