Market-wide Half-hourly Settlement (MHHS)

What is market-wide half-hourly settlement (MHHS)?  

The market-wide half-hourly settlement programme was announced by the Office of Gas and Electricity Markets (Ofgem) in April 2021, the roll-out of which will see the introduction of site-specific reconciliation using half-hourly (HH) data.  

The MHHS programme aims to help suppliers plan accurately, come up with innovative tariffs, engage consumers in energy use, shift demand across the grid, and reduce network operating costs.

MHHS implementation is industry-led, with Elexon managing the overall programme, and is seen as crucial to the UK’s transition to a smarter, more flexible energy system.   

Predicted to bring significant benefits to consumers, the HH Settlement reconciles differences between a supplier’s contractual purchases of electricity and its customers’ demand. 

Smart meter rollout is estimated to reach 99% (almost 26 million meters) by 2025, allowing suppliers to access market-wide consumption usage like never before, and recording energy consumption every half-hour can enhance accuracy and timeliness in the settlement process. 

What electricity settlement reform means for businesses and the energy industry as a whole 

Energy suppliers will be the first to benefit from the settlement reforms, despite margins already being tight. However, the longer-term benefits are aimed at tipping the balance in favour of consumers (with Ofgem originally predicting that MHHS would bring net benefits for consumers of between £1.6bn and £4.5bn over the period 2021-2045) and the environment as a result of load shifting away from peak usage times to alternative, incentivised, products and tariffs. 

Why is MHHS being introduced?  

The half-hourly settlement aims to align the way that generators and suppliers trade electricity in the wholesale market (on a half-hourly basis), and the way consumers are settled (on a non-half-hourly basis). 

It is hoped that by making energy usage data more transparent: 

• Suppliers will be motivated to come up with more creative business models to help consumers move away from peak usage or price periods 

• Consumers will be more motivated to take advantage of off-peak tariffs and new energy storage and production technologies 

 The resulting behaviour change would lead to a much-reduced demand on the grid at peak times, the associated decrease in carbon emissions (and therefore need for expensive generation capacity) of which, is a vital to supporting the UK’s Net Zero transition.