The Australian Energy Market Operator (AEMO) has suspended the spot market in the National Energy Market (NEM) for the first time in the Operator’s history.
The spot market is what AEMO uses to match the supply of electricity from power stations with real-time consumption by households and businesses.
The NEM includes Queensland, Victoria, South Australia, NSW and the ACT.
Announcing the suspension, Chief Executive of AEMO, Daniel Westerman said the Market Operator took the step because it had become “impossible” to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers in accordance with the National Electricity Rules.
Mr Westerman said the AEMO was forced to direct five gigawatts of generation through direct interventions the day before the suspension was announced (14 June), and it was no longer possible to reliably operate the spot market or the power system this way.
“In the current situation suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses,” Mr Westerman 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,” he said.
“Right now we see the market is not able to deal with all the factors thrown at it.
“Frankly, those factors are quite extreme, ranging from generators that are both planned and unplanned outages, very high demand.”
Mr Westernman 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.
The Chief Executive said this was understandable, but 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 operation.
He said the current energy challenge in eastern Australia was the result of several factors across the interconnected gas and electricity markets.
Mr Westerman said that in recent weeks in the electricity market, the NEM had seen a large number of generation units out of action for planned maintenance; planned transmission outages; periods of low wind and solar output; around 3000 MW of coal fired generation out of action through unplanned events; and an early onset of winter which increased demand.
“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,” he said.
“The market suspension is temporary, and will be reviewed daily for each NEM region.”
Mr Westerman said that when conditions changed, and AEMO was able to resume operating the market under normal rules, it would do so as soon as practical.
