Half hourly settlement: What can gas learn from the electricity sector?

The electricity sector’s journey towards Market-wide Half Hourly Settlement could offer invaluable lessons for the gas industry, writes Orlando Minervino, decarbonisation lead at Xoserve.

The energy transition isn’t as simple as swapping fuel sources – if only it were. Instead, it’s a complex evolution of interconnecting systems designed and built around decades of fossil fuel extraction and distribution. Successfully redesigning this landscape requires an integrated approach to how we produce, distribute, and consume energy. A key enabler in this evolution is data, and robust management of this will play a pivotal role in ensuring the gas sector’s infrastructure and systems are prepared for the transformation.

Part of reducing the UK’s overall energy consumption and carbon emissions to reach such a future includes the implementation of Market-Wide Half Hourly Settlement (MHHS). Its mandatory smart meter rollout underscores data’s critical role with electricity suppliers preparing to migrate all their customer meters by October 2026.

MHHS will provide a detailed view of consumers’ energy consumption, which benefits billing accuracy. For the gas industry, there is similar potential to unlock value by exploring real-time settlement methodologies, enabling the sector to evolve and better handle the complexities of a mixed gas network, such as natural gas blended with hydrogen. Accurate data collection and management will be key to optimising operations, enhancing billing accuracy, and ensuring consumers are charged fairly.

Billing for the changing energy landscape

Energy suppliers are already obliged to procure electricity from the wholesale market at thirty-minute intervals. Most UK consumers, however, are still settled on a non-half-hourly basis, resulting in an imbalance between supply and demand. In today’s volatile energy markets, the MHHS aims to tackle this head-on.

While electricity aims for all meters to be settled half-hourly, gas billing is based on daily positions. However, for customers who do not have their meter read daily, such as homes and businesses without a smart meter, their billing consumption is derived from manual input or expected annual consumption of the meter point. This estimation is based on historical metered volumes and seasonal weather conditions and isn’t the most accurate approach.

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In the Future Energy Scenarios, set out by ESO, it expects that the UK will likely see a period of mixed gas within the transmission network. This could create hurdles for billing, as different gases have varying calorific values. If, for example, a meter point receives natural gas blended with hydrogen for part of the day, and then pure natural gas during peak demand, the consumer may be disproportionately billed based on the volume of gas used, rather than its energy content.

The fundamental role of data

To address such fluctuations, real-time settlement methodologies are being explored. By enabling more granular data collection, these methodologies could better account for variable gas compositions and ensure fairer billing for consumers.

The lessons learned from MHHS in the electricity sector are clear: data is fundamental to driving the energy transition. For the gas sector, leveraging more frequent and in-depth data on usage and gas content will be crucial in enabling more accurate settlement, improving billing precision, and optimising gas procurement. This approach will also support the integration of renewable gases like hydrogen, ultimately contributing to the UK’s net zero targets by ensuring a more sustainable and efficient energy future.

Benefits of more frequent gas settlement

As with the MHHS initiative in the electricity sector, the gas industry stands to gain significant advantages by adopting more frequent settlement periods. With access to half-hourly consumption data, gas suppliers could forecast demand more accurately, enabling efficient purchasing of gas in the wholesale market. This improved forecasting could lead to reduced energy wastage and optimised procurement strategies.

The shift to hourly or half-hourly readings is also crucial for gas blending, delivering benefits for both gas suppliers and consumers. Enhanced settlement frequency enables clearer tracking and understanding of the natural gas and hydrogen blend composition at any given moment. With the integration of renewable gas, like hydrogen, having a detailed view of consumption could help track and verify the use of cleaner energy supporting the UK’s net zero goals by driving smarter, lower-emission energy use across the gas sector.

Furthermore, reduced settlement periods also improve billing accuracy – a benefit for both suppliers and consumers. Consumers can have confidence that they are being charged fairly based on the actual energy content of the gas they consume.

Navigating an increase in gas settlements

Should there be a shift toward more frequent gas settlement, Xoserve has already identified potential challenges that may arise. We recently supported Wales & West Utilities on a project, which involved assessing the feasibility of hourly settlement. This process highlighted the complexity of such a transition, emphasising the need for a comprehensive review of the existing infrastructure’s capacity to accommodate such a change.

For more frequent settlements, substantial improvements are needed to scale the current system’s capabilities for processing, validating, and storing a significantly larger volume of detailed consumption data. Such changes include the development of new algorithms and the advancement of data validation methods to manage the complexities associated with variable gas compositions within the networks.

A transition to half-hourly or hourly gas settlement extends beyond IT infrastructure enhancements. There would also be a need to update relevant industry codes, such as the Uniform Network Code (UNC) and related gas industry frameworks, as these codes govern crucial aspects of data management, billing, and settlement within the industry.

In addition, regulatory frameworks may need to evolve to mandate the installation of smart meters equipped with half-hourly reading capabilities for customers. This would ensure widespread data availability and accuracy, underpinning the effectiveness of the new settlement system.

Embracing lessons for a resilient future

The electricity sector’s journey towards Market-wide Half Hourly Settlement offers invaluable lessons for the gas industry. The need for more frequent gas settlement may become undeniable as we navigate the complexities of decarbonising Britain and a rapidly evolving energy landscape. Accurate data lies at the heart of this transformation. By implementing robust data collection and management systems, the gas industry can unlock insights to enable informed decision-making, optimise operations, and ensure fair billing practices.

As our energy system continues to evolve, it is vital to conduct comprehensive reviews and explorations of all necessary infrastructure and legislative changes. From upgrading IT systems to refining industry codes and regulations, every aspect must be addressed, or we face falling short of our net zero targets.

Xoserve stands ready to steer and guide the gas industry through its transformative journey, whether that’s reforming gas settlement or any other future initiatives. With a cross-industry approach, we can build a resilient gas industry prepared for the challenges and opportunities of decarbonising heat and power while delivering reliable and sustainable energy.