If you were in Queensland or New South Wales on Monday night, you may have had the end of your long weekend interrupted by the news that blackouts were expected due to a shortage of power. By Tuesday the problem had spilled over to Victoria, South Australia and Tasmania!  Why is this happening and what does this mean for our grid in transition?

This week the Australian Energy Market Operator (AEMO) announced a 'lack of reserve' forecast, meaning demand is likely to outstrip supply in south and eastern states. Energy ministers recently met to discuss controls for the skyrocketing energy prices on wholesale market. Our electricity market is just that- a marketplace. Generators bid to power into the grid and set prices for those bids. As the cost of coal and gas has risen sharply in the global commodity market, so too has the cost of generating power by these methods, leading to generators seeking to retain high profits, to pass on those costs to the market.

On Sunday AEMO mandated a price cap on energy prices in the National Energy Market (NEM). This has led to some generators reducing their generation bids as they are limited in what they can charge. The resulting forecasted shortfall has the energy regulator pulling all sorts of levers available to it under the National Electricity Rules to stabilise the market and there is evidence that generators are now capitalising on the crisis by pushing the regulator to force them to supply, triggering lucrative compensation payments that ultimately come from energy users as taxpayers.

This game with the market doesn’t have to exist if our NEM was more reliant on renewable energy. Currently the NEM (on a good day) is 70% reliant on power generated from coal and gas which are vulnerable to commodity pricing. If we relied more on solar, wind and hydro, with increased battery storage, we would be insulated from global market peaks and have a diverse reliant source of energy.

We need to push for the transition to 100% renewable energy generation as fast as we can.

How can we transition more quickly?

Here is some good news. We recently wrote about the policy promises of the new Labor government. While we wait for the feds to catch up, NSW has just announced its biggest ever investment in renewable energy infrastructure. A whopping $1.2 billion!

As we push to decarbonise, one key tool we will need to use is to electrify as much of our energy as possible. This is easy in a country like Australia with vast resources in land, sun and wind but to support the increased traffic of electricity, we need to upgrade our infrastructure that has fallen victim to a policy vacuum in recent years.

The latest investment announcement from the NSW Government will support the already announced creation of Renewable Energy Zones in traditional mining hubs such as New England, the Hunter and the Illawarra by investing in upgrades to the transmission system that will deliver renewable energy across the state, as well as significant increases to battery storage capabilities.

The investment will unlock more private sector investment in renewable energy projects, both in generation and supporting technologies. It’s the push we’ve all been waiting for.