Energy Regulator confirms SA market working

A review of recent high electricity prices in South Australia by the energy regulator has confirmed that these were caused by the conditions of the market at the time, and not by the state’s power station operators gaming the market.

The Australian Energy Regulator is required to investigate any incident where the wholesale price exceeds $5,000 MWh, including the price spikes that occurred in South Australia in July this year.

“The regulator has confirmed that these prices were the normal market response to the conditions at the time,” Australian Energy Council Chief Executive Matthew Warren said.

“At the time South Australia’s 1200MW of wind generation was producing only 20MW of power.  Because of constraints on the interconnector to Victoria, the remaining operating gas generators had to find gas in a tight supply and transport market, to bring on extra capacity quickly.

“This confirms what the industry has been saying.  The problem of higher electricity costs in South Australia is structural, not behavioural.  There was no abuse of market power, lack of competition or gaming of the market.

“Generators did everything they could to bring power on as quickly as possible.  If we are going to address this problem, we are going to have to address the structural issues in the South Australian market.

“Proposing a new interconnector to increase competition is a solution to a problem that doesn’t exist.  We need to find smart solutions to integrating high levels of intermittent generation that maintain security of supply at the lowest possible cost.”

About the Australian Energy Council

The Council represents 21 major electricity and downstream natural gas businesses operating in competitive wholesale and retail energy markets. These businesses collectively generate the overwhelming majority of electricity in Australia and sell gas and electricity to over 10 million homes and businesses.