The Australian Energy Market Operator (AEMO) has highlighted the urgent need to build-out the country’s renewable energy capacity and accelerate the transition to the cheapest form of reliable electricity.
Releasing AEMO’s Quarterly Energy Dynamics (QED) report for the second quarter (Q2) of 2022, Executive General Manager, Reform Delivery at AEMO, Violette Mouchaileh said the quarter had been one of the Operator’s most complex and challenging periods.
“The June quarter was an unparalleled period for Australia’s energy markets, with wholesale electricity spot prices averaging $264 per megawatt-hour (MWh) in the National Electricity Market (NEM), up by $177/MWh on the previous quarter and $179/MWh on Q2 2021’s $85/MWh average,” Ms Mouchaileh said.
“[The QED Report] shows these high prices triggered the application of administered price caps, first in the gas markets and then in the NEM,” she said.
“Consequently, reductions in generation offered in the NEM led to reserve shortfalls that required extensive AEMO intervention to maintain reliability and, ultimately, the suspension of the spot market in all regions between 15 and 24 June.”
Ms Mouchaileh said wholesale energy price hikes and volatility were driven by multiple factors, including high international commodity prices, coal-fired generation outages, elevated levels of gas-fired generation, fuel supply issues, and many east coast cities experiencing their coldest start to June in decades.
She said these factors also drove the frequency of NEM spot prices that exceeded $100/MWh from 14 per cent in Q2 2021 to 86 per cent in Q2 2022, and above $300/MWh from one per cent to 26 per cent.
“What’s clear is the urgent need to build-out renewable energy with diversified firming generation – like batteries, hydro and gas – and transmission investment to provide homes and businesses with low-cost, reliable energy,” the Executive General Manager said.
“Coal-fired generation outages reached highs of around 3.6 gigawatts (GW) in late April and peaked in June at 4.6 GW,” she said.
“Outages, bidding changes and fuel supply constraints saw black coal generation’s average quarterly output down by 947 MW or 8.5 per cent from Q2 2021 to its lowest Q2 output on record, its share of NEM supply falling 4.8 percentage points to 43 per cent.”
In contrast, Ms Mouchaileh said gas-fired generation was up 27 per cent (472 MW) from Q2 2021 to its highest Q2 level since 2017, while renewable generation increased 21 per cent on Q2 2021 with the total NEM renewable supply share for the quarter reaching 31.8 per cent.
AEMO’s 65-page Quarterly Energy Dynamics can be accessed at this PS News link.
