AEMO suspended the spot market on June 15 from 2.05 p.m. (AEST) in New South Wales, Queensland, South Australia, Tasmania and Victoria. The moves follow weeks of soaring prices, as price caps went into effect and generators withdrew massive amounts of capacity, plunging the national grid into mayhem.
It is the first time such a measure has been deployed across the national market. The decision was made after a crisis meeting between energy ministers, companies and regulators. AEMO said it had “determined that it is necessary to suspend the spot market in all regions … because it has become impossible to operate the spot market in accordance with the provisions of the [National Electricity] Rules.”
The suspension will be reviewed daily for each region. In terms of the economics of what happens now, AEMO said that generators will be offered a predetermined pricing schedule for each region. This amounts to one compensation scheme and it is expected to simplify things after the operator was forced into the more chaotic market direction mode this week.
AEMO CEO Daniel Westerman said the market operator was forced to direct 5 GW of generation through direct interventions this week. It was no longer possible to reliably operate the spot market or the power system this way, he added.
“In the current situation suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses,” said Westerman. “The situation in recent days has posed challenges to the entire energy industry, and suspending the market would simplify operations during the significant outages across the energy supply chain.”
The energy crisis that has descended across Australia’s east is the result of a number of events which have compounded one another. Firstly, fossil fuel prices have been soaring globally, pushing up the cost of generation. Likewise, a number of Australia’s aging fossil fleets have recently failed and are now out of action.
Fossil generators, which still dominate Australia’s electricity system, have benefited from the disparity between supply and demand as it has driven up prices. It has led a number of analysts, including Victoria Energy Policy Centre Director Bruce Mountain, to believe that generators have widely been “gaming” the system, or withholding much-needed capacity to fetch even higher prices.
New South Wales Energy Minister Matt Kean welcomed the move from AEMO.
“This decision will help prevent energy companies from putting energy reliability at risk by unnecessarily withdrawing supply,” Kean said. “This comes after the Australian Energy Regulator yesterday reminded generators of their obligations under the National Electricity Rules. I expect power companies to do the right thing by their customers and the country.”
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