Eastern Australia’s precarious electricity industry should be able to meet forecast demand over the coming weekend, but regulators are still intervening in the market, the head of the Australian Energy Market Operator says.
On Friday afternoon, most regions in the national electricity market (NEM) that serves all regions of Australia, except Western Australia and the Northern Territory, had adequate supplies.
But Aemo had to activate its reliability and emergency reserve trader scheme that pays big power users to cut demand in Victoria.
We’re back to unleashing the payments for companies to reduce power use… this time for Victoria. pic.twitter.com/CGO8WTc1h3
— Peter Hannam (@p_hannam) June 17, 2022
Aemo boss, Daniel Westerman, said conditions had improved “markedly” since Wednesday when the regulator intervened to suspend the entire NEM wholesale market for the first time since the system was set up two decades ago.
“We’re better than we were,” he said. Regulators were trying to “create the conditions where we can lift the market suspension … we don’t want this suspension in place for a minute longer than it needs to be”.
“But we do need to be confident that we can operate the system and that’s not possible today, but the trajectory is good,” Westerman said. “It’s improved markedly since Wednesday but supply and demand is tight at the moment.”
Westerman welcomed the decision by the New South Wales government to seek special powers to ensure coal-fired power stations would receive adequate supplies. The NSW energy minister, Matt Kean, said the move was “proactive” and precautionary in case the government needed to intervene.
“I think every coal plant is looking closely at their fuel supply and to a greater or lesser degree is actively managing,” Westerman said. Coalmines around the country have had to deal with various challenges from flooding to rail access, he said.
A move by Aemo to trigger the gas supply guarantee earlier this month had succeeded with gas “returning to normal flows”, he said.
The international ratings agency Moody’s issued a report saying Aemo’s suspension of the wholesales market was “credit negative” for AGL and Origin “because their dispatch prices are now capped” at $300/MWh.
Moody’s rates AGL’s debt as Baa2 negative and Origin at Baa2 stable, and for now will level them at that rating.
“The price capping means that generators are at risk of being directed by Aemo to dispatch uneconomically, particularly those generators that need to source fuel at prevailing elevated prices,” Moody’s said.
“However, we understand that Aemo has instituted a compensation regime that allows eligible generators to recoup their costs of production (above the administered prices) and, as such, is likely to mitigate the risk of generation assets running at a loss.”
The agency said that global prices for coal had soared, and remained high.
Queensland’s minister for energy, renewables and hydrogen, Mick de Brenni, said he was “confident that the NSW government is able to effectively manage that state’s resources”.
“I’m also confident in the advice and action being taken by Australia’s energy market bodies and will continue to work closely with them.”
