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South Australia has already had an energy crisis like this, but it seems there are still lessons to be learned & More Breaking News Headlines Today

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A suspended electricity spot market, rolling blackouts because of supply shortages, a “botched transition” to renewable energy – these terms were all used to describe the state’s energy crisis of 2016/17, long before the troubles of today.

But has anyone learned from SA’s hard lessons in those difficult months for the state’s energy sector?

The situations have many parallels.

As Australia sizzled in the heatwaves of the 2017 summer, the country’s energy market was in crisis.

In SA, demand exceeded supply and 90,000 homes and businesses in Adelaide were cut off from power.

New South Wales faced a similar situation two days later.

Months earlier, SA had gone through its infamous 2016 blackout, a cascading failure of infrastructure and systems that sent shock waves through the electricity sector.

Now, energy companies are again considering cutting customers off from electricity, not because they can’t generate enough, but because there isn’t enough to buy.

There are similarities between SA’s statewide blackout in 2016 and the current energy crisis. (ABC News: Chris Gillette)

So, who’s to blame? 

Both crises are very similar, said Danny Price, the managing director of Frontier Economics, who was hired to advise the SA government after the blackout.

Mr Price blames the Australian Energy Market Operator, AEMO, for the problems.

“This is a systems operator failure,” Mr Price said.

The agency’s job is to manage the National Energy Market and ensure there is enough supply of electricity and gas.

It can influence or control what energy companies do, what they pay for gas, and what they are paid for electricity.

In 2016 and 2017, AEMO was criticised for failing to ask electricity generators to “spin up” reserve power ahead of the one-in-50-year storm that triggered the statewide blackout. 

Although the question of who was to blame for the multiple failures that led to SA’s “Black System” remains contentious.

Black transmission towers under sunset sky
The electricity sector has been dealing with soaring costs.(Supplied: Unsplash)

Generators who were paid to provide “black start” capacity in the event of a system failure were not able to do so when everything went dark.

After power was restored, AEMO then suspended the electricity spot market in SA for two weeks.

Today, with ageing coal generators failing and the price of gas skyrocketing, Mr Price said AEMO had not reassured electricity companies they would make enough money if they bought more gas to generate extra power.

“This is another failure by AEMO… to convey how people should respond to administrative pricing versus directions,” he said in reference to the AEMO decision to suspend the national electricity spot market.

Electricity generators had been withdrawing capacity from the market after AEMO imposed price caps, for fear they could not cover their costs, forcing the operator to direct them to supply electricity and triggering compensation arrangements.

“The real evil out of this is because it then generates this belief in politicians and regulators that the generators are doing something wrong, so the public has been turned against the generators and it’s not their fault,” Mr Price said.

“They’re just responding to the incentives and directions they’ve been given.” 

‘States need to take back control’

In 2017, Mr Price helped the then-Labor state government lease and install emergency power stations to ensure the state wasn’t left short again.

But those generators were never used and were later privatised by the subsequent Liberal government.

Mr Price said states should consider doing the same thing again to ensure there is adequate generation capacity as coal power stations age.

“They should take their own actions,” he said.

“I would encourage every state to think about exiting the national electricity market arrangements, just get out of it. They don’t need to be in it.

“It’s not necessary to stay in the national electricity market to keep the lights on this, it is just a completely broken heap of rubbish.

The silhouette of a power station is seen against the sky in the early evening, with thick smoke billowing from three towers.
AEMO says the current problems are in part due to planned and unplanned outages at power stations. (Shutterstock: Kip Scott)

AEMO said the current problems are due to planned and unplanned outages at power stations, an early start to winter, low output from wind and solar farms and planned outages in transmission infrastructure.

It declined to comment on Mr Price’s criticisms and referred questions about its management of the energy sector to its statement on the suspension of the National Electricity Market. 

“We are confident (these) actions will deliver the best outcomes for Australian consumers, and as we return to normal conditions, the market based system will once again deliver value to homes and businesses,” that statement said.

Fears problem is only going to get worse

But Mr Price said the reliance on ageing coal power stations to cover peak demand periods in winter and summer while the grid transitions to renewables was going to make things worse in the future.

“If anyone thinks this is going to go away, it’s not, because every day that these generators are run and run harder because of the requirement to do so to meet demand, they get more and more worn out,” he said. 

Wind farm turbines
The complicated transition to renewable energy has been among the reasons blamed for the shortfall. (Stuart Stansfield: ABC)

The director of the energy program at the Grattan Institute, Tony Wood, said AEMO was not to blame for the problems.

“I think there was just enormous frustration on both sides with the situation, I think the market had failed, the market wasn’t responding to the way markets work and therefore you had to admit, the market had failed and implement what they’ve done and when they fix the physical system, normal service will be returned.”

He also urged states not to consider leaving the National Electricity Market (NEM).

“Now, whether or not there are things about the NEM that are not by any means perfect, and all the work to sort out the capacity mechanism and the way interstate generation gets built, and so on, is a work in progress that hasn’t been done as quickly as should have been.” 

“(But) South Australia at times benefits by sending electricity to the other states, because generators get paid for that.

“When you’ve got more than we need, and you benefit by getting electricity from the other side. And all the states benefit from that.”

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