AEMC confirms 5-minute settlement to begin in 2021

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Big win for battery storage in change to market settlement periods that will be introduced …. in four years time.

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Image: AAP
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Image: AAP
Image: AAP

A major rule change that will change the settlement periods on Australia’s electricity markets and offer major incentive to fast acting technology such as battery storage and demand management has been confirmed.

The Australian Energy Market Commission on Tuesday confirmed a “final” rule change to change the settlement period for the electricity spot price from 30 minutes to five minutes, starting in 2021.

It described it as a “fundamental change” will provide a better price signal for investment in fast response technologies, such as batteries, new generation gas peaker plants and demand response and enable the power system to operate in a more dynamic way.

“With more wind and solar generation entering the market, along with the retirement of thermal generators, there is an important role for fast response generation and services to plug the gaps when the wind isn’t blowing and the sun isn’t shining,” said AEMC Chairman John Pierce.

Proponents of the rule change – which began with Queensland zinc refiner Sun Metals nearly two years ago, also say it will limit the ability of fossil fuel generators to “game” the market.

Numerous studies have shown how big generators have taken advantage of the 30-minute settlement period by adjusting their bidding patterns to create scarcity in one five minute bidding period, pushing the price up and then flooding the market with capacity that is suddenly made available.

The price rise in the one five minute period guarantees a high price over the 30-minute settlement period. The new rules make that less possible, and also gives an incentive to fast response technologies to capture any high priced events.

The AEMC’s decision to delay the entry of the 5-minute settlement until 2021 has been criticised by many, including leading economist Ross Garnaut, particularly given that the AEMC is proposing equally important changes in the National Energy Guarantee that it wants to introduce by 2019.

 

The details of that policy have not even been worked out – other than a vague idea of requiring an emissions and a reliability obligation that will be met through contracting by the big retailers. Many see this as fundamental a rule change as the five minute settlement.

Greens climate spokesman Adam Bandt said ‘five minute rule’ is an important step towards fixing the “broken” National Electricity Market, but criticised the delay.

“As we feared, the AEMC is delaying the change to protect the big, polluting power companies,” he said. “This change should be happening next year, not in 2021. COAG should overrule the AEMC and act to accelerate this reform.”

The AEMC said the July, 2021 starting date for the 5-minute settlement would give the industry time to adjust to this major change which affects the spot and contract markets, metering and IT systems.

Pierce said the new settlement period should lead to more efficient bidding, and flow through to lower wholesale costs.

ACT climate change and sustainability minister Shane Rattenbury welcomed the change, saying the current rules result in slow responding generators such as coal, gas and hydro being paid high prices for energy delivered up to 25 minutes after it was needed.

 “This rule change brings the pricing and generation intervals into line, so electricity generators are paid for the amount of energy delivered in a five minute period at the price calculated for that five minute period.

 “This decision is a win for the ACT, which has embraced smart, fast-response, energy storage technologies as part of its drive to 100 per cent renewable energy by 2020 and zero net greenhouse gas emissions by 2050 at the latest,” Rattenbury said.

He said the new rule would have an immediate effect on new contracts.

 

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36 Comments
  1. Chris Fraser 12 months ago

    If it’s true that the July, 2021 starting date for the 5-minute settlement would give the industry time to adjust to major change which affects the spot and contract markets, it appears equally true that forward contracts already signed relied on rampant gamification. We’ll always know who’s in control.

    • Hettie 12 months ago

      I wonder if the ACCC should have another look.

  2. Mark Fowler 12 months ago

    Only 3.5 years left to rort the system.

    • Joe 12 months ago

      …yes, the music is still playing and the partying still has some way to go.

  3. Jo 12 months ago

    the snail pace of progress

  4. BushAxe 12 months ago

    What a joke!

  5. Hettie 12 months ago

    It’s all about fast response.
    Five minutes
    Five years
    How stupid are they?
    Someone writes a program patch
    Installs it. Job done.
    Get a teenage hacker on it.
    Or is it really five years more complicated than that?
    I do wish that someone who knows about these things could tell me. Yes it can be done .
    Over night? 3 weeks?
    Originally they said three and a half years. Now its five. $WTAF???

