As the migration of energy meters to half-hourly settlement draws closer, Peter Stanley, Elexon chief executive, discusses how the market facilitator is enabling the demand-side flexibility that clean power plans call for.
2025 is a key delivery year for the energy sector, as it marks the first year of progress towards the government’s ambitions set out in the Clean Power (CP) Action Plan 2030, published in December. It is also a pivotal delivery year for Elexon, which manages the wholesale market arrangements and provision of data, playing a key part in enabling CP 2030.
From October 2025, Elexon will begin to migrate meters to half-hourly settlement and we will fully complete migration in July 2027. Half-hourly settlement will encourage energy companies to develop new tariffs and products to help consumers to be more flexible about their energy usage, and receive payments or rewards in return. It will play an essential role in keeping the costs of the energy system down for all of us.
At the end of 2025, we will start operations as the market facilitator through which we will govern and coordinate flexibility markets, work with key stakeholders to tackle barriers and drive the system to be more flexible.
By implementing half-hourly settlement and performing the market facilitator role, Elexon will play a significant role in helping to meet CP 2030. The National Energy System Operator (NESO) states that to reach the target there will need to be five times as much demand-side response as is currently available. Both of these reforms will increase the contribution that flexibility makes to managing the system more efficiently.
The year ahead of the market facilitator
Working with flexibility providers, Ofgem, NESO (which buys services through a national flexibility market) and distribution system operators (DSOs, which manage the regional flexibility markets), Elexon understands the barriers that flexibility providers face.
Currently, flexibility markets are fragmented and difficult to navigate for users. The registration process differs from one market to another, as does the data required from market users who want to participate. The services that participants are expected to provide also vary between the markets, as do the time periods for when those services are needed. This makes it harder for providers to forecast revenue.
Network companies (buyers of flexibility services) also do not always have clear visibility of the flexibility assets and their capabilities. Overall, there needs to be more standardisation and consistency across these markets so that trading of flexibility is frictionless.
Aligning the local and national flexibility markets
The market facilitator role will focus on aligning both the local and national flexibility markets. As the market facilitator, Elexon will make these markets more open, coordinated and transparent, and we will support their growth.
We have been working with Ofgem and flexibility market stakeholders to develop the scope for the role, together with the governance and funding arrangements. In December, Ofgem published a consultation on the policy framework proposing that the market facilitator should have three functions: strategic leadership, market coordination and implementation monitoring.
Two-year delivery plans for the market facilitator
Ofgem proposed that Elexon will need to publish two-year delivery plans that have been consulted on with participants. In the first delivery period (2026-27) we would prioritise alignment of DSO flexibility services with the majority of the NESO ancillary services (apart from ‘stability’ and ‘reactive power’). The procurement by NESO of services in the Balancing Mechanism (BM) and associated reporting would also be in scope, while the operational aspects of the BM would of course be managed by NESO.
Ofgem plans to widen the scope for the second period (2028-29) to include the wholesale market and the Capacity Market. We support this, as it will achieve further alignment so that value can be captured across all markets.
The requirement for the market facilitator to provide strategic leadership would involve Elexon identifying to Ofgem and government, any challenges and opportunities for policy development, regulation and innovation relating to flexibility. Elexon will need to proactively identify barriers to the provision of flexibility that can either be addressed in the delivery plans (if they are within the scope of the market facilitator role) or raised with a party that has the powers to resolve them.
Ensuring compliance with the work of the market facilitator
The coordination part of the role includes management of existing (and development of new) rules, standards and market processes that can be adopted by the DSOs and NESO. Ofgem would ensure compliance with Elexon on this by inserting conditions into the companies’ licences.
Elexon supports the wider scope of the market facilitator
Ofgem’s consultation closed earlier in February and in our response we fully support its proposals, particularly the widened scope of the role, as it will now capture the value of greater alignment and coordination across markets. This is important for making the energy markets operate more effectively as a whole.
Ofgem will decide on the market facilitator policy framework in spring 2025, and in mid-2025, Elexon will submit proposals to Ofgem on the governance regime for the role. Elexon will continue to work with Ofgem and the industry to ensure that the scope of the role is clear and effective. It will also need to provide robust governance arrangements to create open, transparent, and well-coordinated flexibility markets.
We expect Ofgem to make a decision on the governance arrangements, and to direct the licence condition changes for NESO and the DSOs in the autumn, which will ensure that we are on track to begin operations as market facilitator before the end of 2025.
Improvements to help flexibility market users
During the past few years, the Energy Networks Association (ENA) has been leading the Open Networks programme to increase participation in flexibility markets. Elexon is in the process of taking over ownership of the programme.
During 2025, some practical solutions resulting from the programme’s work are being put in place, so that improvements can be made before we begin work as market facilitator:
- At the end of 2024, a new stacking tool was launched helping participants to better forecast revenue by determining whether a single flexibility asset can deliver multiple products. The tool makes recommendations for implicit stacking related to ‘service jumping’ where the same asset provides different flexibility services and products at adjacent times, to earn revenue
- Aligned and harmonised baselining methodologies will be made available for adoption by NESO and DSOs later this year. Baselining is a process for measuring the amount of flexibility that a provider can offer compared with their usual generation or consumption
- In spring 2025, a new version of the primacy rules for flexibility markets will be developed, providing clarity on which flexibility purchaser takes precedence when the same asset is called on to provide more than one service
- In summer 2025, the development of a dispatch API standard will be complete. It will be a set of technical specifications defining how system operators can link to (and dispatch) flexible assets via a flexibility service provider (FSP). This will be done through an API to standardise communication between system operators and FSPs – an important step towards achieving a more digitally interlinked electricity system.
Elexon will ensure that the development and delivery of technical outputs continues in 2025. This includes reviewing the approach to standard agreements and defining the vision for revenue stacking and other key areas. Our goal is to maintain momentum while establishing the market facilitator role.
We plan to publish our transition plan alongside Ofgem and ENA in March, outlining both the handover from Open Networks and the broader transition, ensuring clarity on this year’s key deliverables.
Elexon will work collaboratively to scale up flexibility provision
To achieve CP30, NESO has stated that significant network buildout and investment are needed, with the build rate over the next five years needing to double that achieved over the past decade. NESO has highlighted that without the necessary network development, constraint costs could rise sharply under the ‘Further Flex and Renewables’ and ‘New Dispatch’ pathways, potentially reaching £12.7 billion and £10.9 billion respectively, compared to 2023-24 constraint costs of just over £1.5 billion.
While expansions in network and renewable generation capacity are essential for CP30, NESO also emphasises the critical role of flexibility. A balanced approach, which avoids building redundant or under-used capacity, will ensure consumers do not bear unnecessary costs.
We will continue to work closely with colleagues from across the industry, Government and Ofgem to make sure that the market facilitator role and delivery of half-hourly settlement create the platform for rapidly scaling up the amount of flexibility available to the system.
