Wholesale Market Trials Real-Time Pricing
Wholesale Electricity Market Trials Real-Time Pricing
Organisations exposed to wholesale electricity prices stand to benefit from a Real-Time Pricing (RTP) trial launched today by the New Zealand Electricity Market (NZEM).
“Real-time pricing is regarded by many as an important evolution of New Zealand’s electricity market, as it offers purchasers the opportunity to participate more effectively in the wholesale price discovery process,” NZEM Chair Toby Stevenson said.
“Market Participants have long recognised that more could be done to deliver purchaser participation to its full potential and the real-time pricing trial reflects our commitment to progressing this.”
The Minister of Energy Pete Hodgson is heartened by the NZEM’s progress in this area.
“The real-time pricing trial is a positive and important step toward enabling effective consumer participation in the wholesale electricity market,” he said.
In the context of the NZEM, RTP means a wholesale electricity price is calculated and published every five-minutes. This provides market participants and other interested parties with almost constant information on the electricity price, which they can use to make consumption or production decisions.
“One of the key benefits of this kind of real-time pricing is that it gives wholesale purchasers and consumers timely and effective price signals to which they can respond,” Mr Stevenson said.
“The effects on price of factors such as transmission constraints and outages will be reflected in real time, enabling more efficient production and consumption decisions and increased energy efficiency.”
The RTP trial is one of a number of initiatives the NZEM has implemented or is currently progressing to improve purchaser participation in the market. Other initiatives include releasing information on final prices, hydrology, and historical bids and offers on COMIT freeto-air, and a project to improve demand-side bidding and the quality of market forecasts.
“Real-time pricing is part of our multi-faceted approach to increasing both market transparency and demand-side participation,” Mr Stevenson said.
The RTP trial, which begins today, involves the calculation and publication of six five-minute indicative prices and one aggregated indicative final price every half-hour. The prices will be published on COMIT and COMIT free to air in real time.
During the trial, the five-minute prices will not be used for market settlement. Currently the wholesale electricity price is calculated every half-hour and the prices that will be received and paid for electricity in every 24-hour period are not published until noon the following day.
“The real-time price trial will allow the market to assess both its benefits and the effect any actual demand-side response has on national grid management and security,” Mr Stevenson said.
The trial will initially run for three months and will be monitored and evaluated by a Project Team. There is potential for the trial to be extended for up to 12 months if required for evaluation purposes.
The trial’s aim is to evaluate the market’s response to the new five-minute prices. The next step will be to consider whether the market could be improved by using the five-minute pricesto calculate settlement prices.
“The publication of real-time indicative prices heralds a significant step forward in NZEM price information and provides another valuable opportunity for the demand-side to participate in the market,” Mr Stevenson said.