Investor News

How to avoid blackouts AEMO style

Apparently, we have a solution to avoid blackouts following the closure of 2,400MW of coal-fired power in recent years.

The below article in The Australian ($) highlights the plan to shore up 'strategic reserves'.

Here's the simple 3 step approach now in place courtesy of the Australian Energy Market Operator (AEMO) and its Reliability and Emergency Reserve Trader (RERT) program.

Step 1: Get big businesses to shut down so households don’t lose power.

Step 2: Give high-priced electricity generators an 'incentive' to power up.

Step 3: Use taxpayer money to pay for both so the costs stay hidden from retail electricity bills.

It raises the question… why is the plan needed?

Sadly, it means demand is forecast to exceed supply under certain conditions. You know, such as normal summer conditions, when high temperatures across multiple states cause more households to switch on air conditioners to stay cool… and the wind isn't blowing… as much as we hope.

The RERT program seeks to deliver 1,150 megawatts of 'emergency reserves' across Victoria and NSW.

This is less than the 1600MW capacity of the now-closed Hazelwood power station.

Prior to Hazelwood's closure, South Australia closed its two coal power stations, removing over 800MW of reliable, affordable baseload power.

As a result, all states except Tasmania have experienced a jump in wholesale electricity prices… though Tassie was coming from an unusually high base due to their own reliance on diesel generators. Now their hydro capacity is back on track:

State2015–16 ($/MWh)2016–17 ($/MWh)Movement
New South Wales












South Australia








AEMO state:

South Australia’s average wholesale electricity price for 2016–17 was $108.66 per megawatt hour (MWh), which was approximately 76% higher than for 2015–16 ($61.67 per MWh). AEMO’s analysis suggests the higher prices in South Australia were mainly due to tighter supply conditions, higher gas costs, and network outages.

What does the past two-year price movement look like when we factor in 2018 year-to-date?

State2015–16 ($/MWh)2016–17 ($/MWh)2017–18 ($/MWh)2-year Movement
New South Wales












South Australia








SA's price did come back down a bit, but it, too, was coming off the second highest base in 2015-16. Nevertheless, it's been well and truly outdone by Victoria's jump, which has nearly doubled in two years, most noticeably since Hazelwood closed.

This shows what the loss of affordable, reliable baseload does when replaced by expensive gas in a market with diminished supply. It's created a perfect storm for high wholesale electricity prices.

The solution? Short term, there's the installation of 100 diesel generators near Morwell. Though the cost is secret. We're not allowed to know how our money is being spent. This cost won't appear on our power bills.

Beyond that, the government is banking on the deployment of more high-cost, intermittent wind and solar over the next two years.

Part of the solution for encouraging solar PV installations is an increase in the feed-in tariff for solar. It went from 5c per kWh to 11.3c back on 1 July 2017. Translated, that's $113 per MWh.

Meanwhile, the Victorian government has increased the brown coal royalty rate, taking a cut of the increased profit now enjoyed by brown coal generators AGL, Alinta, and CLP.

But don’t feel sorry for them. They can afford it. They're receiving an absolute windfall benefit as their costs stay relatively stable despite doubled wholesale prices.

AGL shareholders should be very proud of their 2012 acquisition of Loy Yang A, and Alinta should be similarly proud of their recent purchase of Loy Yang B. In fairness to Alinta, they are the only retailer to drop power prices for their customers recently.

Unfortunately, the medium-term solution of adding more wind and solar still requires backup or storage, so we'll need to rely on expensive gas.

Call us biased, but we recommend a Coldry-enabled HELE power station in Victoria to restore reliability and affordability while reducing emissions intensity. We can then avoid the need to give big business our ‘hard earned’ taxpayer funds to switch off.

Just a thought.

Read more below…

Big energy users act to save the grid from blackouts over summer

Samantha Hutchinson | The Australian | 5 January 2018

More than a dozen big ­energy users across NSW, Victoria and South Australia could be told to power down or power off this weekend as searing heat across the southeast puts energy supplies under pressure.

Source ($): Big energy users act to save the grid from blackouts over summer