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Australia’s energy crisis has taken a wild turn as the country’s main wholesale electricity market was suspended by the Australian Energy Market Operator (AEMO) saying ‘it has become impossible to operate’.
AEMO operates the National Electricity Market (NEM), the main wholesale market that covers most of the east coast and delivers 80% of all power consumed in the country. The electricity crisis has worsened as some power generators have allegedly been withholding supply after the country introduced price caps.
“It is disappointing that energy generators were potentially gaming the system and not utilising the options available to them – this behaviour is unacceptable and will be investigated,” said Lily D’Ambrosio, Victoria’s energy minister.
Reason behind Australia’s energy crisis
Australia’s energy prices are among the highest in the world, and soaring coal and gas costs, slowing renewables growth, and an unusually cold winter leading to increased electricity demand have put further pressure on the fragile sector.
“In the current situation suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses,” said Daniel Westerman, CEO of AEMO. “The situation in recent days has posed challenges to the entire energy industry.”
AEMO said it is taking the drastic step of suspending spot energy trading for the first time in its history as power generators have failed to pick up the pace of electricity production and restart shuttered plants. Australia has been facing a power crisis for several years now, and the situation is unlikely to improve drastically as the country moves towards renewable sources of energy while shutting down coal-fired power plants.
“We have been able to avoid so far any significant load shedding events or, of course, any blackouts. That will likely continue to be the case,” said Chris Bowen, Australia’s climate change and energy minister.
AEMO says suspending the spot trading market will help it keep track of power generators and thus anticipate the supply of electricity. CEO Westerman has also appealed to residents of New South Wales to try and conserve energy.
The operator had to force power plants to deliver 5 gigawatts of electricity, but AEMO has capped electricity prices in the wake of soaring costs. Earlier this month, Australia’s Origin Energy had withdrawn its earnings guidance as it is struggling to secure coal for its Eraring power station, the country’s largest coal-fired plant. AEMO said in its statement it will review the suspension of spot markets daily in each state.
The Australian stock market slipped deep into the red after the suspension of NEM and fell for the fourth straight session as investors await the US Federal Reserve’s decision on a rate hike.
