The Australia Institute has published an open letter to the Prime Minister calling for three energy market reforms – including a “5 minute rule” that has been gaining increasing support.
In Australia’s National Energy Market (NEM), generators bid to supply energy over 5 minute intervals. However, they are paid a price that is set over 30 minute intervals based on the average of the most expensive successful 5 minute bids. This arrangement has led to accusations of generators gaming the system to push up prices.
A proposed 5-minute rule, originally floated by Sun Metals, would see prices set for each 5 minute interval instead of the 30-minute average.
This would give battery storage an advantage and help rein in wholesale electricity prices during peak demand.
The rule wouldn’t just benefit huge single-site energy storage installations. It could also provide opportunities for residential/commercial solar battery systems aggregated as virtual storage facilities participating in the market.
“One of the many competitive advantages of batteries is that they can turn on and off very quickly, even faster than gas and far faster than coal,” says The Australia Institute. “Batteries are uniquely well suited to jumping into the market on a short term basis, smoothing price spikes and reducing the capacity of incumbents to use strategic bidding to push up prices.”
The other two market reforms proposed in the open letter to address Australia’s ‘energy trilemma’ (security, cost and emissions):
- The use of proven software systems to aggregate large numbers of commercial and industrial consumers into ‘virtual peak plants’ that will provide safe and scheduled reductions in load, on commercially competitive terms.
- New markets for additional services to reflect changing demands and technology.
The open letter (PDF) appeared as a full-page advertisement in the Australian Financial Review and was signed by parties including Dr. Martin Green and Future Super’s Simon Sheikh.
Late last month, Greens Senator Sarah Hanson-Young indicated her strong support for a 5-minute rule.
“Fixing the energy market’s 30-minute settlement rule, making it a 5-minute rule, to level the playing field and give batteries and storage an equal footing will increase competition and drive down costs for consumers.”
A motion put forward by Senator Hanson-Young to the Senate last week for a 5 minute settlement period passed unanimously.
The Australian Energy Market Commission (AEMC) is expected to release its opinion on the issue next week, before a draft rule is published in July.
