AEMC’s five-minute rule to start in 2021

Battery storage projects are expected to get a boost and power prices will fall under the Australian Energy Market Commission’s (AEMC) new five-minute rule.

The AEMC this week made a final rule to change the settlement period for the electricity spot price from 30 minutes to five minutes, starting in 2021.

This change will help get the electricity wholesale market ready for new technologies that enable the power system to operate in a more dynamic way.

AEMC chair John Pierce said five-minute settlement provides a better price signal for investment in fast response technologies, such as batteries, new generation gas peaker plants and demand response.

“With more wind and solar generation entering the market, along with the retirement of thermal generators, there is an important role for fast response generation and services to plug the gaps when the wind isn’t blowing and the sun isn’t shining,” he said.

Moving to five-minute settlement will align the physical electricity system – which matches demand and supply of electricity every five minutes – with the price signal provided by the market for that five-minute period.

“Price signals that align with physical operations lead to more efficient bidding, operational decisions and investment,” Mr Pierce said.

“Over time, this flows through to lower wholesale costs, which should lead to lower electricity prices than in a market with 30 minute settlement. Wholesale costs make up around one third of a typical electricity bill.”

Five-minute settlement will start on July 1, 2021.

The Australian Energy Market Operator (AEMO) will work closely with industry to develop an implementation plan, with policy guidance from the AEMC.

The Australian Energy Regulator (AER) will monitor and report on the conduct of market participants and the effectiveness of competition throughout the transition.