Victoria pushes for urgent overhaul of energy rules as blackouts loom
Victoria will fight to overhaul energy market rules in a bid to prevent summer blackouts amid concerns that ageing power plants are increasingly unreliable during heatwaves.
The plan, to be presented at next week’s meeting of energy ministers, seeks to reset how authorities measure the amount of backup power required to keep the lights on during summer when the grid is under the most strain.
As concerns deepen about an elevated risk of blackouts facing Victoria in the coming months, the Andrews government argued the existing method of calculating how much reserve power needs to be available to meet demand fails to consider the rapidly diminishing reliability of coal-fired power plants and the growing risk of multi-day heatwaves.
Victorian Energy Minister Lily D’Ambrosio will push the proposal for a fast-tracked review of the reliability scheme at next Friday’s Council of Australian Governments (COAG) energy meeting in Perth.
It’s clear we can no longer stand by and let this out-dated measure of reliability threaten our power supply,” she said.
“At COAG next week I’ll be pushing for a new standard which accurately reflects our current energy needs.”
Victoria in particular is increasingly susceptible to energy supply failures as it relies on ageing coal-fired power generators in the Latrobe Valley.
A rising number of unplanned shortages at the plants has caused instability in the market. There have been four unplanned unit outages in Victoria over the past 10 days.
The Australian Energy Market Operator (AEMO) has warned that up to 1.3 million Victorian households could face blackouts unless two other power plant generators are repaired according to schedule or additional supplies of electricity are secured.
The AEMO has also voiced concerns with the existing reliability standard – which is based on ensuring enough generation to supply 99.008 per cent of total energy consumption at all times.
It wants a “modified standard” arguing the current system is based on averages and overlooks risks associated with extreme events.
The proposal will face strong opposition from energy companies and users, as the cost of acquiring more reserve power would ultimately be worn by consumers through higher retail tariffs, adding to the woes of rising power prices.
The Morrison government is open to considering proposed changes to the reliability standard. Federal Energy Minister Angus Taylor last month said the nation’s reliability standards were set lower than many other countries and extreme scenarios were given low probabilities in the AEMO’s modelling of peak requirements.
“I have long advocated for a change to the reliability standard, but it needs to be done in a considered, measured way – not called for in a panic,” he said on Tuesday.
Tony Wood, energy director at the Grattan Institute, said there were “justifiable” reasons for reviewing whether or not the standard met community expectations.
But he cautioned a review should not be rushed simply because politicians in Victoria and New South Wales were becoming increasingly worried about being held accountable for blackouts in the fast-approaching summer.
“While we agree that the existing reliability standard should be properly and thoroughly reviewed, it should be done through the formal process to ensure we don’t overreact to a situation and consumers don’t pay for something that is unnecessary and we come to regret,” Mr Wood said.
The Energy Users Association Australia, a group representing large power consumers, such as steelmaker BlueScope and aluminium giant Alcoa, has opposed a review, saying the current standard was working adequately.
Chief executive Andrew Richards said creating a system that guaranteed power on the “four or five hottest days of the year” would prove “horrendously expensive”.
He added that businesses and hospitals that required guaranteed power supplies all year used their own backup systems, including diesel generators.
Representing the nation’s biggest power companies, including Origin, AGL and EnergyAustralia, the Australian Energy Council said a recent review had determined the current reliability standard struck an “economically optimum balance” between system costs and inconvenience to customers who experienced outages.
“There is no need to have an additional review process,” a spokesman said.
Victorian Energy Policy Centre director Bruce Mountain said the current system of ensuring backup power needed to change as the state’s brown-coal power plants proved unable to withstand extreme summer heat.
“The brown coal generators in Victoria have an atrocious rate of operating,” he said. “All of them have high outage rates.”
Premier Daniel Andrews said he was confident AEMO had put in place contingency plans for this summer but the coming season would be “challenging”.
He said it would be “foolish to think that every generator will work for every hour of every hot day” when power was needed the most.
“We know that when you need power most our coal-fired power stations can be relied upon least,” he said. “They have demonstrated that over recent times.”