Australia’s energy market regulator closes electricity spot market
Post date: 15/06/2022 - 11:56
The Australian Energy Market Operator (AEMO), responsible for regulating the country’s electricity and gas markets, on Wednesday (June 15) suspended electricity trading on the spot market for the territory of the National Electricity Market (NEM) network, i.e. the states of Queensland, New South Wales, Victoria, South Australia and Tasmania. The historically unique measure has become necessary »because it has become impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers,« AEMO announced. The NEM area has been experiencing chaotic conditions for weeks: withdrawal of generation capacity, skyrocketing prices, and an increasingly unstable grid with numerous supply outages.
The continuation of the closure ordered under the National Electricity Rules (NER) is being reviewed daily. AEMO will establish a »compensation regime« for each NEM region »for eligible generators who bid into the market during suspension price periods.«
CEO Daniel Westermann said AEMO had been forced to direct five gigawatts of generation capacity the day before »through direct intervention,« but that it was »no longer possible to reliably operate the spot market or the power system this way.« According to Westermann, electricity price caps combined with unforeseen operational disruptions and supply chain difficulties for coal and gas have led to power generators removing capacity from the market.
Australia’s power generation is heavily dominated by fossil fuels. Rising fuel and therefore power generation costs, combined with power plant outages and relatively low seasonal generation from wind and solar power plants, have led to the supply problems. However, analysts also accuse energy companies of manipulating the electricity trading system by driving up prices further by deliberately withholding generation capacity.