    • Joe 12 months ago

      Settle down there young Hettie, keep that blood pressure in the normal range. We don’t want to lose your thoughtful inputs in these very fine pages just yet.

      • Hettie 12 months ago

        It’s venting that keeps the pressure cooker from exploding. All better now.
        My bp is in fact rather low, for which I am profoundly grateful.
        Thanks for the approbation, Joe.

        • Joe 12 months ago

          Just call me….. Dr. Joe

          • Hettie 12 months ago

            LOL
            OK, Dr Joe.

    • john 12 months ago

      I could do it in about 20 seconds mate.

      • Hettie 12 months ago

        The people of Australia would love you forever.
        How do we know that you are for real?

    • Mike Westerman 12 months ago

      Read Cooma Doug’s comment – coding is easy, upgrading every element of the network to maintain fast enough measurement, processing, decision making and communications is another. But in the interim, regulation needs to be redoubled to stop the infamous rebidding.

  6. JIm 12 months ago

    We hear change needs to be gentle on incumbents but meanwhile more will go off grid to beat the market gaming

  7. Cooma Doug 12 months ago

    The 30 minute settlement was not applied initially to enable gouging by big slow machines.
    The time of market bidding and settlement began with both being 30 minute. This was necessary due to the realities of technology.

    There are an enormous number of algorithms, price nodes and forced initiated market options that hold the thing on its feet.

    Without the half hour settlement time it would have been impossible to retain any measure of certainty and adaquate stability of function givrn the technology available.

    Sure its true that the rules provide an ability for players to maximise their capabilities for profit. This did happen.

    Now we can run a 5 minute settlement and do all the analysis
    in that time without increased security risk. Modern technology will actually enable greater certainty in much shorter time frames. At the moment when failures of large plant happens the analysis is inadaquate and manual intervention would not be effective in 5 minutes. I can imagine 5 minutes closure would create a lot of problems making it unviable without extensive technical overhaul.

    • Mike Westerman 12 months ago

      Doug what you say is no doubt true as you were close enough to the action to know first hand. What we are not hearing tho’ from AEMC is endorsement of AEMO intention to jump on those feigning unavailability!

      • Cooma Doug 12 months ago

        We will hear about that I expect. It will be a process of capability commitment in a 24 hr bid. The unavoidable short term forced outages scrutinised in more detail.

    • Hettie 12 months ago

      OK, Doug, if I understand you correctly, there is considerable mechanical adjustment to be done to accommodate the rule change, as well as the obvious computer programming.
      I’m guessing that would mostly involve the coal plants of which there are – how many? And gas plants. Again, how many?
      Would wind and large scale solar also have physical modification needs?
      The real nub of my question is how many installation are reqyired, and given an adequate workforce, how long would it take ?
      4 years seems ludicrous.
      If Tesla can build and commission its battery in 3 months, if wind farms and solar farms can be built in 2 years, why would the adjustment of relatively few items take so long?
      Or is AEMC aiming to use a lone 93 year old one armed mechanic to do it all?

      • Cooma Doug 12 months ago

        There would be a few GW of peaking plant I expect. Much of it will be required through the transition to adaquate renewable plus storage for a 100% situation.

        Moving straight to s 5 minute settlement is not a simple task given the mix of generation and the design of the existing market.

        It is true that the Teslat battery was built quick. True it is s great asset. But to fully utilise its potential the market needs to evolve. We cant change things to allign with the battery and so block the asset value of existing systems. This is under way but to say 2021 is too far away is not reasonsble.

        • RobertO 12 months ago

          Hi Cooma Doug, I am not sure that I agree with you on this. 4 years, 7 months time to adjust all the bits and peices given that it was started some 2 years ago. A reasonable time table would be 6 months at the most. I have written to some pollies trying to get them to ask AEMC why so long? Remember the same person is aiming to write the NEG rules in 12 to 18 months.

        • neroden 12 months ago

          We certainly could change things to align with the battery and reduce the asset value of existing systems.

