Blackouts dodged as regulator demands answers from power companies

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Blackouts dodged as regulator demands answers from power companies

By Mike Foley
Updated

Blackouts the energy market operator flagged on Tuesday night across the east coast electricity grid did not end up happening after the operator forced power companies to fire up generators they had taken offline.

The Australian Energy Regulator has warned power companies they will be investigated for their role in the current crisis as it calls energy companies into a meeting on Wednesday afternoon to discuss the situation.

Power companies have been called in for an emergency meeting with the energy market regulator for answers on why so much electricity capacity is sitting idle.

Power companies have been called in for an emergency meeting with the energy market regulator for answers on why so much electricity capacity is sitting idle. Credit:Fairfax

Blackout warnings were issued because coal and gas-fired generators reacted to soaring prices for fossil fuels by withdrawing power supply from the grid.

The Australian Energy Market Operator (AEMO) is required under law to issue warnings no matter if the power is not available or if it is just waiting to be fired back up.

Since Monday AEMO has been using its statutory powers to make what were previously rare interventions in the electricity market and forcing power companies to re-start their units to bring more electricity back into the grid.

“Despite electricity shortfalls forecast in Queensland and NSW last night, AEMO successfully directed generators, which hadn’t bid into the market, to be available,” the market operator said in a statement on Tuesday night. “As such, there was sufficient electricity supplied to meet consumer demand.”

Electricity supply will remain tight, but regulators are confident of avoiding blackouts and Federal Energy Minister Chris Bowen advised people not to turn off their heaters and other necessary devices.

“I’m very pleased that we have been able to avoid so far ... any blackouts,” Bowen said on Wednesday. “AEMO advises me that will likely continue to be the case and we will be able to avoid any load shedding events or any blackouts.

“Of course that is subject to any unexpected outages in the system.”

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Power companies say they have been forced to take units offline because soaring prices for coal and gas, due to the global energy crunch driven by a ban on Russian exports, is making it unprofitable for them to operate in the current market.

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The withdrawals on Tuesday represented more than 10 per cent of the east coast energy grid’s total generation capacity of 55 gigawatts and followed a series of breakdowns and maintenance outages that have forced about one quarter of the east coast’s coal-fired power stations out of action.

There is no law stopping power companies from withdrawing their electricity generation from the market, and in the past two days, they have reduced the volume available by 2 gigawatts in Victoria, 3 gigawatts in NSW and 1.5 gigawatts in Queensland.

Economic pressures for power companies ramped up in recent days because AEMO slapped caps on the price they can charge for wholesale electricity, which suddenly became far more expensive to generate due to the spike in prices for fossil fuels. About two-thirds of the eastern seaboard’s electricity is generated with fossil fuels.

AEMO has current electricity shortfall warnings in place for Victoria, NSW, Queensland and South Australia starting from Wednesday afternoon.

Australian Energy Regulator chair Clare Savage wrote to power companies on Tuesday to warn they may be in breach of rules against reckless behaviour and actions without reasonable cause that prompts AEMO to intervene in the market.

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“There are rules around how and when they can withdraw supply from the market and I have written to every generator in the east coast yesterday to make sure they understand their obligations and they are in the process of providing the reasons to us,” Savage told Channel 7 on Wednesday.

Energy experts have accused electricity providers of “unconscionable conduct” for withdrawing their power.

But the Australian Energy Council, which represents large power companies, said its members were losing money selling power due to soaring costs of the coal and gas they burn.

“There is sufficient capacity in the market but the situation is tight,” said the council’s chief executive Sarah McNamara.

“The price cap has the effect of incentivising some generators to sit on the sidelines and await direction from the market operator. And that’s because those generators are being squeezed between the price cap and their high input costs.”

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