Deepening energy crisis triggers power price caps in Queensland

Australia’s east-coast energy crunch is continuing to deepen as a blow-out in wholesale electricity prices in Queensland forces the national market operator to step in and impose new price caps.

Shortly before 7pm AEST on Sunday night, the Australian Energy Market Operator (AEMO) began administering a cap on Queensland’s wholesale power prices at $300 a megawatt-hour. The intervention was triggered because the state’s cumulative power prices across seven days had reached $1.35 million, exceeding a limit set out in market rules.

Shortly before 7pm on Sunday night, the AEMO began administering a cap on Queensland’s wholesale power prices at $300 a megawatt-hour.

The price cap had been due to expire at 4am on Monday morning, but AEMO has since notified the market it would be extended until the end of the day’s trading because the price limit remained breached.

“AEMO will continue to monitor the rolling sum of the uncapped spot prices and issue further market notices as required,” it said.

Wholesale power and gas prices are surging across the eastern seaboard as a burst of cold weather drives up demand for heating and a series of simultaneous coal-fired power station outages forces gas-fired generators to fill the gap. Meanwhile, international prices for coal and natural gas remain stubbornly high as Western utilities race to find alternatives to Russian energy imports, intensifying competition for supplies.

Australia’s east-coast price spikes have been particularly severe in Queensland and NSW – the two states most dependent on burning black coal for electricity.

Graeme Bethune, chief executive of Australian energy consultancy EnergyQuest, said the price rises across the grid had been “extraordinary”.

“The last two months have seen east-coast domestic electricity and gas prices surge to unprecedented levels,” Bethune said.

“East-cost spot markets are relatively small and illiquid, so small increases in demand send prices through the roof.”

So-called “default market offers” for electricity – price caps on what retailers can charge households and businesses that don’t take up special deals or bundle utilities bills – are set to rise in all states across the east-coast electricity grid from July 1.

From July 1, default offers will jump by 14 per cent, or $227, in New South Wales; 11 per cent, or $165, in Queensland; and 7 per cent, or $124, in South Australia.

In Victoria, where the state’s Essential Services Commission determines its own default offer, the price cap for households will rise by 5 per cent, or $61, a year.

Federal Energy Minister Chris Bowen convened an emergency meeting of his state and territory counterparts earlier last week to push ahead with sweeping market reforms aimed at ensuring a smooth transition away from ageing and failure-prone coal-fired power stations, which still account for two-thirds of the nation’s electricity needs.

One of the plans is to introduce a so-called “capacity market”, which would reward energy assets for guaranteeing power that can be quickly called onto support renewable energy through all weather conditions.

AEMO has also imposed price caps of $40 per gigajoule on the Sydney and Victorian wholesale gas markets after prices blew out last month and caused the collapse of gas company Weston Energy.

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