What is 5 minutes settlement and how does it benefit you?

28 Sep 2021 |

On October 1st, Australia’s National Electricity Market (NEM) is changing from 30-minute to 5-minute settlement.

What is the current process?

The NEM consists of AEMO dispatching electricity, and generators in the NEM calculate the price based on the 5-30 arrangement. In other words, five-minute dispatch prices are averaged (on a time weighted not volume weight basis) to produce the 30-minute Trading Price or “spot price” – this is then used for settlement.

This arrangement has been used since the start of NEM (December 1999) until now. However, the 30-minute settlement usage demonstrates limitations in the metering and data handling technology at that time.

Why is the 30-minute settlement changed into the 5-minute settlement?

The 30-minute settlement is now no longer suitable as there is a mismatch between dispatch and settlement, which leads to inefficiencies in the operation and generation mix of the market.

Therefore, applying a 5-minute settlement to align the dispatch and settlement prices is necessary to create a more accurate, reliable, and transparent electricity market.

Benefits of 5-minute settlement

  • Enhancing data transparency

As the system provides data every five minutes, it allows customers to track their using data more easily and sufficiently. Moreover, as there is a shift from “settlement by difference” to a “global settlement” framework, AEMC requires all unmetered devices to be published on the market systems to ensure the data is fully transparent.

  • Customers can buy electricity at a lower price

A common tactic that is frequently used by large generators when the 30 minutes settlement was applied is to bid at a sky-high price for five minutes and then rock-bottom prices for the rest of the half-hour.

In this way, they create their own advantages as they gain sufficient market power thanks to a supply constraint or lack of competition.

But now, as the sky-high 5-minute bid increases the price paid to the generator when averaged over the half-hour, customers are benefitting from lower electricity prices as their tactic is no longer used.

  • Improving price signals for more effective electricity use, especially for large businesses.

The 5-minute settlement allows users to change their consumption in response to price. It is difficult for a business or a household to turn off their refrigerator, air-conditioner, or electrical appliances during the 30-minute high price period but it is easy to do so for 5 minutes.

This using behaviour change will encourage to lower the electricity cost as well as to reduce the price difference between 5-minute settlement periods.

  • Improving generators’ effect and electricity use

With 5-minute settlement, modern generators with batteries will create more advantages over Australia’s old coal generation. This new generator will not only react far faster than any fossil fuel generator to immediately take advantage of the 5-minute periods of high or low electricity prices but also eliminate start-up costs, start-up times, and minimum levels of stable output as there are no moving parts.

 

What are the expected changes from October 1st, 2021?

As 5-minute settlement will produce around six times more meter data than a 30-minute settlement, IT system interfaces need to be upgraded to handle the significantly larger amount of data. The network load will increase for consumers wanting to view their usage data web and mobile. Consumers/sites with a smart meter will receive 288 five-minute intervals instead of 48 half-hour intervals.

Moreover, the Meter Data File Format (MDFF) for submission and Meter Data Management (MDM) profile, which is particularly related to the accumulation of meter data, should also be considered.

To ensure a smooth transition to a five-minute settlement, retailers need to choose an accurate, market compliant software solution that can handle the increased data load.

 

How to extract your data from Blue NRG My Account Portal

If you are a Blue NRG customer, you can export your 5-minute interval data from My Account portal in an excel spreadsheet format. You can also get your consumption insight through interactive graphs.

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