Industry on edge despite AEMO tick for power’s grid winter readiness
Energy market executives have warned of the risk of a looming winter crunch, despite the market operator saying the country’s power network is well placed to cope with a demand spike.
Energy market executives have warned of the risk of a looming winter crunch, despite the market operator saying it believes the country’s power network is well placed to cope with a demand spike.
Australia’s national electricity market is entering one of two peak periods when cold winter conditions prompt a rise in demand for heating. Authorities are desperate to avoid a repeat of the events of 2022 when the market was suspended in a bid to stabilise the grid and avoid blackouts.
In its latest winter readiness report, the Australian Energy Market Operator will reveal that the market is better positioned than it was in 2022 amid record high gas reserves, ample coal stockpiles and forecasts for a relatively mild winter.
Should that forecast materialise, Australia will avoid soaring increases to the wholesale cost of electricity, which are a key determinant in how much power bills rise in 2024. Australian households and businesses have endured two years of increases of more than 20 per cent.
AEMO chief executive Daniel Westerman will say generators have used recent months to prepare for winter and the weather outlook is favourable, though he acknowledges risks.
“While the 2023 winter weather outlook looks less severe than 2022, with lower than average rainfall and warmer temperatures, the potential for extreme weather events and generation vulnerability are still there,” Mr Westerman will say. “Fuel supplies are estimated to be similar to last year, with improved coal stockpiles increasing the availability of generators that were operating at reduced capacity last year because of coal supply issues.
“East coast gas storage levels are also higher than historical levels. Victoria’s Iona Gas Storage facility hit a record level at the end of the March quarter, and the Dandenong storage facility is in a healthy position.”
AEMO will also reveal that there is 2300MW of dispatchable generation available across the market, while there is another 2200MW of new renewable generation and storage capacity expected to be available this winter.
Mr Westerman will say this extra capacity will partly offset the impact of the closure of AGL Energy’s Liddell coal power station in April, and the prolonged outage at Queensland’s Callide C. But, while AEMO will present a rosy outlook, senior industry sources insist the market is precariously placed and susceptible to shocks that could prompt demand curtailment and price increases.
Energy executives said there was a high chance of unforeseen outages at coal power plants.
Coal is still Australia’s largest electricity source and the country’s ageing coal power plants have in recent years suffered a spate of outages, which has seen the role of gas fundamentally change. Gas is typically used as a so-called peaker, with plants only fired up during periods of high demand – notably in the morning and evening. When coal power stations go down, gas power plants are forced to run throughout the day.
“We see a real risk of gas curtailments this winter. Conditions are better than last year but I think we are sleepwalking into some real issues,” one energy executive told The Australian. Sources said they also worried about the impact of the prolonged outage at Callide C, Queensland’s fifth largest coal power station, which would increase the strain on other generation sources.
Wind is a major source of electricity generation in winter but it is volatile. When gusty, wind can drive down wholesale electricity prices and the renewable source was a key driver for Victoria recording very low wholesale power prices on Wednesday.
However, during periods of renewable droughts, when the sun is not shining or the wind is not blowing, Australia does not have sufficient storage capacity to smooth the dispatchable capacity of wind particularly. These periods could often coincide with cold weather, and Victoria’s reliance on gas for heating could also leave the grid under strain, traders and executives said.
Gas supplies have also been patchy in recent weeks. ExxonMobil’s Longford plant has suffered a series of constraints and further disruptions are scheduled for this week.
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