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AEMO suspends national electricity market

The Australian Energy Market Operator (AEMO) has suspended the spot market for wholesale electricity to deal with the price and supply crisis plaguing Australia’s biggest electricity grid.

16 June 2022 

AEMO has now suspended the spot market entirely across the National Electricity Market — which includes Queensland, Victoria, South Australia, NSW and the ACT — saying it is impossible to ensure reliable electricity supply under the current circumstances.

Instead of the price for wholesale electricity being set competitively, the market operator (AEMO) now sets fixed prices and will take a greater role in directing which power stations generate energy and when.

AEMO chief executive Daniel Westerman said suspending the market would simplify operations of the electricity market to navigate challenging times ahead.

Households and businesses have been urged to try to conserve power, switching off unnecessary appliances and lights in a bid to ease some of the pressure on the system.

"We are seeing very challenging times. It was impossible to operate the system under current conditions while ensuring reliable, secure supply of electricity to Australian homes and businesses" he told reporters.

"Right now, we see the market is not able to deal with all the factors thrown at it. Frankly, those factors are quite extreme, ranging from generators that are both planned and unplanned outages, to very high demand. There is a confluence of factors at hand."

Mr Westerman said the AEMO’s decision to suspend the market would allow the regulator to create a process where it has visibility of which generators are available and when, in advance, rather than relying on last-minute interventions.

“That visibility will help us to manage the system in real time, as well as understand the balance of supply and demand in the periods ahead," he said. 

“Conditions remain tight in the coming days in particular in NSW, where we would urge consumers to conserve energy where it is safe to do so.”

Energy and Climate Change Minister Chris Bowen said the energy market intervention would last "as long as it needs to".

"I don't envisage that long, but it will be reviewed on a day-to-day basis," he said on ABC radio.

"I've been very clear with the chief executive of the operator. He has my full support for any action he deems necessary. The government will back the operator and the regulators 100%.

"This intervention will not be lifted one day earlier than it needs to be."

Mr Bowen said the current national energy market was in a complex situation.

"The generators bid in, and the energy regulator wrote to all the generators last week and reminded them of their legal obligations to bid in at fair and accurate rates and reminded them that the energy regulator was closely monitoring behaviour," he said.

"But clearly, the judgement was made that that wasn't enough, that the operator needed to step in and take control."

Prime Minister Anthony Albanese said the intervention was a result of almost a decade of underinvestment in renewable energy, transmission and storage. 

"That's the situation we're dealing with. And last week I convened state and territory energy ministers, who agreed on a comprehensive national plan to fix that. And that was a big step forward. But in the short term, we are dealing with a very challenging situation," he told reporters.

"We are managing that situation. We have avoided blackouts and we have avoided load shedding so far, and yesterday was an extreme action. It wasn't taken lightly, but it was the judgement that it was absolutely necessary to act in the best interests of consumers to intervene and to close the market and to take control.

"A failure of policy has led to a market failure, and that is why AEMO have stepped in here. They have this tool at their disposal and they're using it and we support them using it because quite clearly, if the market was just left to operate, there were vulnerabilities that have been exposed. But this has been warned about for a long period of time. 

"This is what happens when you don't have investment certainty, when you don't have the transmission grid fit for purpose for the 21st century, which is why there aren't simple one day or even one week fixes to this, but AEMO are doing their job and we support them in their actions."

Australian Energy Council Chief Executive Sarah McNamara said electricity generators welcomed the AEMO  taking control of the market on Wednesday.

Ms McNamara said the current energy crisis was due to the combination of global issues caused by Russia’s invasion of Ukraine pushing up prices for coal and gas combined with several Australian power plants needing unscheduled maintenance.

“The situation was becoming difficult for the market operator to coordinate, so we were pleased and supportive of the market operator’s decision to step in and start controlling the market for the next few days,” she said.

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

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

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