Proposal could help boost financial prospects of battery storage on the grid

A proposal to change a relatively obscure energy market rule is being called for by large energy users, battery storage developers and some small energy retailers, in a bid to level the playing field for battery storage, lower prices for consumers, and wrest control from the big generators.

Currently, electricity market rules mean that while pricing is set every five minutes, financial settlement is made only every 30 minutes – a mechanism that even the AEMC admits can distort the market, and push up prices unnecessarily.

Zinc smelter operator Sun Metals has asked the Australian Energy Market Commission to change the rule to include a “five minute settlement rule” because it says current arrangements “accentuate” strategic late rebidding, “where generators have been observed to withdraw generation capacity in order to influence price outcomes.” In other words, it accuses generators of acting artificially to create a price spike.

Sun Metals also says the current arrangement impedes market entry for fast-response generation and demand-side response, and specifically battery storage, which can respond to changes in demand in a fraction of a second, far quicker than most gas-fired generators.

Its submission says that having financial settlement every five minutes will provide a better price signal for battery storage and other technologies to respond to price signals. If they respond to one five minute interval, but fear that the price may be brought down by the half hour average, there may have no motivation to bid.

The proposal has won support from small energy retailers, who say the rule change will also impact small consumers such as households as battery storage becomes more widespread.

Battery storage developers are also on-side, arguing the rule change could increase the opportunities for battery storage to become the most cost-effective solution to managing grid variability and peak pricing.

The AEMC recognises that 30 minute settlement was introduced because it was thought that the metering technology to make it shorter was not available. That has now changed.

The AEMC also notes that bidding patterns have been a problem, an issue also recognised by the Australian Energy Regulator. Another rule change, due to come into effect next week (July 1) also seeks to stamp out some strategic rebidding which it said was distorting wholesale price outcomes, and could create “false or misleading” offers.

The AEMC said the incentives on some generators to engage in strategic late rebidding were exacerbated by the mismatch between dispatch and settlement.

© 2016 Solar Choice Pty Ltd

Giles Parkinson

Giles Parkinson regularly contributes unique content to Solar Choice News. Giles is the founder and editor of clean energy industry news service RenewEconomy. He is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the founding editor of Climate Spectator.
Giles Parkinson