Warning of NSW power shortages after soaring temperatures stoke demand

The demand, issued on Thursday morning by Australian Energy Markets Operator (AEMO), comes after the agency triggered rolling power cuts in South Australia on Wednesday evening as the mercury hovered near 40 degrees.

The loss of electricity to about 40,000 South Australian households for about half an hour reignited a debate over the country's energy policy, with the state blaming AEMO and the federal government blaming states for excessive renewable energy goals.

The issue, though, extended beyond wind farms on Thursday, when AEMO issued an alert for a looming supply shortfall for Friday afternoon for NSW - a state that gets the great bulk of its electricity from coal and gas-fired power stations.

With temperatures set to climb into the 40s across most of NSW on Friday and for several days afterwards, AEMO issued several so-called "forecast lack of reserve" notices, the latest of which identified a 264-megawatt shortfall in the NSW region for 4-6pm on Friday.

"AEMO is seeking a market response," the statement said. "AEMO will determine the latest time at which it would need to intervene."

AEMO also predicted electricity demand in the state to peak at 14,276 megawatts on Friday afternoon.

"That would be very close to the all-time record" power demand of 14,649 MW, Paul McArdle, chief executive of Global-Roam, an energy consultancy.

Mr McArdle said such alerts had become almost a day to day occurrence in South Australia but they are rare for NSW. "NSW still has a fair oversupply of thermal capacity."

Saturday's peak demand would only ease back to 13,376 MW as the major heatwave extends its reach over the state. (See Bureau of Meteorology chart of Friday's expected top temperatures.)

"The challenge is that Queensland is also going to be hot," Mr McArdle said.

Wholesale power prices in Queensland have already been running at record-high levels for the month and the looming demand surge in both NSW and its northern neighbour will likely push them sharply higher in both states, he said.

The market's price cap is $14,000 per megawatt hour.

'Catastrophic failure'

AEMO's early warning to get additional supplies lined up for NSW contrasts with what South Australia's Energy Minister Tim Koutsantonis called a "massive, catastrophic failure" by the agency to predict his state's excess demand and take appropriate steps to avoid rolling blackouts on Wednesday evening.

AEMO issued another forecast "lack of reserve" on Thursday, identifying the need for "contingency capacity reserve" of 420 MW. The reserve was sought for 2pm-3.30pm and 6.30pm to 7.30pm, local time.

About 40,000 households in South Australia were without power for about half an hour on Wednesday evening after the AEMO identified a 100-megawatt shortfall from local generation capacity and ordered "rotational load shedding".

Much of the state had sweltered through temperatures that reached the low 40s, and similar heat is expected on Thursday, the Bureau of Meteorology said.

Mr Koutsantonis told Radio National on Thursday the state had sufficient electricity capacity available, with about 250 MW of the Pelican Point gas-fired power station unused.

"Every South Australian has every right to be furious with the way our national electricity market is operating," Mr Koutsantonis told RN.

"We're at the mercy now of national operators in a privatised market that operate on price signals rather than a public good."

The largest owner of Pelican Point, French multinational electric utility company Engie, said half of the 490 MW gas-fired power plant had been operating since last June.

The second unit at the plant unit, though, "is not able to provide a market response under the current rules of the National Electricity Market (NEM), unless directed by the market operator", a spokesman for Engie said.

The spokesman said "a number of other market mechanisms" were available under the existing NEM design that would have allowed other jurisdictions the right to dispatch this capacity to support the system.

"To date these have not been utilised," he said, adding the company continues to "engage with all relevant stakeholders to make this capacity available".

AEMO's response

In a statement on Thursday, AEMO said it had issued "a number of market notices 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".

"AEMO did not receive sufficient bids into the market to maintain the supply/demand balance in South Australia," it said.

The operator said it had published market notices "forecasting a tightening supply/demand balance across South Australia and New South Wales over the coming days, and is working with the market to mitigate the need for further load shedding events".

'Crisis'

Federal Environment and Energy Minister Josh Frydenberg said the latest power failure in SA followed a series of similar events, including last September's total outage across the state after a freak storm.

This time there was no tempest, but wind energy supplied just 2.5 per cent of the electricity in the state, underscoring the lack of reliability in South Australia's power sector, he said.

"[Premier] Jay Weatherill has a crisis here," Mr Frydenberg told Sky News on Thursday, adding there would be a full inquiry into Wednesday's outages.

Mr Frydenberg said the Labor-run states had "run ahead" of the market in setting renewable energy targets beyond the 2020 goal set at the Commonwealth level.

That target is for annual renewable energy sources to provide 33,000 gigawatt-hours per per by 2020, amounting to an expected share of about 23 per cent of Australia's electricity market by then.

South Australia draws about 40 per cent of its power from renewable energy, mostly wind farms. It also has a power link to Victoria through which it can export or import supplies.

"South Australia has been a basket case when it comes to energy policy and we've made the point that Jay Weatherill's big experiment as failed," Mr Frydenberg told another Sky program on Wednesday.

Queensland has set a target of supplying 50 per cent of power from clean energy sources by 2030, a goal that federal Labor leader Bill Shorten endorses nationally. The Victorian goal is for 40 per cent by 2025.

'Retaking control'

Mr Koutsantonis said Wednesday's cuts were unnecessary and the state would be announcing steps it would take to avoid a repeat of the rolling blackouts.

"The Premier and I have come to the conclusion now that the South Australian people expect us to retake control of own destiny," he told RN.

"We are going to be intervening in the market from this day forward. We're not going to allow market forces and people who use electricity markets for profiteering to set our own future."

At a media conference on Thursday, Mr Weatherill said it was "galling to me to think there was sufficient thermal capacity in the system and it wasn't used".

Mr Koutsantonis said AEMO had been operating the industry "like a stockmarket" but neither he nor Mr Weatherill detailed what steps they planned to take.