SA sets up retailer reliability obligation trigger on power supply for summers to come
Power companies will be forced to ensure they can’t sign up customers unless they have locked in generators to supply enough electricity for summer demand peaks.
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The State Government has given a big stick to the operator of the electricity market to force retailers to ensure they have enough power available for the summers of 2022 and 2023.
Retailers will face penalties of up to $100 million if they fail to meet the demands of the grid. In the first time new laws have been used, Energy and Mining Minister Dan van Holst Pellekaan has set expected peaks in demand which act as benchmarks retailers must meet.
The move, announced in the Government Gazette on Thursday, creates a trigger for the so-called Retailer Reliability Obligation.
“This will provide the Australian Energy Market Operator with greater flexibility,” Mr van Holst Pellekaan said.
“Should AEMO’s forecasts one year out from these periods show a reliability gap, retailers will be required to have enough electricity supply contracts in place or face penalties.
“AEMO would also be able to procure additional reserves as a safety net.
“This allows us to take precautionary measures to safeguard South Australian consumers.”
Previously, retailers were able to sign up customers without needing to ensure there would be sufficient generation capacity to meet demand.
Through the COAG Energy Council, the states agreed to the new system, which took effect last July.
SA’s typical peak operational demand is about 3000MW.
Mr van Holst Pellekaan has set peaks of 3030MW for 2022 and 3046MW for 2023 — based on AEMO scenarios of a 50 per cent probability of exceeding that level.
When AEMO triggers the obligation, retailers must register their contracts to show they will be able to meet their share of expected peak demand.
Contracts can be with any type of generation including gas, solar, hydro, wind, coal or batteries — with authorities weighting that according to how reliable the source is.
If AEMO has to procure generation to cover a shortfall, any companies which failed to meet their obligation stand to cop recovery of up to $100 million of those costs.
In addition, fines of $1 million or $10 million for repeat offenders can be pursued by the Australian Energy Regulator.
The Australian Energy Council, which represents 21 major businesses, warned that the move risked increasing electricity prices.
“Investment confidence comes from market decisions made independently of government,” the council’s chief executive Sarah McNamara said.
“No short fall in meeting the reliability standard has been identified by the market operator for SA, so it is difficult to understand the rationale for this decision.
“SA, even with the retirement of the Osborne and Torrens Island A power stations, will have sufficient electricity supply to reliably meet the needs of electricity customers. This is likely to improve further with the expected approval of the Energy Connect interconnector to NSW.
“Imposing this additional burden means retailers will need to have additional contracts in place by January next year or potentially face penalties.
“This will have an impact on retailers and retail competition in the state.”