A heatwave sweeping across multiple states has rung alarm bells in the power market, with warnings issued about a potential shortfall in generation reserves for both Victoria and NSW on Friday amid expected near-record demand and outages at coal power plants.

The Australian Energy Market Operator advised of "extreme" temperatures above 40 degrees Celsius in Victoria on Friday that could affect output levels at plants and asked generators to check on how much power they expected to be able to supply.