Energy analyst warns of East Coast Summer blackouts

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Energy blackouts could hit Australia’s East Coast again this summer because not enough has been done to make up for shortfall in supply in extreme conditions.

As reported by Leading Edge earlier this week, the Australian Energy Market Operator (AEMO) highlighted that the power network remains susceptible to extreme conditions.

This view is shared by JP Morgan energy analyst Mark Busuttil, who said that while politicians have scrambled to find a solution, the fact that not enough new generation and storage have come online since could lead to brownouts and blackouts in Eastern states.

Energy futures prices still volatile

Mr Busuttil said that futures prices are all over the place with the forward electricity price curves in each of the primary east coast states doubling between October 2016 and March 2017 due to the combined impact of Hazelwood, gas shortfalls and the volatile March quarter market.

Mr Busuttil also said that prices for this summer remain high, although there has been some softening since the Queensland government issued an order for the 385-megawatt Swanbank E gas generator to return to full capacity as from 1 January 2018.

An additional 249 MW of capacity will be added into the mix next month when Engie restarts the second turbine at Pelican Point in South Australia, with a temporary 200 MW being added into the mix through diesel generation.

Various investments across the country will also see 500 MW being added into the mix through renewable sources and demand side management – a scheme where businesses scale back use in return for credit or payment – will also help, but that is not enough to make up for the shortfall.

2,000 MW of energy lost this year alone

The mothballing of Victoria’s Hazelwood power plant accounted for the loss of 1,600 MW of power

Mr Busuttil has calculated that 2,000 MW of power has been lost from the market this year alone. This includes 1,600 MW lost from Hazelwood in Victoria, 171 MW to be lost from Smithfield in NSW and a further 208 MW set to be lost when Hydro Tasmania mothballs its 208 MW Tamar Valley Gas Plant.

According to the Australian Energy Regulator, 2016-17 looks set to be the third year running that more generating capacity has shut down than has been added through new plants, despite the surge in renewables investment.

No new investment in baseload has been made since a 240 MW upgrade to the Eraring plant in NSW – now owned by Origin – in 2013. The AER has Victoria and South Australia already running a deficit in generation – so they consume more than they generate – with no immediate improvement seen.

Events like the possible summer blackouts in the Australian East Coast can affect electricity prices. As an energy management consultancy, Leading Edge Energy makes it a point to stay updated so we can continue giving our clients advice on how to reduce their energy spend.

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