Rare price cap enforced in Queensland as wholesale power prices soar

The risk of power outages in Queensland on Monday night has been averted for now, but the energy regulator warned it would have to “monitor reserve conditions closely” in the Sunshine State.

The risk of blackouts in Queensland on Monday night has been averted for now, but there could be challenging days ahead, the energy regulator warned.

The Australian Energy Market Operator confirmed it had used its powers to order electricity generators to produce enough supply to meet consumer demand on Monday night.

It followed an extraordinary market failure which saw the regulator cap skyrocketing prices, leading to generators reducing the supply they were pumping into the system and creating the risk of blackouts originally forecast from 5.30pm to 8pm.

It forced AEMO to use rarely used powers to direct generators to increase supply to meet consumer demand.

“At this stage, these efforts have provided sufficient generation to cover the lack of reserve 3 shortfall,” an AEMO spokesman said before 5.45pm.

But it is expecting challenging days ahead, with the wholesale price threshold still in place along with generators offline to deal with maintenance and faults.

“AEMO will continue to monitor reserve conditions closely in Queensland, and more broadly across the (national energy market), providing further updates should conditions change,” the spokesman said.

EARLIER

Queenslanders are being urged to brace for potential blackouts tonight, as the energy crisis on the east coast hits home.

It comes as the head of Queensland’s power infrastructure body Powerlink has called for people to conserve power tonight and on Tuesday morning.

The national energy market regulator has warned there is the risk of blackouts between 5.30pm and 8pm on Monday night, after electricity generators pulled supply from the market.

Skyrocketing wholesale prices forced the regulator to put in place a price cap, after a threshold had been reached.

The price cap saw generators lower their bids into the energy market, leading to what the Australian Energy Market Operator called a “deficit in the supply/demand balance” – which means a risk of blackouts.

It is currently working to ensure this does not happen, issuing strong warnings to generators, called “Lack of Reserve notices” and has the power to direct them to generate enough supply to meet consumer demand if they fail to act.

Further updates are expected as the situation develops.

Global Roam analyst Paul McArdle, who runs the Watt Clarity website, warned not meeting the supply would be “catastrophic.”

Yikes.... the wheels do seem to be falling off today - forecast 1,454MW load shedding this evening in QLDhttps://t.co/m2sFQ6OlY8
via @WattClarityhttps://t.co/rxuwD6Eh0ppic.twitter.com/XCp64TVrO1

— Paul McArdle (@4paulmcardle) June 13, 2022

Powerlink boss Paul Simshauser has urged Queenslanders to ease off power and airconditioning use to avoid blackouts on Monday night.

This means households “considering the number of rooms being heated by airconditioners”, turning off at the power point computers, TVs and other appliances in standby mode and turning off pool pumps and second fridges.

Mr Simshauser asked Queenslanders to do this from 5pm today and from 8am tomorrow morning at the peak times, due to the potential for blackouts over “the next day or so”.

“Community safety and wellbeing is important so only manage energy consumption if it is safe to do so,” Mr Simshauser said.

“By carefully managing electricity use at home and in your workplace, the community can help ensure that power system security is maintained in Queensland,” Mr Simshauser said.

Businesses are also being asked to turn off water heating systems and urns, except for food and beverage preparation and cleaning, as well as switch off advertising lighting and any unnecessary exterior lighting.

State energy minister Mick de Brenni has signalled potential blackouts in Queensland tonight will likely be avoided.

Mr de Brenni said the Australian Energy Market operator said the situation was being managed through market mechanisms and was “confident the gap will be resolved” as long as the generators respond appropriately.

“I understand the Queensland electricity transmission provider has asked that consideration is given to turning off unused appliances, and this will provide more comfort in the system,” Mr de Brenni said.

“Commercial and industrial users are also contributing by managing energy use around peak demand, as they ordinarily do.

“We will continue to monitor the situation and provide further updates as necessary.

“Queenslanders have conserved energy in situations like this before as recently as last year and I’m confident Queenslanders will be able to do it again.”

It is the first time in three years AEMO has had to trigger the price cap on wholesale electricity high prices, with the last instance taking place in South Australia and Victoria in 2019.

It is amid the growing energy crisis in Australia and coal and gas generators come under increasing pressure.

There had been a 140 per cent increase in prices in the first quarter of the year compared to the same period last year, driven by a range of factors both global and domestic, and they have continued to rise since then.

The “high price threshold” threshold of $1.359 million over seven days, or an average of $674.16/MWh, was reached just before 7pm on Sunday night and remained there on Monday.

The cap forces the wholesale high price to be instantly dropped to $300/MWh, stopping price rises from getting out of control, but seeing less generation put into the market, while a separate cumulative spot price is near to being reached.

Power generation prices in Queensland have been surging, forcing the market operator to enforce a rarely used price cap overnight. Picture: Andrew Henshaw

It is putting pressure on electricity supplies, but there is no immediate risk of brownouts or other interruptions to power.

This is due to generators pulling back from putting supply into the market while prices are low.

AEMO has issued a “lack of reserve” notice – acting as a warning and encouragement to generators to increase supply, as well as directing some generators to continue to supply enough to meet consumer demand.

There are several other steps AEMO can take to increase supply to ensure there are no interruptions to power in Queensland.

It will review the situation again at 4am on Tuesday and extend the price cap if needed.