The NEM in five minutes

One market, five regions, one solver

The National Electricity Market (NEM) covers Queensland, New South Wales (with the ACT), Victoria, South Australia and Tasmania. Each is a region with its own spot price. The regions are joined by interconnectors, the high-voltage links that carry power between them. Western Australia and the Northern Territory are not part of it.

Every five minutes the Australian Energy Market Operator (AEMO) runs the NEM Dispatch Engine, NEMDE. NEMDE is a linear program: it takes every generator's offer, every load's bid, a demand forecast per region, and a long list of physical rules, and it finds the cheapest way to meet demand for the next five minutes. Its answer is a dispatch target for every scheduled unit and a flow for every interconnector. The physical rules it must obey are the constraints this course is about.

  offers, bids, forecasts, constraints
                 |
                 v
     +------------------------+
     |  NEMDE (linear program)|   minimise the cost of dispatched offers
     |  every 5 minutes       |   subject to: demand met, units within limits,
     +------------------------+               every constraint satisfied
                 |
                 v
  targets per unit, flows per interconnector, price per region

Offers, the merit order, and the price

A scheduled generator does not name a single price. It submits an offer of up to ten price bands, each with a quantity in MW, for every five-minute interval of the day. It may re-bid the quantities as conditions change. Loads and batteries submit the mirror image. Stack every band from cheapest to most expensive and you have the merit order; NEMDE works up that stack until demand is met.

The regional reference price (RRP) is not the last band dispatched. It is the answer to a precise question: what would it cost to serve one more megawatt of demand at this region's reference node? The reference node is a nominated point in each region's network (Sydney West for NSW, for example) where the price is defined. In an unconstrained hour the answer is simply the next band in the stack. Once a constraint binds, the answer can be a blend of several units, or a unit in another region, and the price can land on a number nobody offered. Chapter 5 works through that.

Two more facts you will need. Regional prices are capped between a market floor and a market price cap, both set by the rules (the cap was $17,500 per MWh in 2025). And the price you see is the marginal cost, so it is itself a shadow price: the value of the supply-demand balance constraint in NEMDE's solve. Hold on to that thought, because the marginal values of network constraints in Chapter 4 are the same kind of object.

Unit classes

Scheduled

Follows NEMDE's target every five minutes: large thermal, hydro, big batteries, some loads. Offers are binding.

Semi-scheduled

Wind and solar farms above 30 MW. They offer like scheduled units but their availability is a forecast (the unconstrained intermittent generation forecast, UIGF); NEMDE can cap them, which is where most curtailment lives.

Non-scheduled

Small units NEMDE does not dispatch; they simply show up as reduced demand.

Bidirectional

Batteries registered under the 2024 integrated resource provider rules: one unit that both charges and discharges.

Interconnector

Two kinds. Regulated links (QNI, VIC-NSW, Heywood) are dispatched as network; market network service providers (MNSP: Basslink, Murraylink, Terranora) offer their transfer capacity into the market like a generator would.

Why this matters for constraints: only quantities NEMDE controls can appear on the adjustable side of a constraint. That means scheduled and semi-scheduled units, interconnector flows, and the frequency-control services below. Non-scheduled generation cannot be on that side; it can only shift the limit.

Ten more markets: frequency control

Alongside energy, NEMDE clears ten frequency control ancillary services (FCAS) at the same time, in the same solve. Six are contingency services that catch the frequency after a sudden loss of generation or load, split by speed (1 second, 6 seconds, 60 seconds, 5 minutes) and direction (raise or lower). Two are regulation services that trim the frequency continuously under automatic generation control. Because one unit's capacity can be sold as energy or as reserve, the markets are co-optimised: NEMDE decides the split that is cheapest overall. Chapter 8 covers how FCAS requirements are written as constraints and why their marginal values are usually tiny.

Market time

Every timestamp in AEMO's dispatch data is market time: Australian Eastern Standard Time, with no daylight saving, which is the same as Brisbane all year. The market day starts at 04:00. Dispatch interval 1 runs from 04:00 to 04:05 and is stamped 04:05; interval 288 ends at 04:00 the next morning. A timestamp always names an interval by its end. When a table says 19:25, NEMDE ran that interval just after 19:20, starting from the grid's measured state at 19:20 and a demand forecast for 19:25, and its targets are what each unit must reach by 19:25.

That end-of-interval label hides a split you need to keep straight. Quantities measured at the start of the interval, such as a unit's SCADA output or the initial MW NEMDE started from, sit in the row stamped 19:25 but describe 19:20. Quantities that belong to the end, such as dispatch targets, prices and marginal values, describe 19:25 itself.