Home World Business As Canberra brawls, summer energy shortages remain a threat

As Canberra brawls, summer energy shortages remain a threat

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As political manoeuvring in the wake of the Finkel Review of the nation’s electricity system intensifies, Canberra has been forcibly reminded of the extent of looming energy shortages.

Blackouts could come next summer with the operator of the energy markets warning electricity supplies cannot be guaranteed, with the system exposed to extreme conditions.

As debate rages over the Finkel report into the nation's energy plans, AEMO has reminded Canberra of the looming power ... As debate rages over the Finkel report into the nation’s energy plans, AEMO has reminded Canberra of the looming power shortages. Photo: Luis Ascui

In a short-term forecast, AEMO, the Australian Energy Markets Operator, which runs the country’s gas and electricity markets, said it now expects there will be sufficient supplies of gas to meet demand through the coming summer, but interruptions cannot be ruled out.

Earlier in the year, the group warned of gas shortfalls, which prompted the federal government to put pressure on gas producers to boost supplies – or face direct government intervention.

“Gas supply remains tight,” AEMO’s chief executive Audrey Zibelman​ said, “however the latest industry projections of gas production are just sufficient to meet both domestic gas consumption and electricity generation. Gas availability … together with new initiatives to reduce peak demand [should help] power system security during those hours on the very few extreme condition days per year.”

Extreme weather resulted in power blackouts in some parts of the eastern states last summer, with some large industrial users of energy, such as the Tomago aluminium smelter north of Sydney, forced to halt production for a time.

In March, AEMO warned that both South Australia and Victoria face potential power shortages this summer, due to a lack of gas supplies and also the closure of the large Hazelwood power station in the Latrobe Valley, while recent steps, such as a scheme to pay some large power users to cut demand at peak times this summer, is expected to reduce – but not eliminate – the likelihood of shortages.

“There will be challenges that will need to be managed proactively on days of extreme conditions” to ensure power supplies do not fail, Ms Zibelman said.Those challenges will be most acute “on extremely hot summer afternoons and evenings when consumer demand is highest”, AEMO said, in particular when wind and solar generation is at low levels, or if large generators fail.

South Australia is most at risk of blackouts with the need for the Pelican Point power station to be back in operation, which is due from July, the report noted.

The energy supply outlook released on Wednesday by AEMO breaks with tradition, as it typically releases separate long-term gas and electricity forecasts, which have met with criticism over their inaccuracy. The market operator said it will release a further forecast in August as it continues to work through its options to ensure power supplies over the next year or two.

AEMO warned gas supplies remain finely balanced, due to the level of gas exports. Shipments will run at high levels through the Australian summer, to meet seasonally strong winter demand for gas from utilities in northern Asia. AEMO said it is seeking more information from gas exporters as it refines its assessment of gas availability for summer.

Additionally, it is seeking 670 megawatts of standby electricity generation or sufficient large energy users willing to slash demand for a time, to help avoid blackouts.

Giving AEMO some comfort over the outlook for power supplies has been lower than expected exports of gas so far this year, it said.

The forecast comes in the wake of the Finkel Review into electricity supply security which put forward a number of recommendations, although most focus has been on its backing for a so-called “clean energy target”, with environmentalists concerned that it would water down commitments under the Paris Agreement to reduce greenhouse emissions.

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