The Australian Energy Market Operator has warned power bills could skyrocket, and blackouts could occur as soon as this summer, if major flaws in the National Electricity Market are not addressed.
The AEMO submitted its reply to federal environment and energy minister Josh Frydenberg this week, after Frydenberg asked it in June to advise on the risks to reliability and affordability posed by the recent exit of thermal generation on Australia’s East Coast, as well as further anticipated exits over the next decade.
The outlook from the Operator is not a good one.
“We face an increasing and unacceptable risk that there will be insufficient capability in the system,” AEMO wrote.
“In turn, this exposes consumers to a heightened risk of involuntary and unacceptable load shedding.”
Household representatives and major industrial energy consumers alike have expressed serious concerns over their power bills, and potential outages, as the National Energy Market grapples with a rapidly shifting market for energy and gas.
The AEMO says the Government and private sector should work to develop a 1,000MW baseload reserve of capacity, to ensure security of supply.
“Like others around the world, Australia’s energy system is undergoing unprecedented transformation,” the AEMO wrote.
“Changes include progressive retirement of an aging traditional power generation fleet, flattening grid demand growth, increase prices in domestic gas due to international LNG markets, rapid growth of variable renewable energy resources, increased penetration of rooftop solar, advances in storage capability and the ability to access and exploited increasingly large amounts of data,” it listed.
“All these are radically changing the dynamics of the power system. Today, older baseload units find it increasingly difficult to compete in this environment.
“These units have historically relied on relatively constant high production levels and stable revenues.”
The AEMO suggested the Federal Government could take control of some coal plants to ensure they continue producing enough energy to keep the market under control.