The Australian Energy Regulator is warning power producers against withdrawing plants from the market, and to wait until they are directed to run them as the unprecedented introduction of wholesale price controls across four states ramped up the risk of blackouts.
One market source said about 2000MW of generation capacity was withdrawn in Queensland when the cap came in on Sunday evening, as owners opted to withdraw plants that would otherwise be uneconomic given sky-high gas prices. They could then be eligible for potentially more lucrative compensation under a tested and less bureaucratic system if directed by AEMO later to run.
After discussions with generators on Tuesday afternoon AEMO estimated that about 2000MW of generation was available in each of Queensland and NSW that has not bid into the market. It “continues to encourage” generators to bid capacity into the market given “level three” shortfalls in generation capacity – the most serious level – anticipated through all the regions of the NEM on Wednesday.
“The only way you can really solve this is to sit down with the companies and work out what’s happening. They are making windfall profits,” he said.to get coal plants back online to take pressure off the system. In NSW, a maximum of 1748MW could be “interrupted” at 9pm Tuesday but reaches as high as 3166MW at 8pm on Thursday.
He said many generators were waiting to be instructed by AEMO before they bid into the market and then would be compensated, which he admitted wasn’t a “perfect system”.Controlled prices are imposed when the rolling total of five-minute trading intervals on the NEM over the past seven days in a particular region passes the set threshold of $1.3591 million.That happened in Queensland on Sunday evening, in NSW about 6.30pm on Monday and in South Australia and Victoria later on Monday night.