High temperatures across the country highlight the complexity the energy industry faces in managing electricity supply during times of high consumption.

The recent drama began on 10 February. Residents in NSW and the ACT were asked to switch off appliances between 3:30pm and 6pm to avoid rolling blackouts. The Energy Minister told people across NSW to go to the movies or shops to help save power. The electricity market operator (the AEMO, the body responsible for managing the electricity market) predicted demand for electricity would be at its highest in 6 years.

It turned out to be a damp squib. The AEMO was able to add extra capacity to the system, so there were no power cuts. But the story in South Australia earlier that week was more worrying. Power was switched off to a number of residents to protect the network. Deliberately turning off power to certain areas to reduce demand, which protects the whole energy network, is called load shedding. It's controversial because it can mean cutting off power to residential customers. Understandably customers don't like worrying about how long their frozen food is going to last.

The challenge facing the AEMO is balancing supply and demand for electricity. If demand outstrips supply there is a risk that the whole energy network could blackout. This is a particular risk in Australia because of the isolated nature of our network. Flip that around and too much supply is wasteful not to mention the complex economic impact this would have on the market.

Predictably the blame game for the events earlier this month is in full flow. A few candidates include:

  • it's simply an outcome of higher demand v. lower capacity
  • the increase in renewable energy has led to a more inconsistent, unpredictable power supply which is more difficult to manage
  • the distribution system has not properly adapted to how renewables function compared to fossil fuels. As renewables become a larger part of our energy make up, this becomes more of an issue and/or
  • in times of peak demand the AEMO prioritises money saving over a consistent power supply (controversial!). So it will authorise load shedding instead of increasing supply, or having supply on standby.

Whatever the causes, it's clear that this will be a persistent issue in our energy market for some time given that demand is on the increase.