The Australian Energy Market Operator says it was not asleep at the wheel after another electricity shortage in South Australia on Wednesday caused blackouts for 40,000 people.



Senior managers from the electricity market operator faced combative questioning about their management of the South Australian weather event during a Senate committee hearing in Canberra on Friday.

As other states battled extreme temperatures, and faced the risk of blackouts, and as political debate continued to rage about energy policy, David Swift, executive general manager of corporate development at Aemo, defended the performance of his agency despite admitting there had been an error in their forecasting on the day of the blackout this week.

“We certainly weren’t asleep at the wheel,” Swift told the committee.

Swift went through Aemo’s actions on the day of the blackout. He said Aemo issued market notices in response to what he described as “an unprecedented level of demand”, but despite the market price being very high, there had been no market response.

While the Turnbull government has made much of the role of intermittent renewable energy technologies as a contributor to a run of blackouts in South Australia over the past few months – Swift told the committee the problem on Wednesday was existing thermal generators were not available to come on line.

He said there were three thermal generators in the state on the day that were not available to meet the surge in demand. This lack of availability was attributed to “technical issues”.

Swift confirmed Aemo had powers to direct plants to activate during periods of high demand, but said Aemo had not directed a gas plant at Pelican Point to generate power on Wednesday because the market operator failed to foresee the need to issue the direction early enough on the day.

He said their projection of market demand for Wednesday had been out by 3%. Swift said Aemo had built into its projections that wind and solar power would drop off on Wednesday, but the situation had been manageable until outages were reported.

When Aemo contacted the plant operator at Pelican Point at just after 5.30pm eastern time to check whether it could begin power generation in order to prevent the blackout, the market operator was informed it would take up to four hours to kickstart the plant, and by that time, it was too late.

Swift told the committee he was unaware why Pelican Point had failed to respond to its market requests.

The South Australian energy minister, Tom Koutsantonis, has lambasted Aemo about Wednesday’s incident. After the blackout, he said Aemo had been “caught short”.

“There was obviously more demand than they had generation turned on in SA. There was an issue with the ElectraNet transmission lines in Port Lincoln, which meant that the Port Lincoln generators couldn’t turn on,” he said. “They were caught short by not instructing the second unit at Pelican Point to turn on.”

But Malcolm Turnbull has played down the prospect the problems in South Australia are being caused by regulatory failure, or by commercial decisions by gas generators.

Earlier this week Bruce Mountain, an energy economics consultant at CME, said the underlying cause of the SA blackout on Wednesday was the same as those behind what happened in July last year, when low supply led to massive spikes in wholesale electricity prices.

“When the renewables are not operating flat out or making enough electricity, the fossil fuel generators have the market to themselves. And as we know from studies that I’ve done from 2008 onwards they can and do corner the market,” Mountain said.

After the July price spikes, Mountain’s analysis showed electricity generators were withholding supply in order to push up prices. “This is just classical market cornering,” he said. “If you decrease your output by half but as a consequence increase your price by a factor of ten, you’re better off decreasing your output.”

Turnbull again on Friday declared the problem was the South Australian government not doing enough contingency planning to secure the grid. The South Australian government had “just mindlessly, complacently, negligently introduced more and more renewables into their grid,” the prime minister said.

“They have not put in place the backup gas-fired generators to come into play when the wind isn’t blowing. They have done nothing on storage at all.”

The government will need renewable energy to meet the Paris emissions reductions targets Australia has agreed to. A range of experts have told the government a form of carbon pricing for the electricity sector would allow the required transformation to low emissions energy sources to occur in the national grid at least cost to households and businesses.

But late last year, after government conservatives expressed objections, the government ruled out any form of carbon trading for the electricity sector.

The prime minister was asked on Friday whether it would be best to let the market drive the required transformation through putting a price on carbon, or setting up an emissions intensity scheme.

He said the market would not fix the problem at the moment. “You’ve got a number of big obstacles to the market, actually, right at the moment. Gas is not available. We’ve got masses of gas in Australia, but you’ve got bans on exploration and moratoriums on exploration in many parts of the country,” Turnbull said.

“Gas is more than twice as expensive here, as it is in the United States. It’s more expensive here than it is in Germany. Think about that. They’re importing it from Russia. So we’ve got a big problem with the availability of gas.”