The withdrawals were prompted by the AEMO’s decision to put a cap on spiralling prices that electricity generators are charging for wholesale power,which crimped the profit margin of some generators,which are battling coal prices that are soaring because of sanctions on Russian exports.
But the electricity market is tightly regulated and the AEMO has powers,designed to prevent blackouts,which enable it to force generators to fire up units and start supplying electricity to the grid. Whenever it does this,companies are awarded compensation.
The threatened power shortfall forced the AEMO to issue notices on Tuesday flagging potential blackouts in Victoria,Queensland,NSW and South Australia. But it said on Tuesday afternoon that about 2 gigawatts had been withheld in both Queensland and NSW and this could be directed to fire back up to supply the market,which would trigger compensation.
The AEMOwas unusually forthright in a public statement when it said that directly after price caps were imposed on power companies,“available offers were reduced”.
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These withdrawals represent more than 10 per cent of the east coast energy grid’s total generation capacity of 55 gigawatts and come on top of an energy crunch created by a series of breakdowns and maintenance outages that have forced about one-quarter of the east coast’s coal-fired power stations out of action.
Melbourne University energy expert Dylan McConnell said while power companies might have reduced their output for legitimate reasons,the scale of withdrawal across the industry raised concerns over its social licence.