Blaming renewables and state governments for all that is wrong with our electricity market might look like good political strategy, but it is not going to fix the underlying problems that caused last summer’s blackouts or the rising price of energy.

An open letter from energy and industry experts to the Prime Minister, published today in The Australian Financial Review, has called for practical solutions that can be implemented this year to drive new market rules and energy efficiency policies that could achieve results — on price and reliability — before next summer.

The “rules” that govern Australia’s electricity markets were written last century to regulate power stations using technology from the century before that. Fixing these rules so that they accommodate new ways of generating and storing electricity would unleash innovation in demand management, battery storage and new consumer services that will disrupt incumbent coal and gas players and deliver cheaper more reliable and clean power. It’s why the owners of the old technologies — coal and gas — like the old rules.

But the times, they are a changing. In the last month we have seen Elon Musk and Mike Cannon-Brookes attempt to reshape the SA energy market by Twitter, we have seen the SA Premier and the federal Energy Minister hold the most remarkable press conference in living memory, and we’ve seen the Prime Minister pivot from “coal is great” to proposing Snowy Hydro 2.0 without skipping a beat. 

[Wonder why the Coalition dislikes renewables so much?]

But regardless of who wins the next election, or which storage technology winds up the cheapest, the one thing we can say with certainty is that a 21st century electricity market needs 21st century market rules. And one of the first rules we need to change is the speed at which the market price is allowed to move. 

The so-called proposed “5-minute settlement rule” has the potential to simultaneously address the cause of price spikes and the reliability of the grid, and it would reduce emissions. And it could do all of this without a budget allocation or even passing legislation through Parliament. It could be in place well before next summer’s peak demand arrives just by changing how we “settle” electricity contracts.

Like when you sell something — whether it is shares or a house — the moment of sale in the electricity market is called a “settlement”. If you own some shares in a company, or a house, and you see that the price of your asset has gone up, you “settle on a price” and proceed with the exchange. But that’s not how it works for electricity in Australia. 

While electricity is supplied in five-minute blocks, the price is “settled” in half-hour blocks based on the average price of electricity over half an hour. If you were selling shares on the ASX it would be like instead of getting the price of the moment, waiting to find out what the average price for those shares was over the day before you knew how much money you would get. For coal-fired power stations that pump out the same amount of electricity all day it does not matter much if they get paid in five-minute or 30-minute blocks, but for batteries that can respond instantly to peaks in demand it would make a huge difference. That is why the fossil fuel generators are opposed to any change.

We already know batteries soak up excess energy when it is cheap, or even free, and send it back into the grid when it is needed. Hooked up to solar panels, batteries allow consumers and communities to meet peak demand locally. They can be used also reduce the scale and cost of required “poles and wires” in new and growing areas.

Critically, batteries are also uniquely well suited to jumping into the market on a short-term basis, smoothing price spikes and reducing the capacity of incumbents to use strategic bidding to push up prices.

[How One Nation has hijacked the government’s energy policy]

Faster trading of wholesale electricity would also bring new competition from new entrants such as energy conservation technology, which can respond very quickly to short term changes in the market, if there is a price signal. In turn that would smooth out volatility, undercut ‘Enron’ style strategic bidding to push up prices, and deliver security in a renewable-powered grid.

An Australian invention also means that air conditioners and other consumer devices can be remotely controlled to reduce their load for a few minutes just before a demand peak hits.

Despite all these possibilities our regulators, cheered on by the old incumbent coal and gas generators, refuse to act. The Australian Energy Market Commission, which sets the rules, has repeatedly delayed making a decision. And energy companies are busy lobbying — directly or through their lobby group, the Australian Energy Council– to prevent the five-minute rule change going through.

The Australian Energy Council actually submits as an argument against competition: that it would “change the economic sustainability of some generators”. In other words: the rule change would be effective.

All of the loud voices with all of their solutions to the “energy crisis” have agreed on one thing. The energy market is not working in the national interest. A five-minute rule might not compete with the Punch and Judy show that makes up so much of the energy debate. But it is a straightforward regulatory change can than improve the energy market. If we cannot even do that then we really are in trouble.

* Ben Oquist is the executive director of The Australia Institute