AEMO suspends wholesale power market amidst generation capacity collapse

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The AEMO had to directly intervene to add 5GW of generation the day before and was unable to ensure a secure and reliable supply of electricity. Image: Matthew Henry via Unsplash.

The Australian Energy Market Operator (AEMO) has suspended the country’s wholesale power market after a collapse in generation rendered the spot market impossible to operate reliably.

AEMO confirmed the move after the market operator had to issue direct interventions to 5GW of generation capacity the day before, stating that it was unable to continue operating the spot market or the power system in such a manner.

On Tuesday 14 June 2022, AEMO had to set a AU$300/MWh price cap in the states of Queensland, New South Wales, Victoria and South Australia due to the wholesale electricity prices reaching the high price threshold.

The price cap was triggered after significant unplanned power outages and supply chain challenges for coal – around 3GW of coal fired generation was taken out of action for unplanned maintenance – and gas, led to generators removing capacity from the market, according to Daniel Westerman, AEMO’s CEO.

Moreover, an early onset of winter conditions in Australia has increased electricity and gas demand from consumers, while both wind and solar outputs were at low levels during this period.

The AEMO is to apply a pre-determined suspension pricing schedule for each region of the National Energy Market (NEM) noting the suspension will be temporary and is to be assessed on a daily basis for each NEM region.

Australia has been facing price increases in the electricity market since the beginning of the year with the NEM recording a sharp increase of its average price for the first quarter of the year to highs of AU$87/MWh (US$60/MWh), a price not recorded since Q2 2019.

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

“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 decision to suspend the electricity market was welcomed by New South Wales and Queensland energy ministers, Matt Kean and Mick de Brenni respectively.

Earlier this month, the state of New South Wales announced it will invest AU$1.2 billion over the next ten years to the grid in order to accelerate the installation of renewable energy zones.

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