          There is no rule saying that existing systems need to hold their value. Frequently, they don’t. That’s capitalism for you.

        • Ian Porter 6 months ago

          I do not buy this at all. Asset values can be factored into compensation payments if such were required, but why should they be? If there are no PPA’s in place, what to do? Maintain a clunker non-responsive, incompatible to state of the art, polluting asset for the sake of it’s balance sheet depreciated value notwithstanding it’s negative value to the climate and local communities. To provide stubborn operators the benefit of kicking the can down the road while new tech sits on the sidelines waiting for the industry vested regulators to allow them in. Suggest you consider living the stone age longer for the sake of the flint grinder’s jobs meanwhile the rest of us wanting to move forward are held back by arcane excuse laden profit-centric account and balance sheet/returns driven asset holders. Write them down, move on and stop making excuses for a sunset industry that refuses to see it’s fit on the landscape. Sorry to be blunt, but I do understand this issue and too much airtime is given to this kind of attitude.

  8. Robert Comerford 12 months ago

    3 year wait, should be January next year.

  9. john 12 months ago

    My feeling not even reading the Article is this.
    Why 2021?
    why on earth does it take 4 years to implement?

    • john 12 months ago

      Have read the Article in fact first comment was correct this is total crap it does not take 4 years to implement a simple few lines of code in your bidding process give them 1 month if the incumbents can not deal with that then they are ruled out and should not be in the business.

      • Cooma Doug 12 months ago

        There is more to this than a few lines of code.

        • neroden 12 months ago

          It could be implemented locally in one grid region at a time, with “interconnection” settlement being delayed until later. Some of the regions seem to be technically ready to convert immediately; there is no reason to delay them while waiting for other regions.

  10. mick 12 months ago

    pathetic if you pulled this stunt in any other industry you would be out of business in a year

    • john 12 months ago

      Exactly Mick this is total rubbish It would take about 20 minutes to change the software to allow the generators to cope and if they can not do it in half an hour they must be hopeless beyond a joke.

  11. Chris Drongers 12 months ago

    This could be good for batteries and pumped hydro – they can use the gamed electricity prices that the AEMO has apparently gifted to the incumbents to increase spreads in peak/trough power arbitraging. Does the deal allow renewable-fed batteries to be ‘forced-on’ same as rooftop PV systems?
    A period of greater arbitrage profitability prior to 5 minute pricing and its (hopefully) lower baseload prices would effectively subsidize the first generation of the same storage that will be needed to stabilize the grid as more and more intermittent renewables come on line. I should write a new chapter in ‘Freakenomics’!

  12. George Marsh 12 months ago

    AEMC says it needs 3 years to get the industry to move to a “5 minute settlement” regime. Well maybe, but given it’s 3 years away, why not manage transition via 5 minute reductions every 6 months to give the systems a chance to evolve? Don’t they know computer systems can handle this kind of change very easily?

  13. Ray Miller 12 months ago

    It is clear that we should only pay for the AEMC staff on delivery, which means they do not get paid until 2021! Should fix the problem.
    We as the end customers are fully funding the AEMC so why do we not get a say?
    If from a tweet to being fully commissioned a major new technology in the NEM by a company who has only been in the power industry counted in months makes the AEMC look like a dinosaur, which needs to be consigned to a museum ASAP.

  14. DevMac 12 months ago

    Yep, nice government control of their super important issue of power prices.

    4 years. Time enough for the generators to work out how to game the new system.

    Complete joke.

    Further highlighting that those driving Australia’s energy policy have been asleep at the wheel for the last two decades. If they’re only just finalising the decision now, and implementing in 2021, what have they been doing? It’s not like solar and wind have snuck up in the last 12 months. Same goes for the AEMO or NEG in regards to the Wind Turbine settings that could have saved SA from the big blackout.

    Sigh.

  15. neroden 12 months ago

    Do they really think the grid will survive three and a half more years of Enron-style manipulation? Industries will go off-grid in *droves*.

  16. MaxG 12 months ago

    The typical rort: protect the industry, not the people.

Comments are closed.