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    ENERGY CRISIS EXPLAINED


    June 16, 2022 - Herald Sun

     

      What is happening?

      On Wednesday afternoon, the Australian Energy Market Operator suspended the wholesale electricity market that enables the management of the power grid. Until further notice, the operator will direct electricity generators to bring their power online and determine how much they are paid, rather than relying on the market to sort that out.

      Why was this unprecedented intervention required?

      For the first time in more than a decade, soaring wholesale power prices were capped this week. As a result, some generators stopped bidding their power into the market because prices were not covering their costs, forcing the market operator to direct them to come online in exchange for further compensation. That added to the strain already on the grid caused by outages at coal-fired power stations. The market operator said it became too difficult to reliably operate the system.

      Is Victoria’s power supply at risk?

      Possibly. As the market was suspended, a series of further shortfalls were flagged in Victoria from Wednesday to Friday, with a potential gap of 2065 megawatts on Thursday night. Authorities remain confident enough power will be available to prevent enforced outages, but the situation will remain tight.

      What impact will this have on power bills? It’s hard to say, but households and businesses will foot the bill. Wholesale power prices eventually flow through to consumers, who also will cover the cost of any extra charges for the market operator to direct generators to come online.

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