The operator of Australia’s main electric grid plans to conduct a “detailed investigation” into the breakdown of the country’s wholesale power market that triggered an unprecedented suspension during last week’s energy crisis.
The Australian Energy Market Operator said it plans to resume trading in a two-stage process on Wednesday, starting with the market setting prices again from 4 am AEST on Thursday. After monitoring conditions for 24 hours, Aemo will decide whether the market suspension will be formally lifted.
“We will be working very closely with the regulator and Australian Energy Markets Commission on a series of actions … to prevent this from happening again,” Daniel Westerman, Aemo’s chief executive, told journalists, adding that it would be looking “to make sure that that dysfunctional behavior doesn’t reoccur”.
“It’s not a place where the market operator wants to be in suspending the market, Westerman said. “So we’re looking at obviously undertaking a detailed investigation … to understand comprehensively the lessons learned and put in place actions, so it doesn’t happen again.” He did not give a date when the investigation would be completed.
The federal energy minister, Chris Bowen, said he wouldn’t comment on individual generators but said it was up to generators to bid into the market “as they’re required to do as a matter of law”.
Bowen said he supported the restart to energy trading as “a prudent and carefully managed approach to return to more normal market conditions”.
An unusually widespread and prolonged cold snap at the start of winter, combined with many coal-fired power units going offline, strained power supplies in five states. Temperatures have warmed in most places, easing demand, while some 4,000 megawatts of generation capacity have returned to operation since Aemo suspended the market.
Several energy ministers complained about what they saw as anti-competitive behavior by some generators that threatened blackouts in some states. The federal government has asked the competition watchdog to join the hunt for possible gaming actions in the market.
But Westerman downplayed claims the generators had made conditions worse.
“At an operational level, we have exceptional working relationships with each generator,” he said. “We have been able to reduce the amount of generation under direction from Aemo from about 5,000MW down to less than 1,000MW.”
Aemo has operated since 1998 without needing to suspend its main electricity market. Normally it would identify a potential future supply gap, announce it in a market notice, and generators would respond.
One complication was that soaring wholesale prices – mostly caused by an unusual reliance on costly gas – had triggered price caps, starting in Queensland. At $300 an MW-hour, some generators dropped out of the market, waiting to be instructed back in by Aemo, with the prospect of compensation in the future for any price gap.
Westerman and Bowen spoke out in favor of further developing a so-called capacity market that would pay generators and other electricity suppliers to have a certain amount of energy on standby. On Monday, Aemo and other members of the Energy Security Board released a design paper on the plans for consultation.
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Westerman said a capacity market would help transition the grid from fossil fuels, namely ga,s and coal. It would ensure “that we have sufficient dispatchable capacity at any time. That sort of mechanism will prevent these types of things [including the market suspension] from happening in the future.”
Bowen said he and the state and energy ministers wanted the work on a capacity market “to focus primarily on new technology”, such as storage.
“I want to see this done and sit down right,” Bowen said. “This is a massive transformation that we need to get cracking on.
“We need to make faster progress on the transformation, and we need the capacity mechanism to help us do that to provide that safety net underneath as we engage in this significant transformation to a more renewable economy, a more renewable energy system with more storage.”
