Looking beyond 5-minute settlement to tariff models that show how flexible energy retailers can be

As Australia’s National Electricity Market moves toward five-minute settlement on 1 October, many energy retailers are grappling with the technology needed to reconcile customer use with energy spot market prices within the new interval. One software-as-a-service (SaaS) provider from New Zealand considers this just one of many changes in energy regulation coming down the pike, and is bringing its cloud-based, flexible energy billing platform that enables retailers to design innovative pricing packages tailored to suit constantly evolving regulations, energy mixes and different market sectors to Australia.

“While the intention behind five-minute settlement is very, very good from a demand response point of view, in that it supports new and better business models,” Jessica Venning-Bryan, Chief Customer Officer at Meridien-owned Flux Federation told pv magazine Australia, “retailers are really just focused on being compliant, rather than developing systems that allow them to innovate off the back of these changes.”

She tells the story of one retailer that spent its whole annual innovation budget, changing its systems to accommodate new energy market rules even before the advent of five-minute settlement (5MS).

5MS has evolved from a rule-change request made to the Australian Energy Market Commission by Sun Metals zinc refinery back in 2016.

After market consultations and adjustments, the AEMC in 2017 scheduled implementation of 5MS for 1 July this year — reflecting the time retailers might need to adjust their systems.

Last year, in response to a request from the Australian Energy Market Operator, the AEMC resolved to delay implementation of the new rule by three months, to 1 October 2021, because retailer resources had temporarily shifted to how to maintain services and operations under Covid-19 restrictions.

The intention of the change, from 30MS to 5MS is to provide a more accurate price signal for investment in fast-response technologies, such as batteries, new-generation gas peaker plants and demand response.

Such services, offered at prices that reflect their value to the market at any time, are vital to help stabilise the grid, says the AEMC.

Cloud-based data processing reigns

Aligning operational dispatch and financial settlement at five-minute intervals, will enable a variety of energy generators, including solar owners and virtual power plants, to more efficiently bid to supply grid needs; this in turn, says the AEMC, should over time result in lower wholesale costs, which make up around a third of bills to consumers. But for many of Australia’s more than 20 tier-two energy retailers, management of the new regulation just can’t be bolted on to existing systems

“If retailers don’t innovate, they won’t provide the kind of enticing products that stimulate demand response — and enable those people who have invested in new hardware to use it to its true potential,” says Venning-Bryan.

Software, she says, is the missing link between hardware investment and energy-retail models.

Upon the launch of its FlexiBill product into the Australian market late last month, Flux Federation told pv magazine Australia that the cloud-based software had already enabled its parent company Meridian Energy (New Zealand’s largest gentailer, which supplies 35% of the country’s electricity) to grow customer numbers by 13% month on month, and increase sales by 24% over those achieved in the fourth quarter of 2020 — due to the speed at which Meridien can now deploy new propositions.

The company says it anticipates that FlexiBill will allow, “Australian retailers to reprice multiple connections within 30 seconds and speed up billing processes by up to 230%”.

Innovate, test and implement — fast!

Venning-Bryan adds, “We’ve really changed the way billing software is created, so it can easily be used to design a new tariff for any type of new technology; it can use any sort of consumption data; and support any sort of commercial construct a retailer could think of.”

Rather than having to retrofit new tariff models to existing software systems, this flexible SaaS offering supports fast testing and tailoring of bespoke models, for residential and commercial and industrial clients, as well as for virtual power plants and power purchase agreements.

Retailers can “get a new tariff to market in less than five minutes”, claims Venning-Bryan, “and learn very quickly whether the market wants it or not”.

The all-in-one energy bill

From the customer perspective, she says, many are “still suffering from receiving multiple bills for multiple types of products that they’re buying from the retailer; this product can roll up all those commercial arrangements into a single bill”.

Agricultural customers who might have a solar-powered homestead or irrigation, grid powered chilling or threshing and some gas-powered processes could receive one integrated bill that’s both simpler and more transparent in terms of cost-benefit comparisons.

Commercial and industrial consumers may have a combination of PPA, or onsite solar, and gas used for high-temperature processes. Integrated billing that incorporates time-of-day energy costs lets them more easily understand the advantages of perhaps adjusting their schedules to take advantage of periods of high renewable generation.

Venning-Bryan says such billing supports customers in understanding and realising the benefits of their investments in renewable energy.

Enabling effective demand response

“The uptake of solar energy in Australia has been extraordinary, and the uptake of batteries is forecast to really ramp up over the next three years,” she says, adding that such distributed resources are playing an increasingly important role in electricity supply.

“The investments that companies and individuals are making will become even more powerful in the market and retailers need to be there, supporting those investments with more interesting products and tariffs,” posits Venning-Bryan.

With algorithms deployed to do the heavy lifting of calculation and reconciliation in a cloud environment that can handle the vastly increased quantities of data required for 5MS compared to 30MS, new regulations could look more like the opportunities they’re intended to create.