National first as AEMO suspends NEM Wholesale Market

A combination of factors has seen AEMO temporarily suspends wholesale spot market.

AEMO has taken this step because it has become impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers in accordance with the NER.

The market operator will apply a pre-determined suspension pricing schedule for each NEM region. A compensation regime applies for eligible generators who bid into the market during suspension price periods.

In making the announcement AEMO CEO, Daniel Westerman, said the market operator was forced to direct five gigawatts of generation through direct interventions yesterday, and it was no longer possible to reliably operate the spot market or the power system this way.

“In the current situation suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses,” he said.

The market suspension is temporary, and will be reviewed daily for each NEM region. When conditions change, and AEMO is able to resume operating the market under normal rules, it will do so as soon as practical.

Mr Westerman said price caps coupled with significant unplanned outages and supply chain challenges for coal and gas, were leading to generators removing capacity from the market.

The current energy challenge in eastern Australia is the result of several factors - across the interconnected gas and electricity markets. In recent weeks in the electricity market, we have seen:

• A large number of generation units out of action for planned maintenance - a typical situation in the shoulder seasons.
• Planned transmission outages.
• Periods of low wind and solar output.
• Around 3000 MW of coal fired generation out of action through unplanned events.
• An early onset of winter - increasing demand for both electricity and gas.

“We are confident today’s 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,” he said.

Federal Minister for Climate Change and Energy Chris Bowen MP has stated this action is "the best way to make sure the lights stay on and AEMO has the Government's full support in taking this action."

"This is a tool that was available to AEMO under existing rules - suspending the pricing mechanism temporarily in the market was deemed the best way for AEMO to simplify the operation of the NEM and ensure visibility of actual supply while these challenges are dealt with," Bowen said.

For more information, view this guide on market suspension in the NEM and price scheduling. Information on market suspension compensation is also available here.