AEMO lifts spot market suspension as crisis eases

Electricity grid infrastructure
Image: Shutterstock

AEMO, Australia’s energy market operator, has begun lifting its unprecedented suspension of the spot electricity market in stages, starting today, as a return of some coal-fired generation eased the country’s power crisis, Reuters reported.

The market operator last week capped wholesale prices and had to force generators using gas and diesel to supply power, even at loss-making prices, to fill a gap from coal-fired generation to avert blackouts.

Related article: Five policy decisions that led to today’s energy crisis

Around 25 per cent of the market’s coal-fired capacity has been offline over the past few weeks due to planned maintenance and unplanned outages due to technical faults, leading to shortfalls as demand spiked amid a cold snap, while prices rocketed due to soaring global gas and coal prices. 

Yesterday, the market operator said generators were gradually restoring output to more normal conditions.

“We have seen nearly 4,000MW of generation return to service since this time last week, and that means the risk of any of shortfall has reduced markedly,” AEMO’s Daniel Westerman told reporters at a televised media conference.

The market suspension would be lifted in stages, with generator bids used to set electricity prices from 4am (1800 GMT) on Thursday. The operator would monitor the market for at least 24 hours before making a decision to formally lift the market suspension, Westerman said.

While the market has stabilised for now, analysts say Australia is likely to face more power supply disruptions and high prices over the next few years as the country’s ageing coal-fired plants, which supply more than 60 per cent of the market’s power, are likely to break down more often.

“When the coal generators stop working, you just don’t have enough bulk energy during the day or in the night,” said David Leitch, principal at energy consultant ITK Services Australia.

“We just haven’t built enough wind and solar yet to replace the coal generators,” he said.

The government, energy regulators and power providers expect around 14GW, or 60 per cent of eastern Australia’s coal-fired capacity to be retired by 2030. That will need to be replaced by more than double that capacity in wind and solar farms and energy storage to ensure the lights stay on.

Related article: Enova Energy enters voluntary administration

One of the issues standing in the way of more rapid construction of renewable energy and back-up power is lack of transmission capacity, a problem that the new Labor government wants to overcome by providing $20 billion in cheap finance.

However proposed transmission projects are facing regulatory delays and protests from farmers and communities opposed to huge towers crossing their land and national parks.