June 2022 series of events and reports

In June 2022 a confluence of high commodity prices, domestic market price caps, planned and unplanned outages of scheduled generating plant, low output from semi-scheduled generation and high winter demand conditions led to unprecedented challenges operating the National Electricity Market (NEM).

On Friday 10 June 2022 there were noticeable changes in generator bidding as the rolling sum of spot prices for the previous 7 days in some NEM regions approached the cumulative price threshold (CPT), which would trigger an administered price cap (APC). The APC is a safety net originally designed to facilitate continued electricity trading and supply during periods of sustained high prices. On 10 June AEMO observed the first withdrawal of capacity leading to actual Lack of Reserve (LOR) level 2 conditions, indicating potential for load shedding if a credible contingency event were to occur. This necessitated the first reliability directions associated with this series of events.

Subsequently on Sunday 12 June 2022 the CPT was exceeded for the Queensland region.  The APC of $300/MWh was applied as required by the National Electricity Rules (NER), with price scaling applied to other regions during periods when energy was flowing towards Queensland.

On Monday 13 June 2022 the CPT was exceeded for the NSW, Victoria and South Australia regions. The application of the APC in those regions coincided with reductions in the amount of generation bid into the market, resulting in a requirement for AEMO to intervene by directing generation to bid into the market for system reliability, and implement manual processes to manage capacity and energy limitations on generating facilities. Without this and other interventions, AEMO would have had to direct significant customer load shedding, with forecast shortfalls at certain times up to around one third of NEM winter peak demand.

The large number of constraints necessary to manage directions and supply limitations became unsustainable for AEMO’s automated systems and processes to manage, reaching a point where dispatch pricing in up to 50% of 5-minute intervals had to be resolved manually. Ultimately the level of intervention made ongoing operation of the market in accordance with the NER effectively impossible. AEMO therefore took the decision to suspend the spot market in all regions on the afternoon of 15 June 2022, with prices determined according to a published suspension price schedule.

Over subsequent days, AEMO worked closely with generators, emergency reserve providers, network service providers and jurisdictions to manage system operations and to maintain reliable supply to consumers. AEMO took all the steps it could under the NER, such as deferral of network maintenance, generator directions and activation of emergency reserves to reduce system demand, while working with jurisdictions and generators to facilitate fuel supply chain interventions and temporary relaxation of restrictions that limited generation capacity.   Despite taking these actions, there were occasions when the market came very close to actual supply shortages that would have necessitated customer load shedding in mainland regions of the NEM. Through the efforts of all involved, this was fortunately avoided.

On Wednesday 22 June 2022 AEMO, having briefed industry and jurisdictions, released its criteria and process for lifting market suspension. Following a staged process, the spot market suspension was formally lifted at 2PM (AEST) on 24 June 2022.

At this time, AEMO continues to closely monitor the situation as underlying conditions pose ongoing challenges for system operations.

AEMO will publish a number of reports covering various aspects of this series of events. Given their extensive impact, reporting will include a reviewable operating incident report under clause 4.8.15 of the National Electricity Rules (NER). For efficiency, the incident report will incorporate some of AEMO’s other regulated reporting obligations, and at this stage is planned to cover:

• An outline of the series of events, including directions and market suspension
• Potential insecurity associated with constraints, in particular transfer limits on the Queensland to New South Wales interconnector on 13 June 2022
• Potential exceedance of the frequency operating standards on 17 June 2022
• AEMO’s initial recommendations in relation to this series of events.

The table below identifies all key reports relating to these events and their scheduled publication timeframes.