The Australian energy regulator has halted the electricity market in a drastic intervention as the nation's power supply faces "very challenging times".
It follows days of blackout warnings as generators react to price caps by withdrawing supply from the market, in order to trigger compensation payments when they are directed to return that energy to the grid.
The unprecedented move means the usual process of bids and supply between generators and retailers has been suspended in the National Electricity Market (NEM), which includes every state and territory in Australia except Western Australia and the Northern Territory.
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It is the first time the NEM has ever been suspended.
AEMO CEO Daniel Westerman said the NEM is experiencing challenging times due to a confluence of factors like cold weather, coal shortages and high prices.
"Right now, we see the market is not able to deal with all the factors thrown at it – frankly, those factors are quite extreme," he said.
In a statement, AEMO said it had taken the step because operating the spot market while ensuring reliable electricity supply had become "impossible".
AEMO will apply a pre-determined suspension pricing schedule for each market region.
A compensation regime applies for eligible generators who bid into the market during suspension price periods.
"In the current situation suspending the market is the best way to ensure a reliable supply of electricity for Australian homes and businesses," Westerman said in the statement.
"The situation in recent days has posed challenges to the entire energy industry, and suspending the market would simplify operations during the significant outages across the energy supply chain."
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The market suspension is temporary, and will be reviewed daily for each NEM region.
When conditions change, and AEMO is able to resume operating the market under normal rules, it will do so as soon as practical.
The market suspension is reliant on generators abiding and reporting their availability to the regulator.
Westerman urged all generators act in "good faith" and abide by the AEMO suspension to ensure all Australians can turn on the light switch tonight.
"We would urge all generators to act in good faith. By suspending the market, what we are creating is one simple place where generators should put all their availability and be dispatched in a simple and methodical way and have cost recovered in the process they are familiar with," he said.
Westerman said price caps, coupled with significant unplanned outages and supply chain challenges for coal and gas, were leading to generators removing capacity from the market.
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He said this was understandable, but with the high number of units that were out of service and the early onset of winter, the reliance on directions has made it impossible to continue normal operation.
Westerman said NSW residents are at risk of seeing power outages in the coming days even with the market suspension.
"Despite this, conditions remain tight in the coming days, in particular in New South Wales where we would urge consumers to conserve energy where it is safe to do so," he said.
NSW Treasurer and Energy Minister Matt Kean urged NSW residents to reduce their energy consumption between 5.30pm and 8.30pm tonight.
"If there is an opportunity to reduce their energy usage like not using their dishwasher until they go to bed, that would help," he said.
The reason for the caution, Kean said, is because a number of coal-fired power stations which were expected to come online tonight have not.
"A number of our coal-fired power stations aren't working when we need them to," he said.
Kean added Vivid will still go ahead in Sydney tonight.
The decision to suspend the market was taken by AEMO and government bodies were advised of the drastic measure.
"This decision was taken by AEMO, and we had to ask each state that they supported it," Westerman said.
"I am in contact with states at the ministerial level and parliament level to be transparent in the way we are thinking about managing these situations.
"My understanding is they support it."
Energy ministers from the affected states and territories, including Kean, have welcomed the decision.
"This action by AEMO is to secure energy supply in National Electricity Market (NEM) states, including here in NSW," he said.
"This decision will help prevent energy companies from putting energy reliability at risk by unnecessarily withdrawing supply."
