The RERT mechanism allows AEMO to pay major energy users to power down and free up energy for the wider system. Previous businesses that have powered down include Bluescope's steel operations; OneSteel's Laverton and Whyalla steel mills; manufacturers Visy and Australian Paper; the Tomago smelter in NSW and Alcoa's Portland aluminium smelter in Victoria. "These reserves give us the ability to deal with these heatwaves, that's why we have the RERT in our back pocket," Ms Zibelman said. She urged Victorians "to be conscious to not use more energy than they need". EnergyAustralia’s Yallourn coal-fired power station in the Latrobe Valley is running on three out of four generators, with one down for scheduled maintenance, while its Tallawarra gas-fired power station, located in Wollongong, NSW, is also offline after breaking down last week, further reducing backup power capability.

AGL said a generator at its Latrobe Valley-based Loy Yang A power station was taken offline on Tuesday due to a tube leak. Ms Zibelman said 100 megawatts has also been cut due to the heat making generators run less efficiently. It comes as Victoria is expected to face back-to-back temperatures of about 40 degrees on Thursday and Friday. Loading Replay Replay video Play video Play video On the back of these failures, the Australian Energy Market Operator has forecast a Lack of Reserve Level 2 (LOR2) in Victoria for Thursday and Friday.

On Wednesday morning, AEMO said it forecast a shortfall of 800 megawatts. By midday, the gap had widened with AEMO forecasting a shortfall of nearly 900 megawatts, although it reduced this by the end of the day. It is facing a similar problem on Friday, forecasting a minimum reserve requirement of 1099 megawatts, with only 622 megawatts available. Loading AEMO has also forecast a shortfall in South Australia as well. Electricity prices are currently forecast to hit the price cap of $14,500 a megawatt hour in Victoria and South Australia during the peak demand period.

Origin Energy downplayed the severity, saying it was also announced in NSW last week but was later downgraded as more power was secured. "The LOR2 is a standard AEMO process and a call for the industry to respond – it’s the market at work. How this ultimately plays out this week will depend on factors like generator availability, how the weather plays out and, of course, where demand ultimately falls," an Origin spokeswoman said. The University of Melbourne's energy expert Dylan McConnell said this is one of the largest projected energy shortfalls seen for some time. He said it could be overcome if both Yallourn and Loy Yang A were generating at full capacity by Thursday but it is more likely AEMO will turn to businesses to reduce power. “If they do not then I think it is possible that AEMO will use the RERT," Mr McConnell. Last summer, AEMO called on 1411 megawatts of backup power through this mechanism, at a cost of about $52 million.

“We won't know if AEMO will until we get closer to the time. As we get closer to the time of the shortfall, the projections might improve,” Mr McConnell said. Late last year, AEMO forecast a one in three chance of blackouts across Victoria unless immediate action was taken. “Most load shedding is projected to occur under plausible, extreme weather conditions. Specifically, temperatures of 40 degrees or more in Victoria could be the catalyst for extreme, one-in-10-year demand conditions,” it said.