The Australian Energy Market Operator (AEMO) has revealed that the National Electricity Market (NEM) will introduce a Five-Minute Settlement (5MS) on 1 October 2021 – providing a better price signal for investment in faster response technology.
The Australian Energy Market Commission (AEMC), which approved the introduction of 5MS in 2017, will meet mid-September to discuss AEMO’s recommendation, and any industry feedback submissions, and then will make the final determination.
In 2017, after AEMC approved the 5MS, AEMO was then responsible for updating market procedures, designing and testing systems, and coordinating an industry readiness program.
According to the rule, 5MS will shift the current 30-minute wholesale electricity spot market settlement period five minutes, providing a better price signal for investment in faster response technologies, such as batteries and gas peaking generators.
This involves changes to metering, settlement, and bidding processes, as well as electricity retail and wholesale market systems.
AEMO’s Chief Market Services Officer, Violette Mouchaileh, said, “This is an important market reform that reflects the evolving energy system and an initiative that aligns very closely to AEMO’s priority areas, as we navigate the energy future to the benefit of the market and all consumers.
“The extensive stakeholder collaboration has been valuable for the decision-making process and program outcomes, and essential for market readiness.
“Informed by, and completed in consultation with, market participants, AEMO’s comprehensive risk and readiness assessment measured essential criteria required for rule commencement – concluding that the NEM is on track for market start in October.”
Some risks to successful operation of the five-minute market were noted as part of the readiness assessment and mitigations and contingency plans for these risks have been identified.
October 2021 will also see the soft start of Global Settlement (GS), a framework for the settlement of the wholesale electricity market. This aligns the development of systems and procedures for both changes, reducing implementation costs. GS will fully commence on 1 May 2022.