Essay by Eric Worrall

h/t observa; The Australian Energy Market Operator has replaced freedom with a regime of coercion and expropriation, in a desperate effort to stabilise Australia’s skyrocketing energy prices and supply shortfall.

Australian Energy Market Operator suspends spot market for wholesale electricity to ensure reliability and avoid blackouts

By political reporter Melissa Clarke and Nicholas McElroy

The Australian Energy Market Operator (AEMO) has taken the extraordinary step of suspending the spot market for wholesale electricity across the country.

Key points:

• The electricity sector has been dealing with soaring costs
• It forced AEMO to cap prices and compel generators to offer their services
• Now the spot market for wholesale electricity has been suspended to try and ensure reliability

The electricity sector has been dealing with soaring costs, forcing AEMO to cap prices and compel generators to offer their services.

…

AEMO chief executive Daniel Westerman says suspending the market will simplify operations of the electricity market.

We are seeing very challenging times,” Mr Westerman said. 

“It was impossible to operate the system under current conditions while ensuring reliable, secure supply of electricity to Australian homes and businesses.

“Right now we see the market is not able to deal with all the factors thrown at it. Frankly, those factors are quite extreme, ranging from generators that are both planned and unplanned outages, very high demand. [There are] a confluence of factors at hand.”

He said the suspension created a more simple process to keep track of energy generators.

“We are creating a simple process where AEMO has true visibility of which generators are available and when in advance, rather than relying on last minute interventions,” Mr Westerman said. 

…

Read more: https://www.abc.net.au/news/2022-06-15/aemo-suspends-energy-spot-market-amid-power-crisis/101154054

Why do I claim the Australian government has imposed a regime of expropriation?

Electricity providers claimed they refused to offer services under the government imposed price cap, because it would have meant running at a loss. Now they are being told they have no choice, they will be compelled to provide power at the price the government sets.

…

A spokesperson for the Australian Energy Council, which represents major power generators including AGL, EnergyAustralia and Origin, said its members faced a “complex issue” but were seeking solutions to the power crunch.

“The price cap unintentionally means that some plants can’t recover their fuel costs. Participants are legitimately seeking ways to resolve the problem,” the spokesperson said.

…

Read more: https://www.brisbanetimes.com.au/politics/federal/power-companies-accused-of-unconscionable-conduct-as-they-withdraw-from-grid-20220614-p5ath9.html

I have no doubt energy companies will comply, in the short term. I suspect directors will burn down their own companies to avoid being unjustly prosecuted, fined and possibly jailed. Who would not do the same in their place?

But what will be left when the smoke clears? What happens when generation companies have been forced to burn shareholder’s capital, to operate at a loss, for the political convenience of people who care nothing for their property rights or expectations of fair treatment?

The Australian fossil fuel electricity market was already a dangerous place to invest, given Australian government’s market distorting preference for renewables, and the bipartisan Aussie net zero target, which clearly leaves no place for fossil fuel generators.

My prediction, the threat of expropriation will be the final straw on the back of an already skittish industry.

In my opinion, after today, nobody in their right mind will spend a penny on power system maintenance or upgrades, now that everyone knows the government believes they have the right to expropriate. Except perhaps when directed to do so by the government, under threat of prosecution.

Worst case, competent managers will flee the industry, flee the risk of going to jail, perhaps even flee the country. Their replacements will in many cases be the kind of people you normally wouldn’t hire. The smart shareholders will sell fossil fuel generator assets, leaving companies in many cases in the hands of the inept or, perhaps worse, in the hands of corrupt political opportunists. In time these companies will collapse.

Welcome to Venezuela.

via Watts Up With That?

June 15, 2022

Green Fail: Australian Government Suspends the National Electricity Spot Market