The body that runs Western Australia's biggest power system may have to spend tens of millions of dollars hiring diesel-fired backup generators as part of desperate efforts to keep the lights on this summer.
Amid widespread disruptions to WA's power supplies, the Australian Energy Market Operator called for bids in September from energy companies and users to provide an extra 174MW of capacity for four months from December 1.
However, it is understood the system operator received a subdued response from the market when the tender period for additional capacity closed last month.
AEMO is now believed to be considering the use of dirty diesel-fired generators that can provide backup power in the event the grid comes under stress over the coming period.
Another sizzling summer on the cards
The moves come amid forecasts of a potentially scorching summer in WA, where the south west interconnected system supplies electricity to more than one million customers from Kalbarri in the north, Kalgoorlie in the east and Albany in the south.
In calling for extra capacity, AEMO in September noted the system was dealing with a "shortfall" of reserves caused by a number of different reasons.
Among them was the early retirement of a power station in Kwinana, south of Perth, an unexpected outage of another gas-fired plant north of the city and an increase in forecasts for peak demand.
On top of this, AEMO and the state Labor government have also been hit by the fallout from a worsening crisis in WA's coal basin, which has long formed the backbone of the electricity industry.
Two months ago, the Indian-owned Griffin Coal mine near Collie, 180km south of Perth, fell into receivership following years of operating problems and mounting losses and debt.
Coal supplies hit by double whammy
At the same time, Griffin's rival Premier Coal was plagued with problems of its own including declining ore reserves and a safety incident that interrupted operations.
Combined, the difficulties at the state's two coal producers have forced major customers including listed miner South32, as well as state-owned power provider Synergy, to look at importing coal from interstate and abroad despite sky-high prices.
They also prompted the state government to take the extraordinary decision of mothballing from September until January 1 the 340MW Collie coal-fired power station to preserve fuel supplies.
As part of its tender, AEMO said it was seeking companies that could either supply extra generating capacity or reduce their demand at times of strain on the grid.
The system operator said it wanted the services to be available from December 1 until the start of April between the evening peak between 5pm and 9pm.
This follows a series of rolling 'brownouts' that affected Perth during an intense heatwave last summer, when constraints in the poles and wires network meant supply was unable to keep up with demand.
AEMO would not be drawn on the level of interest in the reserve tender or whether extra diesel generators would be required as a backup this summer.
Instead, the agency noted it was "still assessing submissions" and would provide further information at the end of the month.
