MELBOURNE, Aug 22 (Reuters) - Australia faces a higher risk of blackouts this summer because of generation outages in the state of Victoria, and rising costs to avert shortages, just as the country is trying to cut power bills, the market operator warned on Thursday.
During the Southern (NYSE:SO) Hemisphere summer that runs from December through February, the Australia Energy Market Operator (AEMO) is concerned that the unplanned outages of 750 megawatts (MW) of generation capacity at a major coal-fired power station and gas-fired plant in Victoria may not be fixed by mid-December as planned.
"In Victoria, if extended into the peak summer period, the unplanned outages of two major power stations, Loy Yang A2... and Mortlake 2...pose a significant risk of insufficient supply that could lead to material involuntary load shedding," the AEMO said in its annual electricity outlook report.
The AEMO forecasts a 30% chance that the Loy Yang unit outage will extend into the summer and a 60% chance that the Mortlake plant will take longer than expected.
That could result in the equivalent of up to 1.3 million households going without power for four hours during an extreme heatwave, it said.
AEMO is working on emergency measures with state governments and industry to line up between 125 MW and 560 MW of extra supply, including paying industrial users to cut power consumption at peak demand times.
"However,...we are finding this type of reactive action is imposing higher costs on consumers and risks to reliability which are not sustainable over the longer term," AEMO Managing Director Audrey Zibelman said in a statement.
She called for new markets to be established that would put a price on maintaining a reliable and secure system.
"At present, AEMO does not have the tools or mechanisms to enable cost effective access to sufficient resources for all hours of the year, so we are forced to use more emergency actions that impose unnecessary risk and costs on consumers," she said.
Looming in 2023 is the closure of AGL Energy's AGL.AX Liddell coal-fired power plant, which AEMO said could result in outages in Australia's most populous state, New South Wales.
The start-up of Snowy 2.0, a 2,000-MW pumped-hydro project under construction, which AEMO assumes will be fully running by March 2025, should boost power supply at peak times but will require new transmission capacity.
"Beyond 2020, AEMO forecasts only slight improvements in reliability for peak summer periods until new transmission and dispatchable supply and demand resources become available," AEMO said in the report.