How power is dispatched across the system
Coordinating the dispatch of power across the national electricity market
Generators submit the price and quantity of electricity that they are willing to generate to the system operator, AEMO.
AEMO’s central dispatch engine orders the generators’ offers from least to most expensive and determines which generators will be dispatched. In this way, the expected demand for electricity is supplied by the lowest cost mix of generators.
In delivering electricity, AEMO dispatches electricity every five minutes, so generators are required to bid to supply electricity in five minute blocks. For the purposes of settlement, the price is then averaged out over 30 minutes.
The spot price for a 30 minute trading interval is the average of the six dispatch interval prices. All generators dispatched in that trading interval receive the spot price for the period that they were dispatched.
Moving to five minute settlement
The AEMC has made a rule to change the settlement period for the electricity spot price from 30 minutes to five minutes, starting in July 2021. 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.
Regions and interconnectors
The national electricity market is a five region spot market which has:
- interconnectors (transmission links) which join the regions
- regional reference nodes (RRNs) at the largest load centre of each region.
Prices are calculated at each regional reference node. Demand in the spot market can be met within one of the regions or across regions.
Electricity moves across regions through interconnectors which connect adjacent regions. Interconnectors deliver energy from lower price regions to higher price regions and can thereby equalise prices between regions.
When interconnectors are operating at full capacity, electricity is transported from a lower price region and sold in a higher price region. However prices are not equalised across regions.
Interconnectors can be a partial substitute for local generation in a region to the extent they can be used to import electricity instead of increasing the capital stock of generation within a region.