Explained | Why is Australia facing an electricity crisis despite being a top exporter of coal and gas?
The Hindu
Australia’s energy market operator, in a drastic step, has suspended the National Electricity Market to avoid blackouts
The story so far: On Thursday, June 16, Chris Bowen, the Energy Minister of Australia — the world’s biggest exporter of coal and Liquified Natural Gas — asked the residents of its most populous state New South Wales (NSW), to conserve power as much as possible during the peak demand hours of 6 pm to 8 pm to prevent blackouts. Mr. Bowen added, however, that he was confident that the government could avoid blackouts.
This came just a day after the Australian Energy Market Operator (AEMO), in an unprecedented move amid the ongoing power crisis, suspended the wholesale electricity market for the East Coast, which includes five of Australia’s six states. AEMO cited that the power market had become “impossible to operate” while ensuring reliable and secure electricity supply to Australian households and businesses.
The Australian Energy Market Operator (AEMO) is responsible for operating two electricity spot markets through which electricity is traded across the country.
It operates the National Electricity Market (NEM), which is a wholesale market covering Australia’s five eastern and south eastern states- Queensland, New South Wales (including the Australian Capital Territory), South Australia, Victoria, and Tasmania —effectively covering the whole of Australia excluding the state of Western Australia and the Northern Territory. On the East Coast, coal-fired power constitutes nearly 65 per cent of electricity generation and gas 7 per cent, with the rest coming from renewable sources like wind, solar, hydropower, and others. The NEM operates a massive power grid and thousands of kilometres of transmission lines and cables.
On this wholesale or spot market, power generators offer to supply the market with specified amounts of electricity at varied prices or bids. The AEMO then “decides which generators will be deployed to produce electricity, with the cheapest generator put into operation first.” With this, AEMO aims to exactly match supply and demand.
The auction between generators is held every five minutes, meaning the dispatch price to deliver electricity is determined every five minutes. It is here that distribution companies or retailers buy electricity to provide power to homes and businesses.
As per the National Electricity Rules, minimum and maximum spot prices are set between -A$1000 and A$15,000 per megawatt-hour.
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