An El Niño looms over Australia's stressed electricity system – and we must plan for the worst

• The Bureau of Meteorology this week declared a 70% chance of an El Niño developing this year.
• It’s bad timing for the electricity sector, and means Australians may face supply disruptions and more volatile energy prices.
• And unfortunately, the likely El Niño comes as the electricity sector grapples with other significant headwinds.

How does hot weather affect energy supplies?

• At the same time, electricity generators – including coal, gas, solar and wind – can become less efficient in hot temperatures, and so provide less energy to the system.
• This lowers their capacity to transport energy.
• This occurred in Tasmania in 2016, and contributed to an energy crisis in that state.

Other headwinds are blowing

• The market operator pointed to delays to the Snowy 2.0 hydro project and the gas-fired Kurri Kurri Power Station, both in New South Wales.
• It was scheduled to begin operating in December this year – in time for the first summer since the Liddell coal-fired power station closed.
• But the operator also said delays to the Kurri Kurri project posed risks to reliability in NSW this summer.
• Combine all this with a likely El Niño, and the electricity sector may be facing a challenging summer.

El Niño years are not normal

• However, the way the assessment is derived may mask the real risk during El Niño periods.
• But if an El Niño arrives, this summer will not be average.
• So the grid may be deemed reliable even though electricity supplies are under immense pressure.

What can be done?

• A mechanism exists that allows the market operator to secure emergency energy reserves.
• It could mean, for example, calling on a large industrial plant to pause operations to reduce its electricity use, or starting up a standby diesel generator.
• The operator can start procuring this months ahead of time, and will no doubt be monitoring the situation closely.
• Several federal funding measures – the Capacity Investment Scheme and Rewiring the Nation – might help realise these projects.