Australia’s east-coast energy crunch is continuing to deepen as the market operator orders Queensland power suppliers to switch on extra electricity generation to avert blackouts.
Queensland’s power was at risk of significant disruption from 5.30pm to 8pm on Monday evening because of a shortfall in supply, according to the Australian Energy Market Operator (AEMO), which issued a “lack of reserve” notice.
Shortly before 7pm on Sunday night, the AEMO began administering a cap on Queensland’s wholesale power prices at $300 a megawatt-hour.
Just before 1pm, AEMO directed a power generator to switch on and supply electricity to the state’s grid. The intervention came after the market operator imposed a $300-per-megawatt-hour price cap to halt runaway wholesale power prices, which limited the volume of bids into the market and reduced reserves.
The intervention came after the market operator imposed a $300 a megawatt-hour price cap on wholesale power, which limited the volume of bids into the market and reduced reserves.
“To maintain power system security and reliability, AEMO has directed some generators to continue meeting consumers’ demand to improve reserve conditions,” a spokesperson said.
“At this time, there is no impact to consumer supply.”
Wholesale power and gas prices are surging across the eastern seaboard as a burst of cold weather drives up demand for heating and a series of simultaneous coal-fired power station outages forces gas-fired generators to fill the gap. Meanwhile, international prices for coal and natural gas remain stubbornly high as Western utilities race to find alternatives to Russian energy imports, intensifying competition for supplies.
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The imposition of price caps was triggered because the state’s cumulative power prices across seven days had reached $1.35 million, exceeding a limit set out in market rules.
Australia’s east-coast price spikes have been particularly severe in Queensland and NSW – the two states most dependent on burning black coal for electricity.
Graeme Bethune, chief executive of Australian energy consultancy EnergyQuest, said the price rises across the grid had been “extraordinary”.
“The last two months have seen east-coast domestic electricity and gas prices surge to unprecedented levels,” Bethune said.
“East-coast spot markets are relatively small and illiquid, so small increases in demand send prices through the roof.”
So-called “default market offers” for electricity – price caps on what retailers can charge households and businesses that don’t take up special deals or bundle utilities bills – are set to rise in all states across the east-coast electricity grid from July 1.
Default offers will jump by 14 per cent, or $227, in New South Wales; 11 per cent, or $165, in Queensland; and 7 per cent, or $124, in South Australia.
In Victoria, where the state’s Essential Services Commission determines its own default offer, the price cap for households will rise by 5 per cent, or $61, a year.
Federal Energy Minister Chris Bowen convened an emergency meeting of his state and territory counterparts last week to push ahead with sweeping market reforms aimed at ensuring a smooth transition away from ageing and failure-prone coal-fired power stations, which still account for two-thirds of the nation’s electricity needs.
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One of the plans is to introduce a so-called “capacity market”, which would reward energy assets for guaranteeing power that can be quickly called upon to support renewable energy through all weather conditions.
AEMO has also imposed price caps of $40 per gigajoule on the Sydney and Victorian wholesale gas markets after prices blew out last month and caused the collapse of gas company Weston Energy.
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