Record $310m to ‘rescue the grid’

The emergency costs of rescuing Australia’s power grid soared to an all-time record after the SA/Victorian interconnector failed.

The emergency costs of rescuing Australia’s power grid soared to an all-time record after the South Australian and Victorian interconnector failed over the summer, while electricity and gas prices fell to a four-year low amid lower demand.

The costs of managing the power system soared to $310m in the first quarter of 2020, more than double the previous record set in 2008. It consumed 8 per cent of all energy costs for the three-month period compared with just 1-2 per cent historically, the Australian Energy Market Operator said.

Some $166m was recovered from power generators and the $144m balance from electricity retailers.

The 18-day loss of the Victorian and South Australian interconnector after a severe storm on January 31, along with two other power system separations during the period, accounted for $229m, or 74 per cent of the overall bill.

The cost of keeping the frequency of the power grid in a safe range — a service known as frequency control ancillary services — accounted for the bulk of the charges.

The cost for maintaining frequency rose to $175m due to the extended separation of the South Australian and Victorian power systems, which required fast-start gas generation to be fired up in both states to maintain system ­security.

The first-quarter figure compared with $81m in the last three months of 2019, which was already the highest quarterly number in more than a decade.

Victoria’s power supply was plunged into chaos on the final day in January after a storm triggered the South Australian ­interconnector to shut down, cutting electricity to the state’s giant Portland aluminium smelter and forcing the national power operator to find emergency supplies to keep the lights on amid heatwave conditions.

The summer’s biggest power crisis started after six major transmission towers in western Victoria fell over in a storm, knocking out the electricity interconnector and leaving South Australia separated from the national power market.

The costs revealed by AEMO underline a warning delivered by the federal government’s Energy Security Board in February which said the reliability of the nation’s power grid had deteriorated to critical status as severe weather and ageing coal plants raised new system risks.

Australia’s energy market agency upgraded its assessment of the current challenges posed by electricity reliability to critical from moderate a year ago, given the challenges of keeping the power system stable.

Spot power prices fell to $66 per megawatt hour for the first three months of 2020 across the national electricity grid, the lowest level since the fourth quarter of 2016 and 8 per cent lower than the final quarter of 2019 at $72/MWh.

Electricity demand eased, partly due to COVID-19, with gas prices falling in line with lower Asian tariffs while coal and hydro generators lowered their bids into the market. East coast wholesale gas prices hit a four-year low.