Value of Aligning Dispatch and Settlement

Author: Dylan McConnell12

1Melbourne Energy Institute (University of Melbourne)

2Australian-German Climate and Energy College (University of Melbourne)

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Working paper 4Summary Points

  • More storage capacity is required with 30-minute settlement to realise the same value as under 5-minute settlement.
  • The impact of forecast errors has a substantial impact on the value of storage under 30-minute settlement.
    • The value of storage under 5-minute settlement is generally 60-80% higher than under 30-minute settlement.
    • 5-minute settlement also significantly improves the value of storage in real world cases when the occurrence of price spikes is not perfectly known. Approximately 80%-90% of the 'perfect value' can be captured with 5-minute settlement. By comparison, only 40%-60% of the 'perfect' value is captured under 30-minute settlement.
  • 30-minute settlement increase cap contract prices from storage by up to 30% relative to the 5-minute settlement case.
  • Cap contract penalty payments can substantially erode the value of providing fast response.

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