AEMO flags level three ‘lack of reserve’ notice across SA, VIC, NSW and Tasmania
Power generators have been accused of sitting on spare capacity in order to boost prices, as blackouts loom across five states.
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Power generators have been accused of adding to the uncertainty and chaos of the electricity supply crisis by taking capacity out of the market to access increased compensation payments, with almost 4000 megawatts of supply sitting on the sidelines as the NEM faces a blackout threat.
On Tuesday the Australian Energy Regulator released a letter sent to generators warning them they must bid capacity into the market despite a $300MWh cap put in place by the Australian Energy Market Operator.
AEMO said on Wednesday it believed 2000 megawatts of power in each of Queensland and NSW has not been bid into the market - a situation which has helped trigger warnings of blackouts in all NEM states - Tasmania, Victoria, South Australia, Queensland and NSW - on Tuesday and Wednesday nights.
AER chair Clare Savage wrote to generators on Tuesday reminding them of their obligations to bid available generation capacity into the market despite pricing caps introduced by AEMO, suggesting some generators were withholding supply in order to access higher payments when they were then directed to return to the market by AEMO.
“Recently the AER has observed that following the application of administered pricing in the NEM, generators are withdrawing available capacity from the market,” she said.
“This behaviour may be motivated by generators seeking to avoid the administered pricing compensation process in favour of the AEMO directions compensation process.
“As you know, market participants must not, by any act or omission, whether intentionally or recklessly, cause or significantly contribute to the circumstances causing a direction to be issues, without reasonable cause.”
Gas-fired generators need a price of over $500MWh to turn a profit given soaring spot prices for the fossil fuel, sources said, illustrating why some electricity suppliers are withdrawing from a market offering a $300MWh price cap.
The letter was released after the energy market operator flagged potential blackouts in Victoria, Tasmania and South Australia for Wednesday evening as the east coast power crisis deepens.
The Australian Energy Market Operator issued notices flagging a level three “lack of reserve” notice in the southern states on Tuesday afternoon, as it updated the widening gap between available capacity in the NSW.
At 2.15pm AEMO updated its forecast power shortfall notices for NSW, saying as much as 1748 megawatts of energy needs to come into the market before to avoid load shedding on Tuesday night. That figure represents about 14 per cent to 15 per cent of the state’s usual evening load.
Also, Queensland households have been urged by Powerlink to cut their energy consumption on Tuesday evening amid fears of a power blackout.
The state-owned transmission company called on residents to limit their use of air conditioners, switch off electrical equipment at power points and turn off unnecessary lighting.
The Australian Energy Market Operator has warned for a second day running of the potential for electricity blackouts in both Queensland and NSW from 5pm to 9pm on Tuesday.
AEMO are “forecasting tight power system conditions this evening from 5pm so we are again requesting Queenslanders assistance in managing your electricity consumption over the peak period,” Powerlink tweeted.
Approximately 2,000 MWs of generation in both QLD and NSW, which hasn’t bid into the market, can be directed by AEMO to help meet forecast electricity shortfalls this evening. Our latest statement is available here: https://t.co/Pm2HpBNIShpic.twitter.com/br5qQTA15e
— AEMO (@AEMO_Energy) June 14, 2022
The warnings from AEMO came after it put in place a cap on wholesale electricity prices in Victoria and South Australia, a day after NSW and Queensland were hit with the same market clamp, as the nation’s energy crisis intensifies with potential blackouts set to hit on Tuesday evening.
The Australian Energy Market Operator widened a rarely-used cap of $300 a megawatt hour to the two southern states on Tuesday after electricity spot prices soared over the last week, meaning the control now applies to all four states in the national electricity market.
The cap means some generators have withdrawn capacity to the power grid which has led to forecast supply shortfalls and the potential for electricity blackouts in both NSW and Queensland from 5pm to 9pm on Tuesday, AEMO said. Households are being urged to monitor their use of electricity.
Queensland and NSW generators will continue to be instructed to keep running, despite the fact that some might not be profitable at those levels and therefore not bid energy into the system, Those generators would be allowed to seek compensation afterwards with the same move on Monday helping ease similar blackout fears.
“AEMO will take further actions to improve electricity reserves, including directing generators into the market, which helped meet electricity shortfalls in Queensland and New South Wales yesterday,” AEMO said in a statement.
“AEMO will continue to monitor reserve conditions closely in Queensland and NSW, and more broadly across the National Electricity Market, providing further updates should conditions change.”
Energy Minister Chris Bowen says Australia will be in for a “bumpy” winter period as the country battles energy shortfalls and coal fired power station outages.
“There is a big chunk of coal fired power out of action in Queensland. That has led to higher prices, and … with the situation in Ukraine, flooding and it being a bit colder earlier than normal, that has increased the load on the system,” Mr Bowen said.
“It’s all being actively managed. We can have confidence in our operators, regulators who are working together with the states.”
Mr Bowen also said the state and federal governments are working together to “manage the situation”.
“The operator tells me there is no need to be concerned about blackouts in the immediate future,” Mr Bowen said.
“I’m not here to give a magical guarantee, but I am here to say that everything that could be done is being done very actively.”
Gas-fired generators need a price of over $500MWh to turn a profit given soaring spot prices for the fossil fuel, sources said, illustrating why some electricity suppliers are withdrawing from a market offering a $300MWh price cap.
Still, the behaviour of some power generators to withdraw supply has drawn criticism from experts given the precarious nature of the grid amid a cold snap on the eastern seaboard, widespread coal outages across the system and high fuel costs.
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
Profiteering and bad behaviour would need to be reviewed in the wake of the energy crunch, according to the Public Interest Advocacy Centre’s Craig Memery.
“I expect there will be big reviews over the next year that find some* generation businesses have been profiteering through bad behaviour in the #energycrisis. It’s particularly off when you consider they have made massive windfall gains already, with more to come,” Mr Memery said on Twitter.
The Australian reported energy companies are strong arming domestic manufacturers into accepting 12-month contracts at sky-high natural gas prices, forcing businesses to warn the consumer watchdog about “price gouging” and “cartel-like behaviour”.
The market operator is already enforcing a $40 a gigajoule cap on gas prices, in a bid to help manufacturers exposed to spot gas prices survive the early winter cold snap, which has lifted electricity demand across the National Electricity Market.
Queensland gas exporters are likely to face more pressure over their supply to the domestic market, with new figures released by EnergyQuest showing that more gas flowed north along pipelines to Queensland than was sent south as the energy crisis emerged.
Mr Bowen did not rule out implementing a 90 day temporary export and price control to make more gas available but warned the government does not have a legislative basis to introduce short term reforms to contain soaring energy prices.
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