Cornwall Insight Australia on stopping of east coast NEM

Cornwall Insight Australia on stopping of east coast NEM: On 15 June the Australian Energy Market Operator (AEMO) made the choice to suspend the east-coast National Electricity Market (NEM). This was sparked by continued high wholesale electricity pricing, which forced AEMO to cap the wholesale price, in turn prompting generators to retract capacity from the market. The suspension allows AEMO to direct capacity back to the market so they can lessen the risk of blackouts or load shedding.

Mohsin Ali, Energy Market Intelligence Manager at Cornwall Insight Australia:

“While AEMO have said their forecast for reserve supply conditions have improved, the pathway out of the suspension is still up in the air. AEMO will be assessing the situation day by day until they are convinced the market can operate, in some order, without their guiding hand.

“For the cap to be lifted, generation capacity currently out for maintenance would need to come back online. We would also need to see a reduction in underlying costs for generators so this can flow through to reduced wholesale prices. This means lower coal and gas input costs, as thermal power stations still supply most of the energy in Australia. With international coal & domestic gas prices still at high levels, there is no immediate relief on the horizon.

“While AEMO’s intervention may take some heat out of the short-term crisis, it is likely they will be paying compensation to generators directed to provide the supply. If the suspension lasts for an extended period, the exact level of this compensation is expected to be high. This compensation will ultimately be recovered from customers on their electricity bills. So while the lights may stay on, all users will end up paying in the end.”

Cornwall Insight Australia on stopping of east coast NEM