Australia suspends spot power markets
The Australian Energy Market Operator (AEMO) on June 15 suspended the spot electricity market in all five National Electricity Market (NEM) states, saying it had become “impossible” to operate amid surging coal and gas prices. The decision comes a day after AEMO capped electricity prices across Queensland, New South Wales (NSW), Victoria and South Australia.
“AEMO has taken this step because it has become impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers in accordance with the NER [National Electricity Rules]”, it said. The five NEM states are NSW, Victoria, Queensland, South Australia and Tasmania.
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The market operator will apply a pre-determined suspension pricing schedule for each NEM region. A compensation regime applies for eligible generators who bid into the market during suspension price periods.
In making the announcement AEMO CEO, Daniel Westerman, said the market operator was forced to direct five gigawatts of generation through direct interventions on June 14, and it was no longer possible to reliably operate the spot market or the power system this way.
“In the current situation suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses,” he 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.”
The market suspension is temporary and will be reviewed daily for each NEM region. When conditions change, and AEMO is able to resume operating the market under normal rules, it will do so as soon as practical.
Westerman said price caps coupled with significant unplanned outages and supply chain challenges for coal and gas, were leading to generators removing capacity from the market.
He said this was understandable, but with the high number of units that were out of service and the early onset of winter, the reliance on directions has made it impossible to continue normal operations.
“We are confident today’s actions will deliver the best outcomes for Australian consumers, and as we return to normal conditions, the market-based system will once again deliver value to homes and businesses,” he said.
Queensland energy minister Mick de Brenni in a statement said that the decision to suspend the spot market provides greater flexibility and agility to ensure adequate supply across the Eastern Seaboard. “Importantly, this means your power will stay on,” the minister added.
“I can assure Queenslanders there is surplus supply to meet demands in our state and a further generating unit is scheduled to return to service later this week,” de Brenni said.