Australian energy market operator to lift market suspension this week

Bayswater Power Station is pictured in Muswellbrook, Australia, June 21, 2022. Picture taken June 21, 2022. REUTERS/Loren Elliott

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  • The risk of electricity shortage has “significantly decreased” according to the operator
  • Market offerings will resume from Thursday morning
  • The market suspension will be lifted on Friday at the earliest

MELBOURNE, June 22 (Reuters) – Australia’s energy market operator said on Wednesday it would lift its unprecedented suspension of the electricity spot market in stages, starting on Thursday, the return of part of coal-fired generation alleviating the country’s energy crisis.

Last week, the market operator capped wholesale prices and had to force generators using gas and diesel to supply power, even at deficit prices, to fill a gap in generation at the coal in order to avoid breakdowns.

About 25% of market coal capacity has been offline in recent weeks due to planned maintenance and unplanned outages due to technical faults, leading to shortages as demand surges amid a cold snap, while prices soared due to soaring global gas and coal prices. Read more

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On Wednesday, the market operator said generators were gradually restoring production to more normal conditions.

“We have seen almost 4,000 megawatts of generation back in service since this time last week, which means the risk of any shortfall has diminished significantly,” the Australian power market operator told reporters. Daniel Westerman at a televised press conference.

The market suspension would be lifted in stages, with bids from generators being used to set power prices from 4am (1800 GMT) on Thursday. The trader would monitor the market for at least 24 hours before making a decision to officially lift the market suspension, Westerman said.

While the market has stabilized for now, analysts say Australia is set to face more power supply disruptions and high prices in the coming years as aging coal-fired power plants in the countries, which supply more than 60% of the market’s electricity, are expected to break down more often.

“When coal generators stop working, you just don’t have enough bulk power during the day or night,” said David Leitch, director of energy consultant ITK Services Australia.

“We just haven’t built enough wind and solar power yet to replace coal-fired generators,” he said.

The government, energy regulators and power providers expect around 14 gigawatts (GW), or 60% of eastern Australia’s coal-fired capacity, to be removed from by 2030. This will need to be replaced with more than double that capacity in wind and solar farms and energy storage to ensure the lights stay on.

One of the problems hampering the faster construction of renewable energy and emergency power is the lack of transmission capacity, a problem that the new Labor government wants to overcome by providing 20 billion Australian dollars (14 billion dollars ) in cheap financing.

However, the proposed transmission projects are facing regulatory delays and protests from farmers and communities opposed to the huge towers crossing their lands and national parks. Read more

($1 = 1.4418 Australian dollars)

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Reporting by Sonali Paul; Editing by Christian Schmollinger and Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

Edward N. Arrington