In light of the rapidly changing energy market and new technology, Andrew Hodgson of AMT-SYBEX looks at whether the industry is taking a strategic view and maximising the benefits and capabilities of reliable next day switching.
We are now in the detailed design and market engagement stage of the reliable next-day supplier switching project, part of Ofgem’s plans to improve energy services for UK consumers.
We first published our view on the Centralisation of Registration in 2015. Back then, our key message was for the industry to go into the high-level design activities focusing on the strategic view i.e. not just to view next-day switching as the sole objective of the centralisation of the wider end to end registration process, but to view it as the first step on a roadmap to a simpler, more streamlined energy consumer switching process. Ultimately this would underpin and facilitate a more harmonised way for companies to compete and collaborate in the UK energy supply market.
There is no doubt that the market has moved on since then. There have been a number of changes, some of which are highlighted below:
- There are record number of Suppliers competing in the market – an increase from 30 to over 60 active suppliers
- Energy switching has seen over five million customers switched during 2017, a 15% increase on the previous year and the highest level ever recorded1
- The replacement of the UK gas industry IT system (Project Nexus) has been successfully completed
- SMETS2 roll out continues to be delayed and Suppliers are looking at ways to maximise their investment in SMETS1 assets / infrastructure
- The move towards a more flexible energy market has gathered pace thanks to a rise in ‘embedded generation’ and reduction in cost of storage technology
- There has been a rise in “Smart Home” appliances and therefore a resulting change in the way customers engage with the energy market
- Ofgem have started to look at the impact of some of the changes to the market on the traditional supplier hub model
Now that more detailed plans and a high-level design has been published, we thought it was worth revisiting this topic to look at what has changed.
How big is the technical challenge?
The technical challenge in implementing a new centralised registration system remains. The introduction of the new system may also coincide with the upgrade and potential alignment of the existing networks used to support the industry. This may result in participants having to deal with multiple platforms for different parts of the industry.
From a technology perspective there has also been a lot of talk of new and emerging technologies such as Blockchain.
We are keen to support the use of Blockchain in our Affinity Suite offerings and have been working in a number of areas to explore and develop suitable areas of application. That said, when looking at the design of any centralised registration system, we need to be focused on the suitability and benefit when measured against the scope of the requirement, and be careful not to be swung by a focus on the interest around the latest technology. Whilst we think there is a role for Blockchain in the developing UK energy market (e.g. we are exploring its use in the context of managing interactions relating to flexibility services), we are yet to be convinced that the current CSS approach to procurement and proposed design is a good use case.
During our initial analysis we highlighted the potential to include interactions with other industry participants (e.g. MOP / MAM, DC and DA) in the scope of the solution i.e. a more centralised approach. We also advocated centralising a certain amount of metering data to which everyone would then have access. In possible recognition of this, with some meter technical details now included within the overall design scope, e.g. the proposal to master primary assets in MPAS/MPRS for later synchronisation, it is still early to predict how significant this benefit will prove and whether it will resolve one of the most significant industry issues in the registration process which is the correct set up of a consumer’s meter technical details.
The decision to exclude many existing agent interactions and limit the scope of data held in the solution has undoubtedly made the switching business process simpler and reduced the amount of change. Whilst this should make the solution simpler and cheaper to implement, whether this design approach will improve the reliability of the switching process remains to be seen. As mentioned, one of the biggest causes of delay in failed registrations remains missing or mismatched data from other industry participants and it feels like only partially addressing this could be a missed opportunity,
Centralisation of Registration (via a Central Switching Service (CSS)) could be an excellent opportunity for the industry to simply the complex regulatory framework. At this stage however, it doesn’t appear that the framework will be any simpler, in fact it may be more complex. The “Regulatory Sandbox”, introduced by Ofgem in 2017, provides opportunities to explore and trial new industry propositions and potential new ways of market operation.
In the context of the CSS programme, this could be important for exploring the use of the system to support other parallel industry initiatives such as the expansion of local flexibility markets and Supplier to Supplier and DSO communication.
Taking a strategic view
If we view next-day switching as the sole objective of the centralisation of registration, then next-day switching is the only benefit we’ll get. But if we view it as the first step on a roadmap to a simpler, more streamlined way for energy companies to compete and collaborate, it has much greater potential, but this will take sustained effort in the years ahead to make it cohesive reality.
Over the next few months we will be working closely with our Partners, Existing and Future customers to assess and align our solution offerings with the CSS.
To see the results of our poll on ‘Reliable Next Day Switching’, visit https://www.amt-sybex.com/news/poll-results-reliable-next-day-switching//