AEMO tells two Snowy Hydro generators to stop burning gas as supplies shrink

The Australian Energy Market Operator has intervened again in the growing gas supply crisis enveloping Victoria, instructing two generators – believed to be both operated by Snowy Hydro – to stop burning gas.

The order issued on Wednesday came just a day after AEMO issued an instruction to all gas generators in the state to stop drawing gas reserves from the depleted Iona storage to ensure supplies to other gas customers, including households and businesses.

However, AEMO issued the new order to stop generating because it suspected that its instructions to not source gas from Iona for the purposes of generation were not being followed.

“AEMO has intervened in the DWGM (Domestic Wholesale Gas Market) and directed the curtailment of two gas fired generation facilities in line with previous communications issued for the Iona storage depletion threat to system security event,” it said in the statement issued to the market.

The direction will remain in effect until late September, or until the gas generators can prove they have sourced gas supply (other than from Iona) to meet generation demand, or until AEMO determines that the threat to system security has ended.

Just a day earlier AEMO had instructed gas generators in Victoria to cease purchases from Victoria’s  Domestic Wholesale Gas Market (DWGM) for the purpose of Victorian electricity generation.

That meant that gas generators had to rely on their on-site storage, or other sources. But AEMO said late Wednesday that gas powered generators informed it that they could not obtain enough gas and had to use diesel instead.

Gas generation has doubled in Victoria in 2022 (from 7 petajoules in 2021 to 14 petajoules this year), and trebled in NSW to 15PJ in 2022 as a result of multiple coal plant outages and higher demand.

In Victoria, this has depleted reserves to the extent that AEMO has sought to have more gas diverted from Queensland LNG producers to Victoria and then followed this up with the direct instructions to gas generators.

“Increased gas generation demand is depleting Iona storage inventory at an unsustainable rate,” AEMO said in its Wednesday notice.

“Iona storage is critical to maintaining gas supplies on peak gas demand days in south-east Australia. Iona withdrawals must be reduced to a sustainable rate to last the winter period.”

The AFR identified the instructed gas generators as those owned by Snowy Hydro, without naming the facilities themselves. Snowy Hydro did not respond to requests for confirmation. AEMO would not confirm.

The federal government owned Snowy Hydro owns two gas-powered generators in Victoria, the 320MW Longford facility near Melbourne, and the 300MW Valley facility in the Latrobe Valley.

Valley was producing power at two of its six units late on Wednesday, presumably from diesel, which RenewEconomy has reported previously that it has deployed recently.

Or it may be that the Valley facility has been able to establish to AEMO that it is sourcing the gas from elsewhere, as it would be allowed to do, and not from the Victorian spot market and central reserve.