AEMO moves to bolster emergency defences against summer blackouts

AEMO has sought extra generation and reduced consumption from large power users to head off the potential of blackouts in SA and Victoria this summer.

Australia is struggling to build major infrastructure and generation projects quickly enough.

The Australian Energy Market Operator has sought commitments of extra electricity generation and offers to lower demand during periods of grid stress in Victoria and South Australia this summer as it develops plans to prevent blackouts.

AEMO this week warned of a shortfall in generation in South Australia and Victoria this summer, as a decade of insufficient power generation begins, with reliable electricity not guaranteed.

Even if Australia avoids blackouts, supply shortfalls will drive higher wholesale prices that eventually flow through to households and businesses.

Australia has already endured two consecutive years of price rises about 20 per cent, amid high inflation and soaring interest rates.

The warnings have heightened concern about the country’s clean energy transition.

Fears were elevated with confirmation that Snowy Hydro has experienced a further $6bn cost blowout.

AEMO said it had asked for commitments of extra generation for both SA and Victoria, and tenders from heavy users who could be paid to lower demand when the grid was strained so much that blackouts could occur.

“AEMO seeks offers to provide out-of-market reserves (load reduction or generation increase),” a tender from the market operator read.

AEMO said interested parties have until September 30 to make offers.

Australia has set an aggressive target of having renewable energy generate more than 80 per cent of the country’s electricity by 2030, in an attempt to meet its net zero emissions goal by 2050 – which climate scientists say is vital to tackle climate change.

Coal, however, remains the dominant source of electricity in Australia, with the fossil fuel accounting for two-thirds of all power generation.

But under mounting social and economic pressure, AEMO expects more than 60 per cent of the country’s coal-fired power generation assets to close in the next decade, and it is increasingly alarmed by the slow pace of building new renewable energy assets to replace them.

Australia is struggling to build major infrastructure and generation projects quickly enough.

Even those that are already in development are experiencing cost overruns, exemplified by Snowy Hydro.

Once expected to cost $2bn, the project has been beset by problems and delays, and it is now expected to cost taxpayers $12bn.

But industry executives and analysts said the project must proceed, whatever the cost, as Australia struggles to build so-called firmed storage assets that can dispatch electricity when the sun is not shining or the wind is not blowing.

Still, the soaring costs threaten to stiffen resistance and frustration about the cost of rapidly moving the country’s electricity grid off coal.

Federal Energy Minister Chris Bowen on Friday defended the cost increases, insisting it would be value for money.

“The analysis shows that there’s still $3bn net value, and of course it’s 40 per cent built, so it would be a huge waste of money to cancel it at this point,” Mr Bowen said.

“Obviously, the cost blowout is disappointing. There’s a couple of factors at play here. Every major construction project in the world is going through these cost blowouts. This is one of the most complicated engineering projects under way in the world at the moment. So, to a certain degree that’s understandable.”