How shorter time resolution is the key to decarbonising energy markets

If the energy sector wants to decarbonise, change is needed. Production from renewable energy sources like wind and solar fluctuate continually, which means the established way of using one-hour time resolution for intraday markets just isn’t fast enough. Shortening the time resolution and gate closure times to 15 or even 5 minutes would make it easier to match supply and demand. The result would be better planning, less need for reserves, and lower costs.     

The way the energy sector operates in many countries was perfectly fit for purpose when power was supplied mainly by thermal energy sources. Using one-hour time resolution in the intraday market made sense when production was mostly stable. However, more and more renewable energy sources are being integrated into the grid. These reduce emissions, but also bring challenges – mainly in the form of intermittent production. When production fluctuates rapidly because of cloud cover or a drop in wind, matching supply and demand becomes much harder with one-hour intervals.

    Why 15 or 5-minute time resolution?   

    Luckily, there is a solution – using 15-minute or 5-minute time resolution in the intraday market reduces imbalances. This has become increasingly important as renewable output tends to vary within the hour much more than conventional power plants. Shorter timeframes make it easier for the system operator to match supply and demand, meaning less reserves are needed. As a result, the overall grid operation cost is lower.

    A 15 or 5-minute imbalance settlement period (ISP) would also improve the accuracy of forecasts and enable the power balance to be controlled more effectively. Market prices would drive the balance between production and consumption as producers can more accurately offer balancing resources. The system will also be one step closer to becoming a real-time electricity market.

    In order to make shorter time resolution a reality, flexible generators like engine power plants  or energy storage are needed that can ramp up and down quickly to respond to changing demand. There should also be a regulatory environment that supports this change and establish a new wholesale energy market.  

    Source: Copenhagen Economics report

    Shorter gate closure times are also needed 

    Gate closure is the time at which participants in the electricity market submit their final bids and offers. In a traditional power system dominated by thermal baseload power plants, market participants have to submit their bids and offers in the time frame introduced by transmission system operators based on the operational need . However, in a renewable-dominated energy system, the timing of gate closure is much more important. 

    The closer the gate closure is to the start of the time unit, the lower the renewable forecast error will be as weather data is more accurate. This is important because forecast errors lead to higher curtailment and increase the usage of power plants as well as the demand for reserves – all of which will increase the system cost and CO2 emissions.

    If the gate closure time is five minutes before the relevant market time unit, it means that all power producers can modify their dispatch plan until five minutes before submitting their bid – and thus take into account the latest weather forecast, lowering any imbalances in the system.

    Figure: Less uncertainties for volatile producers with gate closure closer to delivery
    Source: Copenhagen Economics report

    The main benefit of shorter time frames for intraday markets and shorter gate closure times are system-level savings. These savings are expected to significantly increase as more renewables are integrated, as more renewables means more balancing is needed in the system. In a study conducted by Copenhagen Economics, the projected savings for the Nordic market alone was measured in millions of Euros.

    Source: Copenhagen Economics report

    The move to shorter intervals is already happening 

    The move to finer time resolution is already being implemented. For example, Southwest Power Pool and ERCOT in the USA use five-minute time resolution.

    In Europe, the Commission is working on a regulation to improve Europe’s energy market design, and moving closer to real-time markets is going to be part of the solution. Finland, together with other Nordic countries, will move from one-hour resolution to 15 minutes in 2024. Benelux countries and Germany also use 15-minute intervals, and the rest of Europe will follow in 2025. 

    Generally, the settlement period and the dispatch interval are the same. However, in some markets, the settlement period is different from the dispatch period, which is the time during which bids are received and the dispatch instructions are sent by the system operator. For instance, in Australia the dispatch interval is five minutes, but the settlement period is 30 minutes. That means the seller is not paid based on the price of power in 5-minute intervals but for the average price of a 30-minute block period.

    Other markets should also consider shorter time resolution and gate closure times. The reason why is simple - it means you can more easily integrate renewables and ensure stability while saving on overall system costs.

    Written by
    Wärtsilä Energy