Energy market’s time to shine

3 min

In October, major reforms will be introduced in the National Electricity Market (NEM), improving market efficiency, competition and consumer benefits.

Years in the making, the reforms will help enable the energy transition to benefit Australian consumers. They include Five Minute Settlements (5MS), Wholesale Demand Response (WDR) and two-day retail switching.

These new market reforms are the cumulation of rule changes, innovative digital systems and extensive stakeholder engagement and partnership, to deliver this important reform package.  

AEMO CEO, Daniel Westerman, said: “The successful implementation of 5MS, WDR and customer switching will create better outcomes for market participants, consumers and a more efficient energy sector in Australia.”

In November 2017, the Australian Energy Market Commission (AEMC) tasked AEMO with leading a program to update market procedures, design and test systems and coordinate industry readiness with stakeholders for an October 2021 launch.

“From 1 October, 5MS will reduce the wholesale electricity spot market settlement period from 30 minutes to 5 minutes, matching the electricity dispatch periods,” Mr Westerman said.

“As one of the most significant reforms since the NEM’s inception in 1998, 5MS provides better price signal for investment in fast response and flexible technologies, such as batteries and gas-peaking generation.

“Over time, improved price signals should lead to more efficient decisions by generators lowering wholesale costs which make up around one third of a typical bill,” he said.

AEMO will also being reporting on unaccounted for energy (UFE) values as part of the Global Settlement (GS) ‘soft-start’ from October. AEMO will continue to work with industry to implement the full GS changes on 1 May 2022, as per the AEMC’s GS rule.

At the start of October, the time taken for consumers to change electricity retailers will reduce from up to three months to two--day transfers. Following a recommendation in the ACCC’s Retail Electricity Pricing Inquiry report, AEMO developed a new framework to facilitate faster and efficient switching.

“Faster switching between energy retailers removes a frustration, enabling customers to transition to better electricity offers, access new services and provide retailers with a more streamlined process,” Mr Westerman said.

Complementing the capabilities from 5MS is WDR, available from 24 October 2021. This reform will enable large commercial and industrial businesses to bid and schedule a reduction in electricity consumption for payment. A new market participant category – the wholesale demand response provider – will be introduced to coordinate and offer ‘demand response’ into the NEM.

“AEMO will operate a new market for large energy users to commit to lowering usage to help the power system security and reliability, including peak demand days and periods of high wholesale electricity prices, increasing competition with potential flow-on price benefits to consumers,” Mr Westerman said.

The implementation of these efficient and digitally enabled reforms is the culmination of years of collaboration and contribution from a broad range of energy market bodies, energy participants and consumer stakeholders.

“AEMO thanks all stakeholders for their contribution to numerous working groups, developing new procedures, system design and testing programs to launch these three critical reforms on schedule,” Mr Westerman said.  

For further information, please visit AEMO’s 5MS and GS, WDR and customer switching webpages.

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