Incumbents push for even longer delays to crucial 5-minute settlement rule

Leading players in the energy industry have called for even lengthier delays to the critical shift to 5-minute settlements, while those committed to a rapid transition to renewables and storage and smart technologies have insisted there is no case for a delay.

More than a week after submissions to the controversial proposal for a delay in shift to 5-minute settlement closed, many were finally published by the Australian Energy Market Commission, which will deliver its judgment in less than three weeks.

The shift to 5-minute settlements was originally proposed in 2015, and finally agreed in 2017 by an initially reluctant AEMC, with the caveat that the industry be given four years to prepare for the changes. So it set a date for mid 2021.

Earlier this year, the big generators pushed for the 5-minute settlement to be pushed back a year, citing the impact of Covid-19. Some like generation company Alinta Group, which owns Loy Yang B coal generator, and network company Ausgrid, along with the Australian Financial Markets Association which represents energy traders, are now pushing for even longer delays, of up to 24 months.

The 5-minute rule was urged by zinc producer Sun Metals, arguing that the current 30-minute settlement was open to rorting by generation companies, and the shift to 5-minute settlements (the grid is already managed on a 5-minute trading period) would encourage faster and smarter technologies like battery storage and demand management.

The response to the delay – initially proposed by the AEMC and other key regulatory bodies – has provoked a predictable response. Companies and governments heavily committed to the clean energy transition argue there is no case for the delay, saying the industry has had nearly four years to get ready.

This includes the governments of South Australia (committed to net 100 per cent renewables by 2030), the ACT (already serving the equivalent of all its electricity needs from renewables) and the City of Newcastle, which also has a 100 per cent renewables target.

They’re supported by public submissions from the Clean Energy Council, renewables developer Tilt Renewables, demand response specialist Enel X, and software companies Plus ES, Hansen and Ready Energy.

“If the AEMC considers there is a plausible risk of financial contagion (from a delay), support should be targeted to the industry participants that need it through a more transparent and efficient means than by delaying 5MS, which will impose high opportunity costs on customers, battery storage providers and demand response providers.against delay,” Enel X says.

Some groups, particularly the major energy users, are sitting on the fence, and Tas Networks says it has a neutral position, but favours a short delay if there has to be one.

Most of the others – network operators and fossil fuel generators – are arguing for the delay, saying it would reduce costs. But this view is contradicted by the Australian Energy Market Operator, which also appears to have a neutral position but says it faces an additional bill of $7 to $9 million if a 12 month delay is implemented.

Among those advocating a delay is CS Energy, even though it says its preparations have not being affected by Covid 19, Ausnet, Mondo, Engie,  Citipower, Powercorp, United Energy, SA Power Networks, ERM, Sanjeev Gupta’s Simec Energy, Jemena, Vector and the federal government owned Snowy Hydro, which argues there have have been delays to upgrade of plants needed to make them operate faster.

The City of Newcastle says there has been no clear argument supporting this delay. “Moving to a five minute market will greatly support the transitions needing to occur and provide advantages to smart energy users such as City of Newcastle who have both supply and generation sites that will be negatively impacted by any implementation delays,” it said.

ACT energy minister Shane Rattenbury joined the South Australia government in arguing against the move, suggesting only a sixth month delay if one is needed at all. However, most energy companies have argued against this, saying the change to be implemented in the middle of the summer holidays would be problematic.

The Australia Institute says if the AEMC does rule for a delay, it needs to back it up with evidence of financial impacts.

“The NEM faces major reliability challenges as coal-fired power stations retire,” TAI said in its submission.

“The Liddell power station is expected to retire in April 2023 and other coal-fired retirements will follow. It is critical that appropriate price signals are in place for sufficient time, in order to stimulate investment in an efficient portfolio of generation, storage and demand-side measures to replace them.

“The investment case for batteries has already been adversely affected by the implementation of mandatory primary frequency response. Delay of 5MS will further erode the battery value stack and make investment less likely. This will harm competition in energy and FCAS markets.”

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