Eastern Australia has faced another day of electricity shortages requiring regulators to order generators back into the market to avoid power outages and blackouts as a long cold snap rolls on.
Each of the five states in the national electricity market (Nem) – from Queensland to Tasmania – had a forecast shortfall of electricity, according to the Australian Energy Market Operator (Aemo) on Tuesday.
As of 3pm AEST on Tuesday, New South Wales had the largest forecast shortfall of 1,726 megawatts at 9pm, among five such predictions. Queensland had three forecast gaps, the largest of which was 1,537 megawatts at 8pm.
Aemo had warned Victoria could face blackouts on Wednesday evening, but cancelled the alert on Tuesday afternoon after the market responded.
Victoria’s energy minister, Lily D’Ambrosio, blamed the scare on “strange behaviour” from power companies sitting on their reserves and not bidding into the market.
She said the generators were “potentially” gaming the system, a topic federal, state and territory energy ministers asked Aemo to investigate after their meeting last week.
“No one likes the situation we’re seeing now,” D’Ambrosio told ABC radio. “We’ve been told and assured by the market operator that there is more than sufficient power in Victoria available, it’s just not being bid into the market.”
The market operator also triggered its plan to pay big power users to reduce their load in Queensland for a second consecutive day on Tuesday and also activated it in NSW.
To reduce the risk of blackouts, @AEMO_Energy has activated its system of paying big energy users to cut their load in Queensland, as they did yesterday. Now NSW will do the same… pic.twitter.com/6A00SfDTbG
— Peter Hannam (@p_hannam) June 14, 2022
Aemo late on Monday introduced price caps of $300/megawatt-hour for the wholesale power market that now cover the four mainland states in the Nem after prices exceeded thresholds that trigger limits.
On Tuesday morning, Tasmania, the one state in the national market without a price cap, was getting spot prices at the maximum market level of $15,100/mwh.
NSW now loading up with five forecast shortfall periods… (@AEMO_Energy via @reddolphinsys ) pic.twitter.com/hRKcv1N9E9
— Peter Hannam (@p_hannam) June 14, 2022
The energy shortage is expected to continue on Wednesday with Aemo forecasting an electricity supply gap of more than 2,800 megawatts in NSW at 8pm.
Energy ministers were confident the power sector would get through without forced blackouts. They rely on Aemo to muster extra support and instruct generators to switch on when shortages loom.
Matt Kean, the NSW energy minister and treasurer, told RN Breakfast on Tuesday that he was confident the state’s electricity market would weather another cold day without consumers having to turn down their appliances to avoid blackouts.
“We’ve got enough reserve capacity at the moment but obviously, there is not a lot of slack in the system,” Kean told a media conference. “But [it’s] the market operator who runs the system, they’re directing our plan to make sure that we don’t have any outages at this stage.”
Kean said he had been assured by the Aemo chair, Daniel Westerman, that “there’s enough plants available to ensure reliability for the coming week in NSW”.
He said the introduction of the price caps had prompted some generators to withdraw from the market as the limit was “too low to cover their costs”.
“So this is a market failure issue,” Kean said. “Aemo, the system operator, they have the power to direct plants to put electricity into the system and that’s exactly what they’re doing at the moment”.
The NSW minister also shed some of the blame on the state’s northern neighours.
“Obviously, there’s been some big challenges in Queensland,” he said. “They’ve had an unusually cold winter and number of the big generators have gone out of the system. That’s putting increasing pressure on the New South Wales generators.”
Kean’s Queensland counterpart, Mick de Brenni, rejected the view his state was to blame for tight market conditions.
“Queensland has been doing the heavy lifting for the entire east coast, whether it’s on supplying gas to NSW and Victoria, to opening up more gas fields for exploration,” De Brenni told journalists.
“But the main thing that I want to reassure all Queenslanders is that the system is operating,” he said. “We don’t expect there to be widespread outages.”
However, Dylan McConnell, an energy expert at Melbourne University, said the forecast shortfalls appear to be artificial, caused by the sudden withdrawal of capacity from the market.
This is pretty rubbish behavior - over 3GW of generation withdrawn from NSW market at one point overnight
— Dylan McConnell (@dylanjmcconnell) June 13, 2022
Generators that are there, but pretending they are not to maximize compensation by being directed on. pic.twitter.com/vS25KUqrv4
In Victoria, 2 gigawatts of generation capacity had also been pulled out overnight. The state’s brown coal plants are not linked to global markets and their fuel has not increased in line with those international price spikes.
Aemo set wholesale price caps on Queensland on Sunday for the first time since 2019 and the first time in that state. The caps are automatically triggered with the aim of protecting consumers when spot prices for a seven-day period reach a cumulative $1.3591m.
The federal climate and energy minister, Chris Bowen, told an afternoon media conference that he was confident there would be sufficient supplies of electricity in the system to avoid blackouts.
Earlier, he told RN Breakfast the market was “not a perfect system”. The price caps had prompted generators to withdraw, only to be instructed back into the market by Aemo.
Energy ministers would look at the market’s operation “in due course”, Bowen said.
The challenge was “you can’t predict when a coal-fired power station is going to go out”, reinforcing the need to make the transition to “new forms of energy” that the previous government had failed to do.
Asked about reported price-gouging by energy companies offering businesses only short-term expensive supplies, Bowen said the energy ministers had tasked the competition regulator to act against “any untoward behaviour” in the market.
A spokeswoman for the Australian Energy Regulator said that agency was “monitoring the market closely”. It has also sent a warning letter of sorts to the industry.
The AER sent around a nice letter to everyone today:https://t.co/OI2KZrl5xZ pic.twitter.com/7CWoDS9VlN
— Dylan McConnell (@dylanjmcconnell) June 14, 2022
Bowen did not reject outright a call by Malcolm Turnbull on Monday that eastern Australia should introduce a temporary gas reservation system to ensure supply and limit prices, but said any change to the so-called gas trigger would need consultation and then legislative change.
In a statement issued on Tuesday morning, Aemo said it would “take further actions to improve electricity reserves, including directing generators into the market, which helped meet electricity shortfalls in Queensland and New South Wales” on Monday.
It added that separate price caps remain for gas markets in both the Sydney Short Term Trading Markets (STTM) and Victoria Declared Wholesale Gas Market (DWGM). The cap was set at a limit of $40/gigajoule after reaching cumulative high price thresholds in Victoria on 30 May and for Sydney on 7 June and will remain in place until prices remain below a threshold price for a day.
Additional reporting by AAP.
