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Australia energy regulator suspends electricity spot market as energy crisis deepens


No longer possible to reliably operate spot market or power system

Significant unplanned outages, supply chain challenges for coal and gas

Generators remove capacity, early winter ups gas and power demand

  • Author
  • Eric Yep
  • Editor
  • Agamoni Ghosh
  • Commodity
  • Coal Electric Power Energy Transition LNG Natural Gas

Australian Energy Market Operator, the regulator of the country's gas and power market, said June 15 that it suspended the spot market in all regions of the National Electricity Market from 14:05 Australian Eastern Standard Time, under the National Electricity Rules.

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"AEMO has taken this step because it has become impossible to continue operating the spot market, while ensuring a secure and reliable supply of electricity for consumers in accordance with the NER," the agency said.

The agency was forced to direct 5 GW of electricity through direct interventions June 14, and it was no longer possible to reliably operate the spot market or the power system this way, AEMO's chief executive Daniel Westerman said in a statement.

"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. "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."

In early-June, an unprecedented rise in wholesale gas prices in some Australian states had prompted AEMO to enforce a cap on prices in the local energy market. Energy prices have been surging on the back of global energy turmoil and domestic issues, and experts have been warning of more volatility and disruptions for weeks.

Westerman said price caps coupled with significant unplanned outages and supply chain challenges for coal and gas, were leading to generators removing capacity from the market, and with the high number of units out of service and the early onset of winter, the reliance on regulatory interventions has made it impossible to continue normal operation.

The agency said the current energy challenge in eastern Australia is the result of several factors across the interconnected gas and electricity markets. These include a large number of generation units out of action for planned maintenance, planned transmission outages, periods of low wind and solar output, around 3 GW of coal fired generation out of action through unplanned events and an early onset of winter increasing demand for both electricity and gas.

"We are confident today's actions will deliver the best outcomes for Australian consumers, and as we return to normal conditions, the market-based system will once again deliver value to homes and businesses," Westerman said.

AEMO said June 15 it will apply a pre-determined suspension pricing schedule for electricity supply for each region and a compensation mechanism for eligible generators who bid into the market during suspension price periods.

"The market suspension is temporary and will be reviewed daily for each NEM region. When conditions change, and AEMO is able to resume operating the market under normal rules, it will do so as soon as practical," the agency said.