‘Impossible to Continue Operating’: Australia’s National Energy Market Suspended

‘Impossible to Continue Operating’: Australia’s National Energy Market Suspended
A power plug is placed into a power socket in Melbourne, Australia, on Oct. 22, 2012. (Quinn Rooney/Getty Images)
Rebecca Zhu

The Australian Energy Market Operator (AEMO) has suspended the entire national energy market from June 15 at 2:05 p.m. after it was deemed “impossible” to continue operating the spot market while ensuring a reliable energy supply.

AEMO Chief Executive Daniel Westerman prefaced the announcement by revealing the market operator had been forced to direct 5,000 megawatts of generation through interventions yesterday, roughly 20 percent of total demand.

“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 in a media release.

“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.”

Westerman emphasised that the suspension would be temporary and be reviewed daily for each market region. Once the AEMO is able to resume market operation under normal rules, it will do so “as soon as practical.”

The suspension means the AEMO will take sole charge of dispatching energy to the energy grid and will not need to rely on last-minute interventions.

The operator will apply a pre-determined pricing schedule for each energy market region and generators may submit an application to AEMO if their costs exceed the suspended market.

“That visibility will help us to manage the system in real-time as well as to understand the balance of supply and demand,” Westerman told reporters. “Despite this, conditions remain tight in the coming days, in particular in New South Wales (NSW), where we would urge consumers to conserve energy where it is safe to do so.”

It is the first time the entire national energy market has been suspended since its formation in 1998. However, it has suspended the energy markets in Tasmania and South Australia in 2021, making it “a process that’s familiar to [the AEMO].”

The national energy market has faced significant challenges from a confluence of factors that led to this decision, including the closure of coal-fired plants, rising international coal and gas prices, and rising demand for heating during the winter season.

At the beginning of the week, AEMO placed price caps on the retail market after continued volatility in wholesale electricity prices.

However, this simply led to a large number of generators withdrawing their market availability due to the inability to recover costs, further reducing supply, thus forcing AEMO to direct 5,000 megawatts of generation.

The NSW and Queensland energy ministers have backed AEMO’s decision, both saying it would ensure adequate supply across the Eastern states.

“This decision further reduces the risk of supply shortfalls and unplanned outages,” Queensland Energy Minister Mick de Brenni said. “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.”

The Australian Industry Group said worried energy users need confidence in face of the market suspension.

“The unprecedented suspension of the national electricity market spot market is a clear signal that the energy crisis in Eastern Australia is intensifying,” CEO Innes Willox said in a statement.

“The detail of the AEMO market suspension will be completely arcane to most business and household energy users. They need confidence that the physical electricity system they depend on will not collapse.”