Regulator reminds producers of market obligations as Bowen downplays risk of outages

Federal Energy Minister Chris Bowen said he expects no need for forced shedding as energy market regulators write to producers reminding them of their need to bid fairly in the market Energy.

On Tuesday, Bowen played down the prospect of blackouts despite an expected lack of power supply in several states, saying he was confident there was enough capacity available that could be directed to power supply. if the need arose.

“There is enough supply in the system to avoid load shedding – [such as] asking large industrial users to reduce their energy consumption – or indeed – as I’ve seen some public speculation – blackouts,” Bowen said.

“There is enough supply in the system to avoid these for the foreseeable future, subject to further unplanned outages.”

On Tuesday afternoon, the Australian Energy Market Operator (AEMO) announced that it expects a generation capacity shortfall of more than 1,700 MW in New South Wales and 1,500 MW in Queensland. for Tuesday evening.

AEMO has called on generators to meet the projected shortfall, but also has the power to direct generators to supply power to the market to avoid any need for load shedding or blackouts.

The projected shortfall follows the AEMO’s imposition of “administered price caps” in Queensland, New South Wales, Victoria and South Australia, capping the wholesale electricity price at 300 $ per megawatt hour.

The ceiling price – which is now below the marginal cost of generation for most coal and gas generators due to high fuel costs – led producers to withdraw their offers from the electricity market, creating the appearance of a shortfall.

Asked if games had taken place in the electricity market, Bowen said Australia’s energy regulator had written to producers reminding them of their legal obligations, to bid accurately and fairly on the electricity market and the potential ramifications if generators are found to break these rules. obligations.

“Australia’s energy regulator wrote to producers this morning reminding them of their obligations under the law for fair bidding, for accurate bidding, and reminding them of the ramifications if they fail to do so,” said Bowen,

“The Australian Energy Regulator is monitoring and will continue to monitor their behavior very closely.”

Letter sent to generators by AER President Clare Savage tells generators that under national electricity rules they cannot contribute in circumstances where AEMO is forced to issue a directive that generators supply electricity to the market.

AER President Clare Savage’s letter reminding generators that they must not “contribute to the circumstances leading to the issuance of an instruction”.
Suggestions are that producers retain market capacity to ensure access to compensation. pic.twitter.com/6D1JAHVss4

— Michael Mazengarb (@MichaelM_ACT) June 14, 2022

Bowen said he was confident sufficient generating capacity remained available to meet consumer needs in New South Wales and Queensland, with AEMO able to run generators to provide power despite the price cap.

If the AEMO orders power plants to produce power and supply electricity at a loss due to the imposed price cap, producers will be able to seek compensation to avoid any direct loss.

This means that for many coal and gas producers in the current market, it makes more financial sense to withhold their otherwise available capacity in the market and wait for AEMO direction rather than offer their capacity on the market as they normally would.

Reflecting this, Bowen said there will be a “bumpy winter” ahead for energy markets and price limits will remain in place until electricity prices come down, and the AEMO would continue to run the generators as needed to avoid any load shedding events.

But it also sees generators playing a form of ‘trend to the brink’ with the power market operator, knowing they can get higher payments for their generation, as load shedding will always be the option. least preferred for AEMO.

Bowen stressed that it was not necessary for households or businesses to stop all necessary electricity consumption, but suggested that some households might want to reduce excessive and unnecessary consumption due to current high electricity prices.

“No one should cut off the power supply they need and use for their comfort or safety. Nobody is asking for that to happen,” Bowen said.

“There was a general demand [to turn off] everything that is excess. I think most of these things would have been turned off by now because electricity bills have been higher – like pool filters, pool heaters and outdoor lighting not needed at this particular time.

“But no one should turn off the heating or whatever it uses that is necessary,” Bowen added.

Bowen added that “everything is on the table” as the Albanian government considers potential reforms to the gas supply mechanism, known as the “gas trigger” – suggesting that its regulations could be changed to allow the “ trigger” to be activated much faster than is currently possible.

Under current gas trigger regulations, this would not come into effect until January 1, 2023, significantly delaying any potential price relief that may be provided by requiring gas producers to reserve gas for domestic users.

See also: The day the fossil fuel industry lost perspective and threw away its social license

Michael Mazengarb is a Sydney-based journalist with RenewEconomy, writing on climate change, clean energy, electric vehicles and politics. Prior to joining RenewEconomy, Michael worked in climate and energy policy for over a decade.