Senate unanimously supports 5-minute energy market rule

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Senate motion pushing for change of settlement periods to 5 minutes passed unanimously, while South Australia open to variations of battery storage tender.

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The Senate on Wednesday passed – unanimously – an Australian Greens motion calling for a change in the wholesale electricity market rules to a 5 minute settlement period and expressing its support for battery storage.

The motion was put forward by South Australian Senator Sarah Hanson-Young and, to the surprise of the Greens, passed unanimously with no opposition from the Coalition.

It doesn’t have any legal impact, but the fact that the government did not vote against it is being seen as a clear signal to the Australian Energy Market Commission that the government (along with the other parties) want this change to take place.

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The changes to the energy market rules have been proposed by zinc refiner Sun Metals, and supported by a host of other users, market experts and battery storage providers such as Tesla and Zen Energy, to address so-called gaming of prices on the wholesale market.

They argue that the current 30 minute settlement period allows fossil fuel companies to manipulate capacity availability to push up prices, and the rules do not favour fast response technology such as storage and demand management.

The fossil fuel generators have been fighting the proposed rule changes, arguing that this is the way they make their money, and threatening to mothball their gas plants if the changes are made, risking further shortages.

The AEMC, after nearly ditching the proposal, and then twice delaying a ruling, is expected to release its thoughts on the proposal on April 11, before a draft rule is released in July.

It could be the biggest shift in the Australian energy industry in decades, and appears to have the support of AEMO’s new boss Audrey Zibelman, who favours fast reacting technologies and demand management to say to ‘Hey there, we don’t really need you,” to the builders of peaking plants used just a few hours a year.

However, AEMO chairman Tony Marxsen says while he favours the 5-minute rule change, he was keen for it to be introduced over a period of a few years because it “will affect the business model of those investing in gas peakers”.

The problem with that idea, energy analysts say, is that no-one actually is looking to invest in gas peakers – apart from the South Australian government which wants one as an emergency back-up.

Energy analysts say virtually all existing gas peakers are owned by retail companies – gentailers – who use peakers  to internally hedge their retail exposure. Most have very little residual merchant exposure.

“The only other purpose of peaking plant then is to drive up wholesale spot prices, and forward curve,  and in time, retail prices and gentailers margins. It’s all to do with rewarding incumbency then.”

Senator Hanson-Young told RenewEconomy that the market rules are clearly broken and they need to be fixed.

“Batteries and energy storage have an important role to play in the future stability of our energy supply, but until now they’ve been locked out by antiquated and unfair rules.

“The current market rules ignore the value that instantaneous power delivery from batteries represents and the big fossil fuel companies want to keep it that way.

“There’s an oligopoly in Australia’s energy market right now and the best way to change that is to fix these rules. No one is asking for handouts when it comes to batteries and storage, all they’re asking for is a level playing field.

 

The Greens motion in full said:

The Senate:

+ Acknowledges the recent electricity supply shortages in South Australia that resulted in rolling blackouts, even though generation capacity existed in gas power plants that lay idle;

+ Recognises the potential for batteries and energy storage to both stabilise energy supply and drive down costs in South Australia; and

+ Calls on the government to fix the National Energy Market’s rules and level the playing field by implementing 5-minute settlement periods.

The Coalition responded by underlying its support for energy storage, including ARENA funding for a virtual power plant in Adelaide, and for feasibility studies for pumped hydro in South Australia and the Snowy Hydro.

The biggest battery storage plant, however, will be supported by South Australia, which has called for expressions of interest for a 100MW battery storage plant by Friday.

It had advised it was seeking a configuration of 100MW/100MWh – or one hour of storage – but has since updated after it was pointed out that this may restrict some battery storage technologies.

It says it is now open to varying propose battery sizing and power to energy set-ups and is using the EOI to get some ideas of potential pricing and configuration.

It has also opened a two-week EOI process for 250MW of peaking gas plant, which it says will only be used as an emergency alternative to load shedding, and to provide system security.

 

 

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36 Comments
  1. David leitch 2 years ago

    This is very encouraging. And surely a message to the AEMC. The AEMC can ignore it but I think its important none the less. It also seems to represent something of a change of emphasis at least from the LNP.

