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Bushfire electricity interconnector shutdown caused highly volatile spot market prices

The role of the NSW-Victoria electricity interconnector and the lack of one to South Australia to keep electricity prices stable has been in the spotlight during the latest summer bushfire season.

Electricity interconnectors are basically huge transmission vehicles that allow electricity to be moved from one state to another to meet demand.

If NSW has extra power, it can send it to the Victorian or Queensland market and vice versa, as the need arises.

But New South Wales and South Australia are not connected.

A new South Australia to New South Wales electricity interconnector has been given the green light, but will not be completed until somewhere between 2022 and 2024, according to Electranet. 

The new interconnector is needed precisely because of instances such as the Victoria shutdown, to ensure continuity of supply.

What happened to the electricity interconnector on Horror Saturday?

In what was dubbed ‘Horror Saturday’ the New South Wales to Victoria electricity interconnector was shut down at 4pm on 4 January, further exposing the vulnerabilities of Australia’s national energy grid. 

As a result, the Australian Energy Market Operator was hamstrung and could not rely on incoming energy to New South Wales. 

A Lack of Reserve 2 Market Notice was issued, meaning that NSW would have to draw on its own reserves, cut back on demand or try and ramp up imports from Queensland. 

Brownouts and rolling blackouts were expected, but these were narrowly averted by ramping up Queensland exports. 

How did Horror Saturday affect spot market prices?

The results were beyond extreme.

New South Wales was close to brownouts and blackouts and the effect on pricing was astronomical. Spot prices (prices paid on the market at that specific time) went through the roof.

At 3:45 pm, the dispatch price shot up to the Market Price Cap (currently $14,700/MWh) in the NSW region, and almost as high in Queensland. 

Queensland prices shot up because supply from Victoria stopped and what surplus was left was snapped up by NSW.

The NSW Region price for energy was stuck at the market cap of $14,700/MWh from 3.45pm until 5.40pm.

Demand response did have a positive effect on the situation.

When the spot price spiked to the Market Price Cap, Scheduled Demand dropped by approximately 300MW between 4:25 and 4:35 pm, which probably means that NSW energy users curtailed their energy needs as notifications reached them.

Victoria, on the other hand, was suddenly lumped with a glut of oversupply, which plunged into negative pricing because there was an immediate and radical oversupply of dispatchable power. 

South Australia storm triggers shutdown on Victoria connector

The interconnectivity problem reared its head again Friday 31 January.

Six major transmission towers in western Victoria fell over in a storm early during extreme weather that knocked out the electricity interconnector and left South Australia separated from the national power market.

The technical term is “islanded”.

The heat soared to ridiculous levels across the country and electricity demand followed suit. 

NSW’s Tomago aluminium smelter outside Newcastle, which consumes 10 percent of the state’s power each year, shut down two of its potlines for an hour each on Friday night.

In Victoria, the Alco’s Portland smelter managed to ­resume operations after securing an urgent supply fix with Origin Energy and ElectraNet.

The state’s damaged transmission lines are expected to be out of service until February 14, AEMO said.

Electricity demand is forecast to hit its highest levels since January 2014 due to the combination of heat and humidity.

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