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Heatwave a $34m energy drain for users

Energy users in Victoria and South Australia paid $34 million to buy back power from major manufacturers to keep the lights on during January’s record-breaking heatwave in the two states.

Calling on the last ditch electricity mechanism for the first time in more than a year on January 24 and January 25 cost consumers up to 100 times the normal cost of power, although that was still lower than the market price cap of $14,500 per MWh, the Australian Energy Market Operator said in a report released yesterday into the major system event.

The activation of the emergency response unit marked the first time it has been used since more than a year ago in South Australia and just the fifth time it has been triggered in the past two decades.

But the grid operator said the intervention meant some big users avoided compulsory load shedding, which if tapped could have led to an even bigger bill topping $52m.
“Without activation of the Reliability and Emergency Reserve Trader, AEMO estimates a further 1252 MWh of load would have been required to be shed involuntarily,” the regulator said in its report.

“The RERT mechanism in this instance mitigated the additional economic and social impacts of more widespread load shedding.”

The total annual cost for consumers would equate to $3.20 in Victoria and 80c in South Australia based on typical residential tariffs, according to AEMO calculations.

AEMO can call on 940MW of supply reserves through the safety net, although it comes at a cost, with on-standby suppliers paid at hugely inflated rates under the demand response scheme.

The grid operator is looking at adding more generation to the scheme as part of a review underway.

The severe January heatwave buckled local poles and wires networks and stretched the national electricity market to breaking point as demand outstripped supply, forcing the Portland aluminium smelter — Victoria’s largest power user — to cut one of its potlines to help balance the power system. A combination of extreme weather and the loss of thermal coal generation saw the market operator ask customers in the two states to cut their power usage in a process called “load shedding” to help ease pressure on the grid and keep the lights on.

More than 1600MW of brown coal was unavailable over the two-day period, which was far greater than previously forecast by the grid operator.

Three major coal-fired power plants in Victoria and NSW — EnergyAustralia’s Yallourn and AGL’s Loy Yang A and Liddell units — suffered faults and collectively deprived the grid of over 1600MW of power amid peak demand. Among the coal plants forced offline were two of Yallourn’s four units, with one suffering a boiler tube leak and the second down due to overdue maintenance.

AEMO said at the time it was aware of the planned maintenance and noted that with summer temperatures extending into March there was no ideal time to bring down a unit for works. But that meant that even after tapping the emergency safety net for extra power, heavy energy users like Portland’s aluminium smelter had to switch off a major unit to help stabilise the system.

Despite the cost, AEMO said it represented just 65 per cent of the $50m cost incurred over the 2017-18 summer when it was forced to activate the RERT mechanism.

Source: The Australian