Power market ‘beginning to fail’, energy users say

Angela Macdonald-SmithSenior resources writer

Aug 29, 2024 – 6.08pm

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Industrial users of energy say dialled-back forecasts for the uptake of electric vehicles do nothing to remove worries that there won’t be enough new clean energy generation capacity added in time to prevent price spikes when coal stations close.

The fact that emergency reserves are being sought to help cover demand this coming summer in Victoria, NSW and South Australia showed how fraught the supply-demand balance was, said Andrew Richards, who heads an industry group representing large industrial users of electricity and gas.

Australia can’t afford any more delays in the build-out of new generation and transmission without risking blackouts, AEMO said. Alex Ellinghausen.

“If demand is not growing as expected it’s just a bit of a short-term reprieve,” Mr Richards said of the Australian Energy Market Operator’s reduced forecasts for the growth in electricity demand in its 10-year electricity outlook released on Thursday.

“It looks better, but gee, everything has to right ... or we are in trouble,” he said, pointing to the risk of power cuts for customers and price spikes if there are any delays to new supply projects.

Innes Willox, CEO of Australian Industry Group, said the AEMO report showed there would be “serious power shortfalls ... this decade” unless more supply projects were permitted and delivered. He called for a sustained national effort to speed up planning, approval and delivery of new energy infrastructure.

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The lower expectation for growth in the consumption of power from the grid was one of the key reasons AEMO toned down warnings of potential power cuts over the next few years.

The market operator almost halved its assumptions for the uptake of EVs, to 4 million by 2034, by which time they would be consuming 8 terawatt-hours of power. That’s down from an initial estimate of 7 million EVs consuming 18.5 TWh in a draft report in December.

Energy Users Association of Australia CEO Andrew Richards. Jessica Hromas

In total, AEMO cut its forecast for total demand growth in the National Electricity Market by 2034 by 23.2 per cent, to 35.9 TWh. It now expects an average annual growth in power usage from the grid of 1.9 per cent, rather than 3 per cent. The increasing size of rooftop solar systems being installed by households contributed to the reduced forecast.

But Mr Richards dismissed the forecast as “a little like astrology”, given big uncertainties over future demand for cheaper EVs from China and huge growth in demand envisaged in any case from data centres and the digitisation of the economy, in addition to emerging signs of a switch to electricity from gas among households in Victoria.

Tim Washington, co-founder and CEO of charging company Jet Charge, and Grattan Institute energy program director Tony Wood also said that the take-up of EVs could turn around and accelerate.

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The two-year extension of Origin Energy’s Eraring coal-fired station has helped ease strain on the grid, but AEMO chief Daniel Westerman said it was still “critical” that investments in generation, storage and transmission were completed on time and in full to head off the risk of power cuts.

Federal Climate Change and Energy Minister Chris Bowen said on Thursday the AEMO report showed “the government’s plan is working” when it came to reliability, noting the 5.7 GW of new energy capacity added into the supply assumptions since the last assessment 12 months ago.

But opposition climate change and energy spokesman Ted O’Brien said the power system was “on a knife’s edge”, and AEMO’s outlook showed that if new supply projects weren’t delivered on time the lights would go out without more extensions of coal and gas plants.

”To meet Labor’s goal, nearly 7 GW of new renewable generation must be installed every year to 2030,” Mr O’Brien said, noting that last year, only 1.3 GW reached financial close.

Mr Richards, who is chief executive of the Energy Users Association of Australia, said it was worrying that AEMO was now having to regularly use voluntary offers of load shedding by industrial customers just to manage demand on the grid. The EUAA’s members include BlueScope Steel, Brickworks and other manufacturers.

AEMO said on Thursday it was tendering for spare supply in Victoria, NSW and South Australia for this summer “to manage potential low reserve conditions”.

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Mr Richards said regular reliance on voluntary cutbacks of power consumption by industry was evidence the market was failing consumers.

“It feels like ... voluntary demand load-shedding has gone from being an emergency backstop measure to something that is how we manage the market ... that is not right,” he said.

“We don’t mind giving you a hand every now and then, but if you are going to use us as load management as the way you’re going to manage the market, that’s not the market working it’s the market beginning to fail.”

OH look another aemo report