Weatherill promises “dramatic” intervention in energy market

Premier Jay Weatherill has promised a “dramatic intervention” in the electricity market after about 40,000 customers lost power last night, with Energy Minister Tom Koutsantonis declaring the State Government had “lost faith” in the national energy market operator.

Feb 09, 2017, updated Feb 09, 2017
In the dark: Premier Jay Weatherill has promised action, but won't say what it will be.

In the dark: Premier Jay Weatherill has promised action, but won't say what it will be.

Weatherill told a media conference this morning that the Government would “intervene dramatically in the South Australian energy market” – but would not say what form that intervention would take.

“One option is to completely nationalise the system,” Weatherill said.

“It would involve breaking contracts and exposing us to sovereign risk, and the South Australian taxpayer to [paying] extraordinary sums of money.

“It’s not a preferred option, but we’re ruling nothing out.”

He said “everything is on the table” and that the chosen intervention “will be dramatic”.

“We’ll tell you when we’re ready to announce it.”

Weatherill said the South Australia was “now on its own … because the national energy market operator is unable to run a system which can guarantee us security of electricity supply”.

But asked to address the importance of Victorian energy to the SA market, he stressed that “there’s a difference between the physical market [physical links to the national grid] and the virtual market”.

Weatherill argued that the 40,000 residents and businesses that lost power last night were victims of a decision by the Australian Energy Market Operator (AEMO) to “load shed” – purposefully shut off some of the power supply – for about 30 minutes.

He said thousands were “expecting to have power when they needed it, especially during such a hot night, and they were unable to access that power”.

“This is totally and utterly unacceptable, and it didn’t need to happen.”

He said the Government was last night advised that “Pelican Point [Power Station] had capacity – it could have been asked to turn on; it wasn’t.”

“It’s galling to me to think that there was sufficient thermal capacity in the system and it wasn’t used.”

Koutsantonis told reporters: “The South Australian Government has lost faith in the national electricity market.”

“Last night, the market operator decided it was easier to load shed than turn on new generation,” he said.

“We want to know why.”

He said that last night, prices were “maxed out” and “any generator in Australia could have operated, regardless of the import costs, and been profitable”.

He argued that the rules of the national market meant that “we have an oversupply of generation, yet the market is unable to dispatch that [electricity] to sufficiently meet our needs”.

But the market operator says it was forced to load shed in order to protect network equipment from damage that would have caused further blackouts if it hadn’t taken action.

“In order to maintain power system security, AEMO instructed South Australia transmission network business ElectraNet to load shed 100 [megawatts] which was approximately 3% of total South Australian demand at 19:03 AEDT, to avoid potential damage to network equipment,” AEMO said in a statement this morning.

“AEMO understands the frustration from South Australian energy consumers as electricity is an essential service,” it reads.

“It is important to note that AEMO instructed load shedding to ease the pressure on the power system, protecting it from potentially impacting more residents, and for a longer period.

“AEMO is continuing to carefully manage the power system during this period of high temperatures and high demand across Australia’s eastern states.”

The market operator stressed that it asked generators to supply more electricity as demand peaked last night – but generators declined to do so.

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“AEMO did not receive sufficient bids into the market to maintain the supply/demand balance in South Australia,” the statement reads.

“A number of market notices were issued to all generators in the lead up to this instruction, requesting a market response to be provided due to increased demand as a result of the high temperatures in South Australia.”

In a twist, however, the owner of the Pelican Point power station, Engie, said it was not allowed to “provide a market response” from its second unit “unless directed by the market operator”.

Prime Minister Malcolm Turnbull described the latest SA power crisis as disgrace and again pointed the finger at the state’s heavy reliance on renewables.

Federal Environment Minister Josh Frydenberg echoes his comments, saying SA’s energy grid was a basket case and the State Government’s incompetence had subjected consumers to third-world conditions.

But Weatherill said South Australians were fed up with a lack of action from the Federal Government to fix the national energy market.

“South Australians are not prepared to put up with being ridiculed and have the finger pointed at them by a Federal Government that has abdicated its responsibilities,” he said.

Asked on morning radio if he would support giving the State Government the power to direct a generator to turn on, Opposition Leader Steven Marshall told ABC Adelaide: “I just think this is a thought bubble from Tom Koutsantonis and I think all of your listeners now have a clear insight into just how chaotic the energy policy of this Labor Government is.”

“They are the ones with a deliberate policy who undermine the viability of the affordable, reliable, baseload operator that we had at the Northern Power Station,” Marshall said.

“It destroyed jobs in Port Augusta, it destroyed jobs in Leigh Creek and what it’s delivered for the people of South Australia is the highest priced, most fragile grid in the entire nation and there was a deal on the table … there was a deal on the table to Tom Koutsantonis to keep that power plant open and the Government rejected it and look at the chaos that we’ve had ever since – look at the chaos.”

Independent Senator Nick Xenophon told ABC Adelaide the Government needed to underwrite the construction of a new gas-powered electricity generator.

“There is only one solution in the short term to bring about relief from power prices and to give us energy security – and that is for the State Government … to underwrite the construction of a new gas-fired generator,” said Xenophon.

“The State Government consumes a lot of power, they can sign contracts with a new gas-fired generator, bring along with them leading electricity users, significant electricity users, and have a five or six hundred megawatt gas plant being built.

“The impact of that will be immediate, it might take 12 months or so to build but it will send a very clear signal to the market both in terms of energy security and a reduction in prices.”

But Weatherill said that was exactly what the Government was doing.

“The very thing he’s called for, we’re doing,” he told the press conference.

“In fact, tenders closed on the sixth of January.”

Weatherill said SA would get an entirely new power plant: “if the tender works, yes”.

“That’s the objective.”

Last September, the Government announced the tender to procure 75 per cent of its long-term electricity needs, with the aim of introducing a new competitor into the local energy market.

-with AAP.

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