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 roll 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 3 pm AEST on Tuesday, New South Wales had the largest forecast shortfall of 1,726 megawatts at 9 pm, among five such predictions. Queensland had three forecast gaps, the largest of which was 1,537 megawatts at 8 pm.
Aemo had warned Victoria could face blackouts on Wednesday evening but canceled the alert on Tuesday afternoon after the market responded.
Victoria’s energy minister, Lily D’Ambrosio, blamed the scare on “strange behavior” 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 activated it in NSW.
Aemo late Monday introduced $300/megawatt-hour price caps for the wholesale power market that now covers 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.
The energy shortage is expected to continue on Wednesday, with Aemo forecasting an electricity supply gap of over 2,800 megawatts in NSW at 8 pm.
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.
On Tuesday, Matt Kean, the NSW energy minister and treasurer ,told RN Breakfast that he was confident the state’s electricity market would weather another cold day without consumers turning 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 ensure that we don’t have any outages at this stage.”
Kean said he had been assured by the Aemo chair, Daniel Westerman, that “there are enough plants available to ensure reliability for the coming week in NSW”.
He said introducing 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, can direct plants to put electricity into the system, and that’s exactly what they’re doing now”.
The NSW minister also shed some of the blame on the state’s northern neighbors.
“There have been some big challenges in Queensland,” he said. “They’ve had an unusually cold winter, and many big generators have gleftthe 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 was withdrawn from the NSW market at one point overnight
Generators are there but pretending they are not to maximize compensation by being directed on. pic.twitter.com/vS25KUqrv4
— Dylan McConnell (@dylanjmcconnell) June June 132
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 to protect consumers when seven-day spot prices reach a cumulative $1.3591m.
The federal climate and energy minister, Chris Bowen, told an afternoon media conference that he was confident sufficient electricity supplies would be in the system to avoid blackouts.
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 expensive short-term supplies, Bowen said the energy ministers had tasked the competition regulator to act against “any untoward behavior” in the market.
A spokeswoman for the Australian Energy Regulator said that the agency was “monitoring the market closely”. It has also sent a warning letter of sorts to the industry.
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 the Sydney Short Term Trading Markets (STTM) and Victoria Declared Wholesale Gas Market (DWGM). The hat was set at a limit of $40/gigajoule after reaching cumulative high price thresholds in Victoria on 30 MaMay 30for Sydney on 7 JunJune 7will remain in place until prices stay below a threshold price for a day.
