Australian spot electricity market halted to ease crisis

Australia's energy market operator took the extraordinary step on Wednesday of suspending the electricity spot market across eastern Australia to ensure it can secure a reliable supply of power, amid a string of outages at coal-fired plants.

The move came after the operator capped wholesale prices on Monday as required when they exceeded a set threshold, which led some generators to withhold supply as they could not cover their costs at the capped price of A$300 per megawatt hour (MWh).

That forced the market operator to order generators to supply 5 gigawatts (GW) of power, which they had not offered into the market on Tuesday, to avert blackouts in two states — New South Wales and Queensland.

“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,” Australian Energy Market Operator (AEMO) CEO Daniel Westerman said in a statement.

He said it was understandable generators had held back supply in light of the price caps along with unplanned outages and supply challenges with coal and gas, but having to direct generators to provide supply had made it impossible to maintain normal market operations.

The market, which normally trades in five-minute intervals, was suspended at 0405 GMT.

Australia has been hit by soaring power and gas prices over the past three weeks due to several factors, including planned and unplanned outages at several coal-fired plants, periods of low wind and solar output, a cold snap, and record high global coal and gas prices.

Coal-fired plants normally supply around 65% of eastern Australia's power supply, but more than a quarter of that capacity is currently unavailable.

To make up for the lost supply, the market has had to rely on extra gas-fired and diesel-fired generation at a time when gas and diesel prices have rocketed.

The market operator said it will set prices during the market suspension and will pay generators compensation to cover their costs if they bid into the market during the suspended price periods.

Reuters