Markets

Power crisis: Australian Energy Market Operator in the process of lifting the suspension on the east coast energy market

The Australian Energy Market Operator has made a big announcement following last week’s power frenzy.

The Australian Energy Market Operator has announced it is in the process of lifting the suspension on the east coast energy market after taking control during last week’s power crisis.

The electricity industry was in a frenzy last week with up to five states at risk of widespread blackouts.

The crisis is believed to be from the culmination of a global gas shortage, high coal prices and ageing coal-fired power stations, as well as a slow transition to renewable energy.

The AEMO held a briefing with industry figures on Tuesday, outlining the requirements needed to resume normal spot market operation in the National Electricity Market. The operator confirmed there are “sufficient electricity reserves for this evening, but conditions remain dynamic, requiring AEMO to manually direct generators to be available to meet consumers’ energy needs”.

The AEMO however admitted there could be future issues concerning supply and demand.

“These criteria will give AEMO sufficient confidence that it can end the market suspension with minimal risk of the same conditions re-emerging in the very short term,” the AEMO said in a statement.

“AEMO anticipates monitoring will continue for at least 24 hours and, if AEMO is confident the criteria are being met, the next step is to formally remove the market suspension and resume normal operation under the market rules.”

“Conditions remain dynamic, requiring AEMO to manually direct generators to be available to meet consumers‘ energy needs.”

The AEMO said the “next step” would be a “period of monitoring normal dispatch pricing within the suspension period, after advance notice to has been issued to the market”.

Industry experts have warned the UK-style energy crisis could crash Australia’s economy.

Wholesale electricity prices have soared by more than 140 per cent in 2022 alone, driven by surging gas prices even as 70 per cent of Australia’s gas is exported overseas.

Australian gas prices are typically around $3 per gigajoule (Gj), but that skyrocketed to more than $380/Gj this week as the energy market failed, forcing the regulator to intervene and place caps of $40/Gj in Sydney, Melbourne and Brisbane for the first time.

Treasurer Jim Chalmers described the situation as a “perfect storm” of challenges in energy, warning “not one measure that can fix this overnight”.

“This is a big problem,” he said.

“There is no use beating around the bush. We have got spiking gas prices, spiking electricity prices and spiking prices for petrol as well.”

Mr Chalmers said Labor wanted to “get cleaner and cheaper energy into the grid” but “that will take a little bit of time”.

“The more immediate options will obviously be part of a discussion with the companies and with the relevant Ministers as well, and I don’t really want to pre-empt those discussions,” he said.

The Treasurer said triggering the local gas supply guarantee “brings its own challenges as well and it is not immediate”.

Earlier this week, Energy Minister Chris Bowen said he believes Australia is “through the worst of the pressures on the energy system”.

“The National Energy Market continues to function under pressure but nevertheless we are in a situation where more generation has come back on board and the system has avoided any blackouts and any load shedding,” he said.

Mr Bowen said last week, he had been advised by AEMO of 250,000 megawatts returning to the grid and another 1,500 were expected to return shortly afterward.

“This is a testament to everybody who has worked very, very hard over recent weeks,” he said.

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