    • solarguy 2 years ago

      David, Is the AEMC a government body or industry body?

      • David leitch 2 years ago

        Govt. Its the most important body in the National market and the least well known or understood. It makes the rules but cannot propose them and its run by lawyers.

        • solarguy 2 years ago

          Thanks David. So to bring the 5 min settlement period into effect, who has to make it so?

          • David leitch 2 years ago

            aemc. Giles has written about this several times on the site if you are interested. Proposals to change this rule have been going on for years, but the urgency has increased now that new technologies are emerging.

            The AEMC is increasingly being criticised for being (1) slow (2) obsessively ideological about the value of markets to solve problems (and I am a big supporter of markets), (3) too much of the management team is made up of lawyers.

        • Ian Mclaughlin 2 years ago

          I believe that I read recently that they have 2 industry experts. Unfortunately they both come from the NSW owned system and are from the coal generation side of the business!!

  2. Rod 2 years ago

    Breaking news in SA PP2 has magically found some gas and has PPAs in place.

    One day after Hazelwood. Hmmmmmm

    • Mark Roest 2 years ago

      It does just demonstrate the point that “this is the way they make their money” means, quite precisely, ‘if we want to manipulate the market like pirates by shutting down a gas plant at a particular time, we have all the right in the world to do so!’ Given the impact on other people, I’d say they’re sociopaths.

      • solarguy 2 years ago

        Sociopaths, yes I believe you hit the nail on the head.

      • Greg Hudson 2 years ago

        And yet the ACCC defends this action as good business sense ?

      • hydrophilia 2 years ago

        The USA has decided that corporations ARE “persons”. Courts there have also ruled that they are obligated to only consider the financial interests of their owners. What does one call a person who is completely self-centered, focussed on financial interests to the exclusion of others? Yep, “sociopath” pretty well describes it.
        So, by law we have created immortal, hugely powerful, sociopaths….

  3. solarguy 2 years ago

    Unanimous vote! What, didn’t that goose senator Roberts, object? Or didn’t he realize it wouldn’t be good for his FF benefactors.

    • JIm 2 years ago

      sshh!

      • solarguy 2 years ago

        Na, if we can make this guy feel like the moron he really is, so much the better.

  4. Mark Roest 2 years ago

    This quote is priceless! “The fossil fuel generators have been fighting the proposed rule changes, arguing that this is the way they make their money, and threatening to mothball their gas plants if the changes are made, risking further shortages.”
    There are two answers to that kind of attempted blackmail.
    1. Notice that after the Aliso Canyon gas leak nearly emptied its store, and it has to be kept shut at least until it’s proven safe, if not forever, and a nuclear power plant is shutting down too, CAISO declared a semi-emergency, and huge amounts of batteries were installed in record-setting time. It’s quite possible to tell the generators, Make My Day!
    2. If they want to have a total hissy fit about it and try to shut down gas plants before the batteries and additional solar and wind are ready, it should be possible to find a judge who will agree that it’s grounds to nationalize their companies while winding them down in a more friendly manner — and revoke the social license of the owners to make a pile of money on the nationalizing, because it’s because of their treachery against the nation.

    • Rod 2 years ago

      That’s actually what we are doing in SA
      Govt. builds gas peaker = nationalising. win-win

      • Mike Shackleton 2 years ago

        There’s a good chance they won’t need to build a gas peaker. Let AEMO change the rules, and snap up an existing mothballed unit at a bargain basement, stranded asset price. Nice to have the guys who bought these public assets over a barrel for a change.

    • solarguy 2 years ago

      Yes, sue the bastards!

    • Cooma Doug 2 years ago

      There is more to the 5 min settlement rule than meets the passing eye. Plant availability bidding and changes to “forced on” options will be in the mix.
      The market will be fair and it will have adjusted incentives that make gouging extremely risky.
      This is great news.

      • Rod 2 years ago

        Are there technical barriers Doug? Software etc.?

        • Cooma Doug 2 years ago

          No technical barriers. More like transitional hurdles.
          I believe there will be a need to change a few rules to have a fair market faze out of coal.
          The option to suspend the market and act to avoid crisis needs to be easier. Perhaps there needs to be a new look at market rewards for all forns of storage. If the incentives and market certainty is there, we have all the solutions.

