Five Minute Settlement (from 1st October 2021)

At 1st October 2022 the NEM had passed its 1 year anniversary of the commencement of 5MS – and, as such, we included a focus on ‘One Year on from Five Minute Settlement’ as Appendix 7 within GenInsights Quarterly Update for Q3 2022.

On 17th November 2022 we wrote the article ‘(belatedly) one year on from Five Minute Settlement’ to share some details – touching on both:
1)  Some price outcomes observed; and
2)  How much it all cost.

From 00:00 on Friday 1st October 2021, Five Minute Settlement commenced.

We documented this at the time with an article very early on Friday 1st October … and then with a quick review of bids the following day.

Like any large project (and particularly any large IT project) it was a prudent precautionary principle to ensure that there was a contingency plan in place for any unforeseen delays or difficulties encountered in the final stage of initiation.  This was completed through a precautionary Rule Change submitted by AEMO to AEMC, which AEMC duly noted.

However on Wednesday 1st September 2021, following a period of focused industry-wide testing and remediation managed by AEMO, AEMO announced ‘all systems go, for Five Minute Settlement’.

As a result of the larger difficulties introduced by the COVID-19 pandemic, the AEMC issued a 3-month delay to the anticipated start date … pushing this back to 1st October 2021.

After considering the Sun Metals rule change over almost 24 months, the AEMC issued a Final Determination for the implementation of Five Minute Settlement with a start date of 1st July 2021.

The AEMC noted:

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.

Sun Metals Corporation submitted a rule change request to the AEMC for the implementation of Five Minute Settlement, with the proposal to utilise a voluntary opt-in basis (and utilise SCADA meter readings) in an attempt to keep implementation costs low.

Even in the early years of the NEM there were deliberations about how to resolve the ‘5/30 issue’ through some change to the market dispatch and settlement arrangements.

One example was this final report by NEMMCO from 21st February 2003.

The NEM commenced with five minute dispatch and thirty minute settlement.

Even prior to the implementation of the NEM (e.g. in the VicPool market, the SEM and the QIM) the markets operated with five minute dispatch and thirty minute settlement.