Timeline to the perfect storm - what caused the 2022 energy crisis?

Australia’s worst energy crisis this century rapidly unfolded in the middle of this year. But what was the sequence of local and international events that caused it? Was it a result of freak circumstances, entirely foreseeable, or somewhere in between? Energy Insights breaks down the key events that led to the crisis, to help you get a helicopter view of what happened and why.

2022 will be remembered for a long time by Australia’s energy industry. The turbulence that gripped the market in the middle of the year, forcing AEMO to make unprecedented interventions will have long lasting impacts on energy policy, investment & market structure going forwards.

Energy was front page news, and for many Australians it was the first time they’d been called on by governments to use less electricity.

Retailers were pushed to the wall (and some failed), consumers were told to wash their dishes after 10, and generators were forced to operate in a market of controlled pricing, and numerous closures.

But, what exactly was the chain of events that set this off?

Two major factors helped create the conditions that led to the 2022 crisis: war in Europe and a strong La Niña event, resulting in extremely high rainfall.

Russia’s invasion of Ukraine and the subsequent boycotting of Russian gas led to global gas price spikes, which in turn impacted domestic east coast prices. Coupled with a particularly cold winter in regions more reliant on gas for heating, these price spikes were felt even more acutely by consumers.

The La Niña event contributed by constraining coal supply in the Hunter region, and interestingly (and somewhat counterintuitively) also constraining the ability of the Snowy Hydro system to provide additional power supply.

Though these weren’t the only contributing factors, with outages at key power stations also playing a large role.

Interestingly, it’s the timing and sequencing of these events that ultimately precipitated the crisis, leaving many with the question – could it have been prevented?

Read on to see the full timeline of events that contributed to the crisis.

23/11/2021
Australia’s Bureau of Meteorology declares La Niña weather event is under way.

31/01/2022
Amidst a heatwave and soaring demand and a surge in electricity prices, wholesale demand response (WDR) was finally deployed in the NEM for the first time, followed up quickly by other interventions, in February, and on more than half a dozen other occasions since April as prices regularly surged towards the market peak.

24/02/2022
Russia invades Ukraine, precipitating European gas crisis, raising LNG prices worldwide.

18/03/2022
Flooding prevents trains from moving between Maitland and Newcastle, meaning mines in Hunter Valley are cut off. Open cut mining suspended.

21/04/2022
Yancoal says coal production down by 17% from previous quarter due to impact of flooding.

29/04/2022
AEMO press release, detailing increase in wholesale electricity prices in the National Electricity Market (NEM), up 141% on Q1 2021, driven by increased demand, coal generator outages and higher electricity-generating fuel costs.

13/05/2022
Australian Energy Market Operator warns of potential widespread load shedding in Australia’s most coal-dependent states – Queensland on Monday and NSW. Ultimately, it was successful in dodging forced outages, although price caps were soon imposed on NSW, Victoria and South Australia.

20/05/2022
First energy retailer to collapse under cash flow requirements (LPE in Qld).

23/05/2022
Weston Energy closed its doors on May 23.

23/05/2022
AER releases 2022-23 Default Market Offer (DMO), acknowledging significant rises in wholesale electricity costs over past 12 months.

31/05/2022
Pooled Energy appointed administrators end of May.

31/05/2022
A forecast spike in wholesale gas prices in Victoria of more than 50 times normal levels has prompted the Australian Energy Market Operator to impose a price cap. Australian Industry Group chief executive Innes Willox described the energy price rises as “apocalyptic”, and said they “threaten chaos for industry and pain for households”.

03/06/2022
Snowy Hydro issues alert that it’s capacity (particularly that of Tumult 3) is significantly constrained due to extraordinarily high water levels at the Blowering Dam.

8/06/2022
State energy ministers meet with Chris Bowen, focussing on immediate actions to address the current pricing challenges in the east coast energy market.

13/06/2022
Administered Pricing commenced for NSW, SA and VIC.

15/06/2022
NSW Treasurer and Energy Minister Matt Kean tells Sydney residents to reduce energy usage between 5.30pm and 8pm.

15/06/2022
Qld Energy Minister Mick de Brenni has reassures the state that there is no risk of wide spread outages of power.

15/06/2022
Yallourn coal-fired power plant operating at half capacity.

15/06/2022
Australian Energy Market Operator (AEMO) issued more than 100 directions before chief executive Daniel Westerman declared the situation had become “impossible” to manage and suspending the market.

18/06/2022
EnergyAustralia returned two units at its Mt Piper station following maintenance works, but capacity constrained by coal shortage.

18/06/2022
CLP (Hong Kong-based owners of Energy Australia) pointed to a loss of $HK7.2 billion ($1.3 billion) and a $HK1.1 billion cut in operating earnings for the January-May period compared to a year earlier. CLP blamed the reduction on forced outages at the Yallourn power station in Victoria and coal supply constraints at its Mount Piper generator in NSW. S&P estimates EBITDA at EnergyAustralia will fall to between $150 million and $200 million this year.

19/06/2022
AGL Energy’s Bayswater plant comes back into service.

19/06/2022
Unexpected outage at Origin Energy’s Eraring coal-fired power station in NSW.

19/06/2022
Australian Energy Market Operator urgently sources emergency generation in Queensland after reserves fell below a safety-net level. AEMO instructed state government-owned CleanCo to switch its Wivenhoe hydroelectric station from generation to pumping, to have more generation available to meet evening peak demand.

20/06/2022
AEMO issues an alert for a similar, but less serious, shortfall on Wednesday afternoon and evening in both NSW and Queensland.

21/06/2022
Enova Energy placed into voluntary administration.

21/06/2022
Bureau of Meteorology declares end of 2021–22 La Niña event.

24/06/2022
AEMO lifts the market suspension on Friday 24 June 4am.

30/06/22
ReAmped Energy urges its customers to find another supplier or face their power bills doubling from July 1. LPE and Discover Energy issue the same warning.

1/07/2022
10 small to medium energy retailers warn federal and state energy ministers and regulators that more companies will fall and customers will suffer from reduced competition without urgent support. The group includes ReAmped, 1st Energy and Energy Locals.

5/07/2022
Victoria’s Essential Services Commission proposes that retailers be required to report sensitive information about their financial performance and hedging.

6/07/2022
Innes Willox (Ai Group) speculates the cost of compensation for the generators forced to operate at a loss under the price cap as between $1 billion and $1.7 billion, noting “The extra costs for this acute phase of the energy crisis will be significant and unwelcome to energy users when they land.”

Though the timeline stops, this doesn’t mean that the crisis is over. The BoM has just declared another La Niña event, and the federal government is seriously looking at activating the Australian Domestic Gas Security Mechanism (ADGSM).

If we missed any key events, or you have a view on whether the crisis is over or not, please let us know on LinkedIn.