Australia grapples with energy crisis

Experts blame electricity shortage on policy lapses under previous state, federal governments

Australia is among the world’s biggest coal and gas exporters, so it raises the question — why does the country face an energy crisis?

Just over two weeks ago, as the eastern states began to experience a harsh winter, electricity prices started to go up. First, from a few hundred dollars on the wholesale market, a benchmark unit of usage shot up by several thousands of dollars.

Widespread blackouts were predicted, and some big commercial users were asked to scale down their electricity consumption while residential consumers were asked to use electricity sparingly.

Some power producers were accused of deliberately inflating prices and holding back supply to enhance profits.

With no reserves to fall back on, the

Australian Energy Market Operator, or AEMO, suspended the wholesale electricity market on June 15, and pegged prices paid for electricity at A$300 ($210) per megawatt-hour.

“In the current situation, suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses,” AEMO’s chief executive Daniel Westerman said in a statement.

“The situation in recent days has posed challenges to the entire energy industry and suspending the market would simplify operations during the significant outages across the energy supply chain.”

The move avoided massive blackouts along Australia’s eastern seaboard, from Queensland to Tasmania, as well as South Australia.

In Western Australia, it was a much different story. The WA government decided years ago that with so much gas being extracted and sent overseas by foreign producers, it would be prudent to ensure the state has reserves.

The state government insisted producers make sure at least 15 percent of what they extract is set aside for local consumption, just in case of any emergency.

The story in the east of the country is vastly different with nothing set aside and coal-fired power stations closing and replaced, eventually, with renewables such as wind and solar. The problem is that the renewables will take years to come on stream.

While successive governments talk about renewable energy, the fact remains that three-fourths of the country’s electricity is still generated with the use of coal.

Electricity producers, however, have been hit on several fronts. Heavy rain and flooding disrupted coal supplies in New South Wales and Queensland while many power stations had to close or run at reduced capacity due to maintenance issues.

Some estimates say around onefourth of Australia’s coal-fired electricity generating capacity is currently out of service.

AEMO gave no timeline on when the suspension would be lifted. It said in a statement: “The price cap will remain until cumulative wholesale electricity prices fall below the cumulative price threshold.”

It did not take long for the power producers to fall into line.

On June 16, Australia’s biggest electricity producer, AGL Energy, said it expected to be able to supply more power to businesses and consumers in the coming days.

AGL had earlier said it had three units — power generators — out of service at its coal-fired plant in NSW.

Associate professor Lynne Chester, an energy expert from the University of Sydney, said policymakers have been aware of the risks of aging generators for decades.

“The sector’s regulators and policymakers have ignored the escalating capacity constraints of aging generation assets, fired by fossil fuels, which dominate the sector,” she said.

Energy Minister Chris Bowen said on June 20 that the worst pressures on the energy grid may have passed but significant strain remains.

Roger Dargaville, a senior lecturer and deputy director at the Monash Energy Institute, at Monash University in Melbourne, said the energy crisis did not happen suddenly.

It was the result of a series of policy decisions under previous governments — state and federal — that left Australia’s energy system ill-equipped to cope with the demands placed on it.

He said the solution will not be easy, especially as Australia transfers from coal to renewable sources of energy.