Cornwall Insight Australia develops 5-minute model for Benchmark Power Curve

Cornwall Insight Australia has developed a 5-minute model for their Benchmark Power Curve (BPC), improving the granularity of their price forecasts from 30 minutes to 5 minutes dispatch for the first five years of the 30-year forecast.

Cornwall Insight Australia’s BPC helps market participants understand trends in future prices and their underlying drivers, enabling them to make informed decisions. In line with the implementation of 5-minute settlement on 1 October 2021, we are pleased to announce that we have developed a 5-minute dispatch model which, as always, is based on the principles of the real NEM dispatch engine.

The National Electricity Market (NEM) has traditionally been dispatched every 5 minutes but settled every 30 minutes, with 30-minute prices being the simple average of the previous six 5-minute periods. This simplification was considered acceptable at the inception of the market, but as the transition continues towards high penetration of Variable Renewable Energy (VRE), it was recognised that aligning dispatch (the physical operation of the system) with settlement (price signals) should lead to more efficient behaviour by market participants including bidding, operational decisions, and investment. This enhancement is particularly beneficial for Battery Storage, VRE, and other market players that have fast rap-up periods such as gas

Shaz Billimoria, Energy Market Modelling Consultant at Cornwall Insight Australia, said:

“30-minute settlement created perverse incentives for generators, leading to all sorts of distorted bidding behaviour. But it also provided a buffer of sorts. If you didn’t generate during a high price early in a 30-minute block, you could play catch-up and ensure you were dispatched later in the 30-minute block, with the high price flowing through to the 30-minute average. 5-minute settlement doesn’t allow for this – no more playing catch-up, no margin for error. We’ve already seen bidding behaviour for large-scale solar adjust since 5-minute settlement went live, with a large reduction in the volume bid at the market floor of $-1,000/MWh.

“Fast and flexible is the name of the game, so we expect assets with those characteristics to benefit, like batteries, some types of gas, and some forms of demand response. 5-minute settlement creates new uncertainties, risks and opportunities – our granular 5-minute forecasts of medium-term price dynamics can help market participants adapt and respond.”

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