An unprecedented intervention in Australia's east coast energy market will be gradually removed over the next day, with authorities increasingly confident in the supply of wholesale electricity.
The Australian Energy Market Operator (AEMO) last week seized control of the east coast energy market for the first time in its history after days of volatility put several states at risk of blackouts.
The federal government backed the intervention, acknowledging the energy market had effectively failed, and credited the AEMO with successfully managing to avoid both blackouts and load shedding as temperatures on the east coast plummeted.
AEMO on Tuesday signalled there was sufficient supply to get through Wednesday but confirmed it was still directing generators to pump power into the network.
AEMO chief executive Daniel Westerman said the market would begin to set the price from 4am on Thursday, with the market fully reinstated 24 hours later, provided supply was guaranteed.
"We are taking a number of steps operationally and working very closely with generators to make sure that the dysfunctional behaviour doesn't re-occur" he said.
With the electricity sector last week dealing with soaring costs, AEMO initially imposed a price cap and compelled generators to offer their services.
But AEMO then suspended the spot market entirely across the national electricity market — which includes Queensland, Victoria, South Australia, NSW and the ACT — saying it was impossible to ensure reliable electricity supply under the current circumstances.
"We put the security of the grid and keeping the lights on above everything else," Mr Waterman said.
The crisis has been caused, in part, by soaring global coal and gas prices and an ageing fleet of coal-fired power stations in Australia operating below capacity.
Even after AEMO has left the market, it has warned the east coast could face challenges maintaining supply and demand.
Energy Minister Chris Bowen dubbed AEMO's action's "prudent" and endorsed the staged approach to reimposing normal market conditions.
"Risks remain in the system and I know that AEMO remains vigilant about what needs to be cared for in the coming days," he said.
