A look at AEMO pre-dispatch forecasts over the last year

The Energy Security Board (ESB), under the direction of the National Cabinet, is currently working on a number of changes that will impact how generators connect to and operate within the National Electricity Market (NEM). The Congestion Relief Market (CRM) model is one such change to how the NEM currently operates that could result in new revenue streams for battery operators providing load in constrained network areas. A detailed design of the specifics of the CRM is to be provided by the ESB in mid-2023[1].

A new market adds complexity to battery decision-making – particularly when to charge

Whilst offering another revenue source for battery storage is a great way to encourage investment into the storage market, it will likely add further complexity to the decision on when to charge batteries from the grid. Within the current market, and assuming batteries are attempting to maximise arbitrage revenues, the battery operator (or software) will seek to charge from the grid at the lowest prices and discharge at the peak. In the figure below, this would mean charging between 11am-1pm and discharging from 6pm.

With the introduction of a Congestion Relief Market, this decision will likely change as there will be an opportunity to act as a load at different times of the day and receive payments from the CRM market. For example, if the price at 10am was $115/MWh and the estimate was for a price of $100/MWh at midday, then the battery operator would be willing to charge at 10am as long as there was a difference in CRM payments between the two periods of at least $15MWh[2].

A key consideration in this calculation will be the price forecast used for future prices when the battery operator (or software) is making its decision. With this in mind, this Chart of the week looks at AEMO’s pre-dispatch forecasts[3] and how they have differed from actual NEM prices over the past year.

The chart below details the differences between the forecast of NSW prices from AEMO’s 10am pre-dispatch forecasts compared with actual prices at 10:30am, 12pm, and 2pm. Data between April 2022 and April 2023 has been used.

Figure 2 shows that around 57% of the time, the difference between actual and forecast prices at 10:30am (dark blue line) is negative, meaning the price that occurred was lower than forecast 30 minutes prior. The most common outcome for the 2hr and 4hr ahead forecasts (green and yellow lines) is a positive difference, i.e. a higher realised price than forecast. Also of interest is how rarely the pre-dispatch forecast price is close to the actual price. For example, if we use a difference of $10 between the forecast and actual price as a measure of “closeness”, then the 30-minute ahead forecast would be considered close 25% of the time, with the 2hr and 4hr forecasts being close 21% and 22% of the time respectively.

For those using pre-dispatch prices as an input into battery charge (or other load) decision-making, there may be important implications if these results persist over time. For example, if making the decision at 10am and looking at the price difference between 10:30am and 12pm, the results over the last year would indicate that the 10:30am price is likely to be lower than forecast whilst the price later in the day is likely to be higher than forecast. This may mean the operator would be better off charging earlier in the day than a “perfect foresight” model would suggest, particularly if there are CRM payments available.

Cornwall Insight Australia is hosting a webinar on 9 May 2023 discussing the proposed Congestion Relief Market and potential outcomes for those participating in the market. Registration and attendance are free; we would love to see you there.

Register here or contact enquiries@cornwall-insight.com.au.

[1] ECMC Communique

[2] Note this is a very simplified example. In reality there will also be tradeoffs between FCAS participation and having sufficient energy stored to respond to unanticipated price spikes etc.

[3] Data is taken from nemweb.com.au – /Reports/Archive/PredispatchIS_Reports/

To keep reading, please log in to your account or sign up for free

Alternatively, please sign up to receive free market insight online and direct to your inbox

Related thinking

Commercial and market outlook

VNI West selected path; an incentive for delaying coal retirements?

On 29 May 2023, AEMO published a conclusions report on the VNI West Project. According to the report, option 5A (a variant of  AEMO’s preferred option in a previous consultation paper) is preferred for VNI West. In option 5A, the transmission line crosses the Murray River north of Kerang (Wamba...

Commercial and market outlook

Spot the spread: Are current battery revenues enough to encourage further investment?

In AEMO’s ‘Step Change’ scenario, it was estimated that storage capacity in the NEM would need to increase by a factor of 30 between 2022 and 2050 to support a grid transformation that limits temperature rises below 2 degrees. This represents about 13GW of new storage capacity by 2030 and...

Power and gas networks

Trouble Ahead? – What’s Next For TNUoS Charges?

Some industry participants will be well versed in the Transmission Network Use of System (TNUoS) charging regime, while others may not have had to engage with it before. Regardless of previous involvement, these charges are becoming increasingly important to understand for reasons we will discuss shortly.  In this week’s ‘Chart...

Commercial and market outlook

Feast or famine? FCAS costs in South Australia

Frequency Control Ancillary Service (FCAS) prices are highly volatile, at times resulting in short periods of extremely high FCAS cost. Three such events in recent history are the South Australian (SA) islanding events in November 2019, February 2020, and November 2022. During these events, FCAS costs in SA totalled $16...

Low carbon generation

NSW’s transition to a new era: What will replace Eraring?

After 52 years of operation, the NSW Liddell power station officially shut down last 28 April. With Liddell’s closure, NSW’s transition to a green energy future is in full swing. First announced in 2015, NSW had seven years to ensure there is enough replacement capacity once Liddell is retired. Since...

Commercial and market outlook

It’s the Liddell things that matter

Australia’s oldest coal-fired power plant Liddell retired completely in the last week of April 2023 after 52 years. This giant of AGL, which had a total registered capacity of 2,000 MW, operationally acted as a 1600MW station and 1200MW after the closure of its third unit. Australia’s transition to clean...

Commercial and market outlook

Iceman Liddell calls it a career

Recently in the news, there has been some concern that the closure of the Liddell power station in NSW will be a repeat of what we witnessed in 2017 with the closure of Hazelwood. Hazelwood’s closure led to higher prices, particularly over summer peak demand periods1. This is a poor...

Energy storage and flexibility

Exploring the impact of storage assets on QEJP sensitivities

Battery storage has great potential to generate high revenues during large market shifts, especially in Queensland (as shown in our previous analysis in Cotw #158). The Queensland government’s recently announced Energy and Jobs Plan (QEJP) would be another big shift as it aims to reduce the state’s reliance on generation...