The crisis of confidence in Australia’s broken electricity market deepened on Tuesday in even more extraordinary scenes that saw prices move towards market capitalization, market operator emergency intervention and a sudden and massive withdrawal of the capacity of the main generators.
Rapid-moving events were triggered again by rising coal and gas costs, and the ability of coal and gas generators to exploit the market to deliver maximum performance.
Wholesale electricity prices in Queensland on Monday and Tuesday rushed to the recently high trigger point for an automatic price cap: $ 1.398 million on average during the 2016 trading periods, or a average of $ 693 / MWh for an entire week, or more than 10 times the normal “. average”.
Queensland is the most coal-dependent state with the least amount of renewable energy, and is literally the canary in the coal mine of the market dysfunction caused by the rising cost of fossil fuels.
The Australian energy market operator was forced to intervene on Tuesday, activating its reserve trader mechanism, issuing instructions to at least one market player, but the industry was surprised when 1.3 GW of capacity at Queensland withdrew abruptly Tuesday morning.
“What the hell?” Energy analyst Dylan McConnell tweeted, noting that the sudden withdrawal came before the administered price cap was activated, and despite pleas from market bodies for generators to play clean and not force the market to rescue, as they were accused of doing in June. .
See: The day the fossil fuel industry lost all perspective and threw out its social license
At the time of publication, the price cap was expected to be activated later on Tuesday, as wholesale prices were expected to rise in the afternoon and evening as the market operator did juggling with a tight supply situation.
McConnell told RenewEconomy that there is no excuse for generators not to understand their obligations to the market, given the repeated warnings from different market bodies.
“It’s outrageous,” he said. But on Tuesday it looked like the market was determined to take things to heart.
Meanwhile, Alinta Energy led a push, with the support of others, to raise the administered price cap from $ 300 / MWh to $ 600 / MWh, to cover the inflated cost of fossil fuel generation.
Gas prices have forced the cost of generating gas to $ 500 / MWh or more, while the cost of generating coal, for those generators that have to obtain coal on the open market, has also increased. of $ 300 / MWh.
Alinta said this may be the only way to avoid another market suspension. “If the relevant parameters of the underlying market are not changed, there is a real risk that we will see again the same conditions that caused the unprecedented dysfunction and suspension of the market,” he warned.
It is not clear, however, how a maximum price of $ 600 / MWh could help when the average generation price for a week is already higher than that.
The long-term solution is, of course, more renewable energy and storage to replace the increasingly expensive and unreliable generation of fossil fuels, but the search for a short-term solution has left everyone perplexed.
It was unclear in the early hours of Tuesday afternoon what measures could be taken or taken, or how quickly a doubling of the price cap could be introduced, except for ministerial intervention, and particularly in Queensland, where most of the generation is state property.
Paul McArdle of Watt Clarity, noted that the 1.3 GW capacity withdrawn in Queensland on Tuesday morning occurred in just 10 minutes and accounted for 14 percent of the total capacity available at the time.
It also happened with at least five coal units that were not generated due to various problems and that the market operator was marking a supply crisis later in the day.
“This‘ 2022 energy crisis ’still has a long way to go,” he wrote.
The most fundamental problem is the loss of confidence in the energy industry. One could have predicted bad behavior from a fossil fuel industry now very aware of its own mortality and so accustomed to setting its own rules, as it has done in Australia and elsewhere in the world over the past few decades.
But the impact on consumers is serious. The work is caught in a mess: celebrating record fossil fuel revenues as enthusiastically as right-wing LNP antagonists, while trying to express concern and solutions for consumers affected by both these super benefits.
But consumers no longer believe in the industry. Last month, Energy Consumers Australia wrote about a loss of confidence, and a new poll released on Wednesday will be interesting to see, and even the regulator recently noted the loss of confidence and faith in the industry.
This is a story that unfolds, more to follow
See also: Alinta calls for urgent doubling of electricity price cap as fossil fuel costs rise
And: The price cap could return on Tuesday as coal and gas raise prices again
Giles Parkinson is the founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and the founder and editor of The Driven, which focuses on EV. Giles has been a journalist for 40 years and is a former commercial editor and adjunct of the Australian Financial Review.