Anthony Albanese certainly did not expect this. When, after the elections of 21 May, the leader of the Labor Party took the reins of the Australian federal government, he was clearly prepared to deal urgently with several priority projects: the worrying acceleration of the inflation, the necessary revaluation of the minimum wage, the disastrous state of care for the elderly, a still deadly Covid-19 epidemic and, on the international level, beyond the distant conflict in Ukraine, the affirmation of Chinese power in Australia’s “backyard” of Pacific island states.
Admittedly, all of this was very present from the outset. But the most important event of this beginning of mandate took the young government by surprise.
On Wednesday, June 15, at 2:05 p.m., the Australian Energy Market Operator (AEMO), the energy regulator, suspended the Australian electricity market for the first time in its history. In order to prevent the major risks of a break in the electricity supply (or black-out), the regulator has taken control of all production assets and now forces them to produce the volumes it determines, at the time it decides, and at the prices it sets at its discretion. Australian private electricity producers have thus become the executors of a centralized electricity system with administered prices. By its scope and radicalism, this measure is unprecedented in modern electricity economies.
How did Australia, a member of the G20, the twelfth richest economy in the world, come to such an end?
As of June 15, approximately 30% of coal-fired power generation assets were subject to scheduled outages (for maintenance) or unscheduled outages (for technical failures). On that date, for example, the giant coal-fired power station in Yallourn, which alone produces 22% of the electricity in the state of Victoria, was operating at half capacity due to unforeseen breakdowns. Commissioned forty-eight years ago, this end-of-life plant, like all other Australian coal-fired power plants, suffers from repeated operational problems.
The prices of gas and coal which supply power plants have exploded, under the effect of the economic recovery following health restrictions linked to the Covid-19 epidemic and the Ukrainian crisis. These fuels have also been less accessible due to the concentration of national production on export markets (Australia, which exports 75% of its national production, is the world’s fourth largest gas exporter according to the Tarifgaz.com). Electricity producers have passed on the cost of their fuel purchases to their selling prices in the wholesale markets from which electricity suppliers obtain their supplies to supply end consumers. In order to stop the uncontrolled spiral of retail prices, the government capped these wholesale prices; some producers then interrupted their production rather than selling it at a loss, maintaining a vicious circle of falling supply and rising prices.
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