The energy market is in crisis. The unprecedented suspension of the spot market following the continued unavailability of coal generation highlights the chaos, not to mention the significant price rises on the way for both consumers and businesses.
There’s clearly a wide variety of factors at play. Russia’s invasion of Ukraine has significantly increased global demand for gas that has subsequently sent prices skyrocketing, a record cold start to the Australian winter has resulted in higher demand than expected, and supply has been affected by the unanticipated withdrawal of coal generation because of plant outages and coal supply disruption from flooding.
It’s a perfect storm with no easy answers.
The Federal Government has demonstrated a fresh approach to energy policy, signaling a careful and considered response that includes reviewing the gas market and exploring options for reservation. In addition, Treasurer Jim Chalmers has asked the Australian Competition and Consumer Commission to take a close look at the behavior of generators in the electricity market.
While there might not be any quick or easy fixes, it’s clear that our exposure to global markets and a small number of old and centralised fossil fuel generators has resulted in a system that is vulnerable to external events.
The one obvious solution is to accelerate our shift to renewable energy and energy storage. While investment in large-scale renewables is still down by about half compared to that seen in the peak years of 2018 and 2019, last year saw a record 1 GW of new utility-scale battery projects committed.
This points to massive potential to accelerate the role of clean energy in the market, particularly with a Federal Government that is pragmatic and supportive.