Electricity market freeze to be lifted

An unprecedented lockdown of the national electricity market could be lifted as soon as Friday morning with fears of blackouts receding following the return of coal plants and improved bidding from generators into the system.

The Australian Energy Market Operator confirmed a staged approach to removing the suspension after seeing a “clear improvement in market conditions” – seven days since it intervened in the market for the first time since its creation in 1998.

Some 4000 megawatts of generation has returned from coal outages, representing nearly 8 per cent of the entire capacity of the national electricity market.

AEMO chief executive Daniel Westerman said the first step would take place on Thursday at 4am, which would allow the market to set the price again.

“The second step will be to completely lift the suspension,” he said. The market operator expects a low volume of directions from AEMO to generators, after it was forced to intervene in the market up to 100 times a day – 50 times the normal daily level – to force generators to supply the market in recent weeks.

AEMO said at the time that while the practice was “understandable”, with the high number of units that were out of service and the early onset of winter, the reliance on directions had made it impossible to continue normal operations.

Mr Westerman said it would be appropriate to review what had led to the market suspension.

“We’re working very closely with the regulator and Australian Energy Market Commission on a series of actions to take steps to prevent this from happening again,” he said. “It’s not a place where the operator wants to be suspending the market. ” Energy companies also face a consumer watchdog probe into any price gouging and anti-competitive conduct during the rolling national power crisis, with a report into the electricity market to be handed to energy ministers next month after a five-fold increase in wholesale electricity ­prices.

Anthony Albanese has accused generators of essentially “gaming the system” while Australian Energy Regulator chair Clare Savage suggested some generators were withholding supply in order to access higher payments when they were then directed to return to the market by AEMO.

However, Mr Westerman said he was confident that generators’ behaviour had improved.

“We’re taking a number of steps operationally and worked very closely with generators to make sure that dysfunctional behaviour doesn’t occur. We’re working closely with generators to make sure that sufficient generation is available,” he said.

Energy Minister Chris Bowen said regulators were watching the actions of the market closely.

“The Australian Energy Regulator through Ms Savage remains very vigilant to their behaviour. I’m not here to comment on the activities of any particular generator other than to reinforce the federal government’s expectation that generators bid into the market as they are required to do as a matter of law,” Mr Bowen said.

Conditions will be monitored for at least a further 24 hours before any decision to formally lift the market suspension, suggesting a potential lifting of the suspension by Friday morning.

Before the market suspension, a cap of $300 per megawatt hour had been imposed in a bid to restore order following a prolonged period of unusually high wholesale prices. But that price was seen as too low to cover costs for many companies, which meant generators withheld up to 5 gigawatts of generation early last week to avoid running at a loss.

AEMO then forced generators to supply the market through daily interventions to avoid blackouts, creating a chaotic market and ultimately triggering the shutdown. Under the suspension, AEMO applied a predetermined pricing schedule for each state while a compensation regime will be applied for eligible generators who bid into the market.

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