15 June 2022

NSW residents urged to conserve energy as market operator takes control

| Claire Fenwicke
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AEMO has warned there may be no excess capacity in the grid tonight. Photo: Tim Allen.

NSW residents have been urged to “conserve energy where safe to do so” as the state faces a “tight situation” tonight and potentially tomorrow.

The advice came as the Australian Energy Market Operator (AEMO) suspended the wholesale spot market, essentially taking control of power distribution and supply from electricity generators.

It’s the first time the market has been suspended.

AEMO chief executive Damien Westerman warned electricity supplies would remain tight in the coming days, particularly in NSW.

“This is to ensure [household’s] lights go on when they flick the switch,” he said.

Previously AEMO had placed a $300 per megawatt-hour price cap on electricity, which saw some energy generators withdraw from the market rather than sell their product at a loss.

Now AEMO will be in charge of what power would be available and when.

“This decision was made because it has become impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity,” Mr Westerman said.

The market operator was yesterday (14 June) forced to direct 5 GW of generation through direct interventions, which represented 20 per cent of demand.

“In the current situation, suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses,” Mr Westerman said.

“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.”

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Earlier today AEMO issued a Lack of Reserve level 3 (LOR3) alert for NSW, which meant it was predicted there would be no reserve power supplies tonight.

When there is an imbalance between energy supply and demand, AEMO can issue LOR notices to the market to encourage more electricity generation.

AEMO issued the level three alert in an effort to get energy market generators to bid their market availability which can be directed across the National Electricity Market to address shortfalls.

As of this morning, AEMO still sought energy generator support to fill forecast supply gaps.

It also entered into a “reserve contract” through the Reliability and Emergency Reserve Trader, which could be triggered to maintain the power system from 5 pm tonight.

Compensation would be offered to energy generators to recoup their losses.

“It is not true to say prices will go up [for customers] under this market suspension,” Mr Westerman said.

NSW Energy Minister Matt Kean has backed AEMO’s suspension of the market.

“This decision will help prevent energy companies from putting energy reliability at risk by unnecessarily withdrawing supply,” he 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. We will continue to work closely with the federal government and other states as well as the independent market operator to navigate the situation in the National Electricity Market.”

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The Australian Energy Council said it understood the need to suspend the market in order to “reset it”.

“It is quite clear that in these unprecedented circumstances and following the application of the Administered Price Cap the power system was becoming unmanageable,” chief executive Sarah McNamara said.

“We hope the conditions improve in this new phase and we can soon return to an uncapped market.”

Essential Energy controls 95 per cent of NSW’s electricity distribution network, as well as parts of southern Queensland.

A spokesperson said that as of 4 pm, it had not received direction from AEMO regarding load shedding on any part of its network.

“If a direction is received, Essential Energy will work closely with AEMO to minimise impacts on customers,” they said.

According to an AEMO, “load shedding is a last resort response to bring power flows into balance, averting the risk of system collapse or physical damage to parts of the power system”.

“After all supply and demand response options available to AEMO have been exhausted, including importing more power from other states, wholesale demand response, tapping into emergency energy reserves and calling on the Reliability and Emergency Reserve Trader, load shedding may be required.”

The market suspension would be reviewed daily.

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