AEMO orders generators to keep running amid blackout warnings
AEMO has introduced price caps and ordered NSW and Queensland generators to keep running, amid warnings blackouts could be imminent.
The nation’s energy crisis has hit a fresh peak with the energy market operator forced to intervene, demanding generators in Queensland and NSW to continue to run despite not being profitable.
The Australian Energy Market Operator’s move meant the threat of blackout – running most of the day on Monday – ended that evening as supplies stabilised.
But 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.
“There was a net flow of gas from the southern states to Queensland from September 2021. This supplied not only LNG but also Queensland power generation,” EnergyQuest said in its June report on Monday.
“Flows to Queensland started to fall from the end of April 2022 and in the first week of June the flow reversed, probably because of intervention by AEMO invoking the gas supply guarantee.”
And while gas producers have made much mileage over the last week from the fact that they were supplying as much gas as they could into the southern market, with the pipeline running at maximum capacity last week, EnergyQuest figures show that was likely only a response to the crisis.
“There has been some focus on pipeline capacity available to move gas south following use of the gas supply guarantee, with some suggestions that the pipelines (primarily the south west Queensland pipeline) were at full capacity. While this may have been correct for a short period, the SWQP only averaged 57 per cent of capacity in the first week of June,” EnergyQuest said.
The report was released as the Australian Energy Market Operator introduced a rarely-used price cap of $300 a megawatt hour in Queensland and NSW on Monday after electricity spot prices soared over the last week.
AEMO told Queensland and NSW generators they must 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.
Despite that, AEMO on Monday warned of a potential level three lack-of-reserve situation in Queensland, along with potential shortfalls of power in Queensland and NSW on Tuesday, a signal that load shedding – meaning potential blackouts – may be needed in the face of supply shortfalls.
“As a consequence of the administered price cap in Queensland, AEMO has seen generation bids reduce and has issued lack of reserve notices in both Queensland and NSW, signalling a reduction in predetermined electricity reserve levels,” the market operator said in a statement on Monday. “To maintain power system security and reliability, AEMO has directed some generators to continue meeting consumers’ demand to improve reserve conditions. At this time, there is no impact to consumer supply.”
Officials in Queensland were also urging consumers to “turn off unused appliances” to “provide more comfort in the system”.
“Queenslanders have conserved energy in situations like this before as recently as last year,” Queensland Energy Minister, Michael de Brenni, said.
The operator said it would maintain price caps until at least early on Tuesday, but they could be maintained if spot prices remain at elevated levels.
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.
Energy market analyst Paul McCardle noted on Monday that widespread outages at coal-fired stations in NSW and Victoria were being exacerbated by a sharp fall-off in wind generation on Monday, with wind generators across the NEM supplying less than 1GW of energy in the afternoon, down from levels of about 3.5GW over the weekend.
On Monday, AEMO also floated the prospect of load shedding in NSW on Tuesday night, releasing a lack of reserve notice flagging a relatively small power shortfall, and saying it was seeking a market response. But as the new government weighs its options for measures to stabilise power production in the medium term, including talk of the introduction of a domestic gas reservation, EnergyQuest noted that gas flow into the domestic market increased in the first quarter.
“Total east coast gas demand in Q1 (both export and domestic) was 471.8 petajoules (up by 2.7PJ quarter-on-quarter), while supply was 478.9PJ (up by 3.8PJ quarter-on-quarter), with a surplus of 7.1 PJ compared with a surplus of 6.0 PJ a year earlier,” its report read.
And while EnergyQuest noted that surplus was sent into storage, the report also says gas stored in the domestic market at the end of March was well below the levels at the same time last year – a fact that is likely to have exacerbated the current supply problems.
“The surplus went into storage – mainly into Iona underground gas storage. Gas in storage at the end of March was 81.6 PJ compared with the level in March 2021 of 101.9 PJ,” EnergyQuest said.
A spokesman for Energy Minister Chris Bowen said that while the immediate threat of blackouts had receded on Monday night, the national electricity market still faced a challenging winter.
“AEMO has been active in requiring generators to dispatch more power, which appears to have avoided the need for major load shedding in the short term,” the spokesman said. “This is a challenging situation for the national electricity market and will need to continue to be actively managed over coming days.”
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