          • Greg Hudson 2 years ago

            One of the easiest changes is to reduce the maximum price from 14,000/MWh to $5000/MWh

          • Cooma Doug 2 years ago

            There were many studies done on the numbers that determine the price signals. With all the variables and characteristics of the grid it is an optimum number. If the top price signal has a limit too low, it stays higher longer and can result in higher averages. This would turn up in the home bill after the next contract negotiations.
            When the 5 minute settlement is first established, many in the industry believe the prices will average higher during transition. This increase would not be corrected by setting the top at 5k.

            Some suggest that the 5 min settlement would render the existing plant in need of greater certainty for their bidding and so a reduction in competition would see average prices higher.

          • Rod 2 years ago

            Re market suspension. Totally agree.
            Although the AEMO report wasn’t too damning for wind they didn’t admit to stuffing up their weather forecasts. Although a change is mooted in the recommendations.
            At the very least they should have issued a Non-Credible Contingency Event (hope I have that right)
            With hindsight they may have suspended the market in SA, throttled some wind, got TIPS up and throttled the inter-connector.

          • Cooma Doug 2 years ago

            Im guessing here but the process went ahead with assumptions that wind gens were capabale of riding through several severe events. The settings on the gens were wrong and the could not flow through as expected. That hss been corrected. One wrong assumption throws out all other security algorithms.

  5. Mary Hunter 2 years ago

    This about as news worthy as my purchase of toilet paper today with quotation printed on the paper that you can read before you wipe your self

    • OnionMan77 2 years ago

      Mary, we are actually discussing the OTHER 5 minute rule, not the one on how long the toilet paper can lie on the floor before wiping.

      • Mary Hunter 2 years ago

        YOU ARE WRONG IT IS THE FIVE SECOND RULE YOU ARE REFERRING TO ACTUAL

    • Robert Massaioli 2 years ago

      This comment is about as worthy of reading as…

  6. Phil 2 years ago

    Well that’s a start

    I wonder what delays they can put in place around July ?.

    Stalling the implementation is a logical next step.

  7. Tom 2 years ago

    I can just imagine the frenzied phone calls right now between executives of the “baseload” generators and the Coalition government.

    “Josh! Unanimous?! What are you guys thinking?!”

    “Oh mate, it’s just a minor market rule….”

    “Bull****! It’s an absolutely key mechanism! How much do we donate to you guys again?!”

    “Aww, sorry. I didn’t realise. It sounded alright at the time”

    “You didn’t realise?! F*** ME! How f*****g stupid are you?! Well Josh, you guys f****d it up, you’d better f******g fix it!”

    “Yeah, sorry. I’ll do my best. You’d better call Malcolm and Tony, I might need their help on this one.”

    • Phil 2 years ago

      I think it’s a good thing the worse it gets

      My prediction based on the massive solar uptake by consumers is THEY will go batteries quicker than the market anyway

      It’s a logical step if you consider that Solar is only half the job done.

      Never underestimate consumers. They don’t just talk about it , they are known to do it.

      • Ian 2 years ago

        You can be sure people are eyeing the price declines in batteries and will install these in large numbers when the payback periods reach 4 or 5 years.

        For me $250/KWH would be the game-changer, others maybe $500/KWH

        • Phil 2 years ago

          I think the Tesla Powerwall 3 in around 18 months time will be that tipping point of $400 kwh and 5 year payback in say Sydney Metro. With the remaining 5 years warranty use for Free.

          The payback is 7 years now in Regional NSW (Australia) if you go off grid DIY .Using a fully funded refreshed hardware model of $2.20 per day for 10kwh per day average consumption with no grid connection fee. Which is $1.60 a day in Regional NSW

          I’ve done exactly that for 3 years now and it’s a success. An added bonus is triple redundancy with 99.9999% uptime versus the normal power off for 8 hours per month the locals get.

  8. humanitarian solar 2 years ago

    Encouraging. It would be great if someone could do a detailed analysis of the current AEMC board, so we can see who they are, their qualifications, if they are declaring any conflicts of interest and if they are acting in the public interest.

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