AI Group says successive governments to blame for electricity supply crisis

Successive governments criticised for the potential electricity crisis confronting the east coast.

Loy Yang power station in the La Trobe Valley east of Melbourne.

A leading industry group has criticised successive governments for the potential electricity supply crisis confronting the nation’s east coast this summer and called for politics to be put aside to secure the future of energy-intensive industries or risk “continuing underinvestment’’ in the sector which maintains key manufacturing jobs.

AI Group Chief Innes Willox said the latest projections from the Australian Energy Market Operator reinforced “the unsatisfactory state of the electricity market and the need for greater policy certainty and coherence if we are to secure ongoing investment in energy supply and in energy-intensive industries’’.

AEMO reported this week that east coast households and businesses faced a higher risk of blackouts this summer with more generator failures likely on hot days.

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AMEO called for urgent action, including speeding up investment in new transmission lines between states and the creation of an electricity supply reserve to deal with increasingly unreliable generators, especially in Victoria.

In Victoria this summer, unplanned outages at Loy Yang A2 and Mortlake 2 “pose a significant risk” of insufficient supply that could lead to involuntary load shedding, AEMO said, potentially leaving up to 1.3 million households without power.

Mr Willox said: “The potential for increased electricity supply uncertainty in such a finely balanced market is intolerable especially given how much time successive governments of all persuasions have had to better prepare our energy market for the sorts of shocks we are increasingly seeing each summer.

“There is a clear risk of continuing underinvestment in energy-intensive businesses in Australia in these circumstances.’’

Mr Willox said policy makers needed to ensure better interconnection across the National Electricity Market regions and transmission to new renewable and storage resources was needed over the next five years.

He said planning and approval processes needed to be accelerated while continuing to protect consumers against the risk of footing the full bill for bad assets.

Mr Willox said the one “comforting” note from the AEMO report was its headlines projections had excluded some energy resources that in practice were “likely to be available.”

He said Victoria would still be a very tight region in terms of supply in the electricity market this summer although additional generation from South Australia was likely to help.

But the likelihood of load shedding would rise if there were delays to the repair of broken generators at Loy Yang A and Mortlake or if Victoria experienced extreme heat.

“However while sensible steps already being taken by energy suppliers, energy users and governments should reassure us that electricity reliability can be maintained, the market is finely balanced. Bad weather or bad luck could see more energy users lose supply this summer,’’ Mr Willox said.