The Australian Energy Regulator is meeting with ministers and industry today as South Australia, Queensland, New South Wales, Victoria face the prospect of winter power blackouts due to a lack of supply from energy generators.
The Australian Energy Market Operator (AEMO) reported electricity shortfalls in Queensland and NSW overnight but said it was able to avoid blackouts by intervening to direct generators to bid into the market.
The operator says it continuing to seek support from electricity generators to fill “supply gaps”.
AEMO this morning signalled it is anticipating an energy supply crunch in South Australia on Friday from 8am to 9:30am and 5pm to 9:30pm, issuing a “Lack of Reserve Level 3” (LOR3) notice.
A LOR3 notice signals a forecasted “deficit in the supply/demand balance”, according to AEMO.
“This condition exists when the available electricity supply is equal to or less than the operational demand. This means there are no reserve supplies available,” AEMO states.
“Controlled load shedding may be required as a last resort to protect system security and prevent long-term damage to system infrastructure.”
AEMO this afternoon issued further LOR3 warnings in SA for Wednesday 9pm to 9.30pm and Thursday 8am to 8.30am and 9am to 10am.
A forecasted shortfall warning is also in place from Thursday 3pm all the way through to 4am Friday.
AEMO today said it was using LOR notices in South Australia, NSW, Queensland and Victoria to “encourage generators across the NEM (National Electricity Market) … to bid their availability into the market, rather than being directed to do so”.
Both AEMO and the Australian Energy Regulator attributed the shortfall in supply to generators pulling their bids from the market in response to price caps being introduced for their electricity.
This remains a very precarious moment for the state’s energy system
Australian Energy Regulator chair Claire Savage said she wrote to every generator in the east coast on Tuesday to make sure they understood their responsibilities.
“We saw the situation evolve over the weekend where there was a price cap put into the wholesale market and a number of generators who said they were available suddenly withdrew their capacity,” she said.
“We wanted to be quick off the mark to communicate with these generators to put them on notice and make sure they understand their obligations.”
Premier Peter Malinauskas said he received advice this morning that “there’s a degree of confidence there’s enough supply in the system” for South Australia to avoid an imminent blackout.
But the Labor Premier took numerous swipes at the condition of the national electricity market due to “repeated policy failures that seem to be obsessed with market ideology rather than outcomes for users”.
“This remains a very precarious moment for the state’s energy system, as is the case throughout eastern Australia,” he told ABC’s RN Breakfast.
“And to say that we’re disappointed by that prospect is I think a gross understatement.”
Malinauskas said the country was witnessing a “market failure on a grand scale across the National Electricity Market” that was occurring “in a way that I think a range of policymakers should be deeply ashamed of”.
“The simple fact is that we’re in a first world country that is energy rich, and the fact that we’ve now got Australians being told that they should turn off porch lights to keep the system going. I think is somewhat of an embarrassment,” he said.
Asked if the market structure was broken, Malinauskas said: “I think it’s fair to say it is.”
“If it wasn’t broken, I don’t think we’d face the prospect that we’re currently enduring,” he said.
“There are a range of external factors that are beyond people’s control, obviously the Ukraine crisis being the best example of that.
“But nonetheless, we are an energy-rich nation and we should be capable of offering secure supply to our constituents, to our industrial users, to businesses in a way that … gives them confidence to invest in the future.”
Malinauskas’ energy minister, Tom Koutsantonis, labelled the situation the “saddest chapter in the Australian energy market’s history”.
“The idea that Australian generators are buying Australian gas and Australian fuel, are not getting into the market to provide Australian customers with their power is a national disgrace,” he told ABC Radio.
“The Australian Energy Market Operator is compelling participants in a market to trade, cause they’re refusing to, and the commodity they’re refusing to trade is an essential utility in electricity.
“Anyone in Australia listening to this would think we’ve all gone mad.”
Koutsantonis said the chances of a blackout in South Australia today or this week were “relatively unlikely, in fact very unlikely” because “we have plenty of capacity, they’re just not bidding”.
“This is not like a hot summer where everything is on and it’s just getting hotter and hotter and demand increases and then something breaks which means we have a blackout.
“This is ‘we are not participating because you’ve capped our prices so we’re pulling out’.
“Every player is acting rationally under the rules, but when you look at the rules collectively it’s a fiasco.”
Energy policy is set to be high on the agenda when national cabinet meets on Friday. Malinauskas said there was “no silver bullet solution” to the crisis but “all options are on the table”.
“There is a necessity for government to act in any way we can to, first and foremost secure supply,’ he said.
“I, for one, am willing to contemplate any government action that will help deliver that end.”
Prime Minister Anthony Albanese today urged energy companies to meet their responsibilities to customers.
“They have a responsibility to their customers, whether they be households or businesses, to do the right thing,” he told ABC Radio.
“If they’re not doing the right thing, the regulator will take appropriate action.”
State opposition energy spokesperson Stephen Patterson said the Malinauskas Government “must work more collaboratively with electricity generators to get more supply into the market to drive prices down and to stabilise the grid”.
“The energy crisis has well and truly arrived here in South Australia with AEMO already predicting potential power interruptions throughout the week,” he said in a statement.
“The most recent State Budget has no measures to deal with this energy crisis in the short term, in fact, Tom Koutsantonis and has cut proven programs that provided grid stability and reliability, such as the Home Battery Scheme and the Grid Scale Storage Fund.
“Instead, Tom Koutsantonis is spending $593 million on an experimental Hydrogen Power Plant – which isn’t expected to come online until the end of 2025 at the earliest, or even reduce residential electricity prices.”
SA-Best MLC Connie Bonaros labelled the National Electricity Market a “monumental failure”.
“The country has an electricity grid that isn’t fit-for-purpose in the 21st century, and when generators are legally able to withhold power to manipulate pricing there is something gravely wrong with the system,” she said in a statement.
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