Delay to price fix generates concern

Battery, demand response and fast-start gas generators face a 12-month delay accessing a major pricing reform due to COVID-19.

Battery, demand response and fast-start gas generators face a 12-month delay accessing a major pricing reform due to COVID-19.

A raft of new players in the national electricity market have been pushing the rule-maker for years to change the price settlement period to five minutes, from 30 minutes.

Generators already bid and dispatch power on a five-minute basis, with the 30-minute pricing period a throwback to the late 1990s, when coal-fired power plants dominated the energy mix.

Changing the pricing signal to reflect the boom in fast-­response energy generation was originally made in late 2017 with a start date of July 2021.

However, the Australian Energy Market Operator has asked the rule-maker to delay the start date until July 2022 to help ease pressure on changes to tech and metering during the health pandemic.

A decision on the delay will be made by July.

The change is seen as rewarding big power customers and demand response providers by improving access to more accurate data, allowing them to boost energy use when spot prices are low and cut use when they spike.

“Regardless of the decision on timing, five-minute settlement remains a critical market reform,” Australian Energy Market Commission chairman John Pierce said.

“This means it will go ahead and indefinite delays are not on the table for consideration.”

Demand response allows large consumers of power to receive a financial benefit from cutting their own energy use when demand and wholesale prices are high, sending surplus energy back to the east coast’s electricity network.

Some big industry players are against the five-minute change, arguing it will lead to higher costs. ERM Power, bought by Shell last year, said some generators would struggle to adapt.

“Some of the peaking generators in the national electricity market — such as gas, hydro and liquid fuel generators — aren’t currently designed to respond to short time periods and are expected to be less likely to bid their units at the low prices previously seen due to these dispatch constraints,” ERM said on its website. “Those that are capable will face higher operational costs ­associated with potentially shorter dispatch periods, which they may seek to recover through their contracting and bidding strategies.”

Cost benefits would not be ­realised until near the end of a 10-year period, when battery storage reaches a high level of penetration, ERM added.

The AEMC said a consultation paper would assess how a year delay might hit the cash flows of electricity businesses, the effect a delay could have on investments like batteries or fast start generators made in advance of the change, and how a 2022 time frame would affect the contract market and risk management.