AEMO CEO Daniel Westerman

The Australian Energy Market Operator’s (AEMO) Chief Executive Officer, Daniel Westerman, has detailed the “most difficult period” in the regulator’s history in an address at the Clean Energy Council (CEC) CEO Forum.

Mr Westerman outlined several topics relevant to the rapid transition toward renewable energy in his presentation, including the need for further investment in firmed renewable energy to underpin the net-zero transition.

“I’ve said before that the best way the Australian energy sector can relieve these price spikes for the longer term is to break the dependency between commodity prices and electricity prices,” he said.

“And the best way we can lower energy costs for all Australians is to get more of the cheapest form of energy into the system, and for that we need three things urgently: more generation, more firming and more transmission.”

Mr Westerman also provided further insight into recent disruptions to the energy grid for the 2022 winter months, and AEMO’s unprecedented decision to suspend the National Energy Market (NEM).

In doing so, Mr Westerman referred to AEMO’s recently published Quarterly Energy Dynamics report, which covers the period the NEM was suspended in mid-June, and the NEM market suspension incident report.

“I’ve been reminded recently that while it’s a huge amount of work within AEMO to publish reports like these, the real value is actually in the digestion of information outside AEMO, since the purpose is, of course, to provide a fact base that informs both investment and policy development,” Mr Westerman said.

Operational challenges were stoked by a range of unprecedented challenges according to Mr Westerman, who cited a number of conflating issues including:

  • A cold snap resulting in increased demand
  • Planned and unplanned outages of thermal generators
  • Low output from renewable generation
  • High commodity prices
  • Administered price caps in the gas market

“During the whole episode, we issued 483 separate directions, peaking at one stage at 110 directions in a single day,” Mr Westerman said.

“The volume of these manual directions meant that NEMDE, our automated dispatch engine, simply couldn’t solve such over-constrained equations.

“And no matter how much human effort we threw at the problem, ultimately the level of intervention made the ongoing operation of the market impossible.

“And as a result, we took the unprecedented decision to suspend all regions of the National Electricity Market at 2pm on Wednesday June 15.

“I don’t have words to describe how challenging this period was for our operational teams. 

“Our most seasoned operators describe this as the most difficult period they’ve ever experienced.”

Despite this, Mr Westerman stood by AEMO’s actions stating that it would be a template for future responses in an increasingly unstable market.

“The way AEMO operated in this event is exactly the way we will operate moving forward,” he said.

“Always putting the interests of consumers first, and working together with industry and governments with the highest degree of collaboration.

“And, this is the approach we are taking to mopping up the consequences of the market suspension and claims for compensation.”

AEMO has predicted future volatility in the NEM as carbon-intensive energy sources are taken offline, demanding an additional 45MW of new generation – 9MW of which should be firming generation – to maintain grid stability.

“Over the next decade, 9GW of new firming generation is needed to support the 36 GW of renewable energy that’s required,” Mr Westerman said.

“I might add that that’s 45GW of new generation needed – some four and a half times the current pipeline of committed and anticipated projects.

“And I’ll say it again: firming unlocks renewables.”

Mr Westerman’s speech to the Clean Energy Council CEO Forum was delivered Tuesday, September 6 and is available to read in full at this link.

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