The Australian Energy Market Operator has warned citizens in five Australian states to prepare for possible blackouts as a power shortage threatens the grid and bids up consumer prices.

The AEMO has cautioned that consumers in Queensland, NSW, Victoria, South Australia and Tasmania could face possible blackouts as unusually cold temperatures force households to use more power heating their homes.

The shift in supply and demand dynamics also pushed consumer energy prices to previously inconceivable levels and forced the AEMO to introduce a $300 per megawatt hour cap in Queensland, NSW, Victoria and South Australia.

If wholesale prices remain at these levels – in some cases more than three times what they were at the start of the year – consumers will be paying even more on their power bills in the second half of the calendar year.

Energy crisis deepens as fuel prices rise

The blackout warnings come only a few weeks after the Australian Energy Regulator increased its ‘default market offer’ – the maximum price that retailers are permitted to charge consumers for energy.

This price cap is intended to protect consumers while still balancing the need for retailers to turn a profit, and the latest decision to increase it comes in response to the high wholesale energy prices that have climbed significantly in the wake of Russia’s invasion of Ukraine.

Russia is a major supplier of oil and gas to global markets and sanctions imposed in the country in an effort to undermine its economy and loosen its grip on neighbouring Ukraine have effectively reduced supply of these key fuels into the global economy.

The significant increases in fuel and electricity prices are one of the drivers behind higher-than-expected levels of inflation globally, with the US on Monday recording some of the largest increases in consumer prices since the 1980s.

That prompted sell-offs on US and European equity markets, which then flowed through to Australia when markets reopened on Tuesday after the Queen’s Birthday holiday on Monday.

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Sources:

• The Guardian, Big electricity consumers in Queensland cut use to avoid blackouts as NSW faces shortages
• theconversation.com, 3 key measures in the suite of new reforms to deal with Australia’s energy crisis
• abc.net.au, Queensland power prices have been capped and there’s concern about blackouts. What you need to know
• cnbc.com, European stocks close lower as investors assess recession risk; Atos slides 23%
• abc.net.au, How much are power prices increasing by? Why are they going up? What can I do to save on electricity?
• cnbc.com, Global markets are tanking ahead of a huge week for central banks
• aer.gov.au, Default market offer prices 2022–23
• twitter.com,  Commsec Market Close
• news.com.au, Australian Energy Regulator accuses electricity generators of capitalising on loophole and intensifying power crisis