Today, AEMO activated the Gas Supply Guarantee mechanism to secure additional gas supplies from Queensland-based gas producers to support gas-powered electricity generation in the National Electricity Market (NEM).
AEMO said challenging generation conditions experienced from early June continue in the NEM and has resulted in a greater reliance on gas-powered generation and larger than forecast inventory reduction at the Iona gas storage facility in Victoria.
Iona storage inventory has reduced at an average daily rate of approximately 200 terajoules since 11 July 2022, falling to 10.2 petajoules (PJ) on 18 July, due to purchases from Victoria’s Domestic Wholesale Gas Market (DWGM)for supply to other jurisdictions and for Victorian electricity generation.
In response, on 11 July, an initial threat to system security notice was sent requesting participants to cease purchasing gas from Victoria’s DWGM in an attempt to reduce the depletion rate of Iona storage inventory.
Yesterday, AEMO issued another updated ‘threat to system security’ notification due to ongoing depletion of gas storage levels at the Iona storage facility. The notice requires market participants to prevent purchases from the DWGM for electricity generation after carefully considering the impact on the National Electricity Market.
AEMO said the action is necessary as it forecasts that at this rate of decline, Iona storage inventory will reduce to 6 PJ on 6 August 2022, threatening the capacity to deliver gas from the facility.
“This reduction increases the risk of curtailment during peak demand days and during periods of high demand for gas-powered electricity generation.”
Market participants have responded to the latest threat notice with purchases ceasing from the DWGM to supply to other jurisdictions. AEMO said at this stage, there is no impact to gas supply in Victoria.
AEMO expects the gas supply guarantee and threat to system security mechanisms to remain in effect until 30 September 2022 or until gas supplies are sufficient and the threat to gas supply caused by Iona storage inventory depletion has subsided.