Regulators flag possible delay to key switch to 5-minute settlements

gannawarra battery
The Gannawarra big battery in Victoria.

The Australian Energy Market Operator has flagged a potential delay to the introduction to 5-minute settlements, a key market reform that will level the playing field for new technologies such as battery storage and help eliminate rorting of market prices by fossil fuel generators.

The 5-minute settlement rule is scheduled to begin on October 1, more than five years after it was first proposed by big energy users sick of seeing manipulation in the market in the current 30-minute settlement period, which has six different trading periods.

The proposal  to switch to 5 minute settlements was vigorously opposed by incumbent generators – mostly because they favoured smarter and quicker new technologies such as battery storage and other inverter-based systems – and the Australian Energy Market Commission initially baulked at the idea.

When it was finally approved the market was given nearly four years to prepare their bidding systems to incorporate the change, much to the surprise of many in the industry.

Now the Australian Energy Market Operator is flagging another potential delay, and has asked the AEMC to approve a rule change that will effectively act as a “plan B” should its systems not be ready in time, and allow for a delay to either December 1, February 1, 2022, or April 1, 2022.

“AEMO’s 5MS Program is on track to meet the 1 October commencement date,” AEMO’s chief markets officer, Violette Mouchaileh, said in a statement.

“This precautionary rule change proposal is a prudent step for the industry to set alternative commencement dates in the rules should it be needed,” she said, adding that “major technology change programs” are susceptible to late issues that may only become evident near the go-live date.

The AEMO document flags potential problems in both the upcoming market trials, and the readiness of market participants.

“If either of these risks eventuates and cannot be effectively addressed or mitigated in time for 5MS commencement by 1 October 2021, a change to the 5MS commencement date will be necessary,” it says.

“If the 5MS commencement date remained unchanged in the event of an avoidable delay, the potential consequences of this type of contingency could be very significant.

“If not managed effectively the potential ramifications could include AEMO not being able to settle the market on a 5 minute basis, with prudential arrangements being compromised leading to increased financial risk to both AEMO and market participants and disruption to the wholesale electricity market.”

AEMO will make a final decision on whether things are on track by September 1. If they are, then the AEMC will not make a rule change. If they are not, then it will consider three alternative start dates and make a final ruling by September 30.

“It is critical that industry does not halt or slow down preparations for five-minute settlement,” AEMC chair Anna Collyer said in the statement.

“If no contingency event occurs, the start date of 1 October 2021 will still apply, and they will need to be ready. It is also important to make clear that any long-term or indefinite delays are off the table.

“That’s because most work to implement this reform has already been done and five-minute settlement is fundamental to securing the fast-response energy options needed as the energy sector decarbonises.”

A public forum on the issue will be held on 9 August. Please register to attend the public forum here.

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