Australia’s Recent Power Market Crisis and the Struggle for Public Ownership

By staff - Trade Unions for Energy Democracy, July 8, 2022

This past June 15th, Australia’s Electricity Market Operator (AEMO) announced the suspension of wholesale electricity spot markets in all regions covered by the country’s National Electricity Market (NEM). The NEM typically provides 80% of Australia’s electricity, mainly in developed coastal areas around the eastern third of the country.

The market suspension came in response to soaring wholesale electricity prices and serious shortages in supply — a combination of factors that, according to AEMO, made it “impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers” in line with national regulatory requirements.

Key unions in Australia have recognized for years that the NEM does not serve the interests of unions, working people, or the public in general. According to Michael Wright, acting national secretary of the country’s Electrical Trades Union (ETU):

The ETU has been sounding the alarm about the NEM for years. This vindicates our long-held concerns that the market is broken and beyond repair.

The experiment in synthetic markets, trying to deliver essential public services through profit-motivated, tax-avoiding multinational energy corporations, has failed shockingly.

Similarly, Colin Long, Just Transitions Organizer for Australia’s Victorian Trades Hall Council (VTHC), points out that such markets only function when they ensure profits for private owners and investors. As Long states in a background document he has written on the current crisis:

The NEM [like other market-based systems] is designed to deliver electricity in a way that is profitable to generators, mostly privately-owned, not in a way that maximises public or social benefit to Australians.

As Long further explains:

Privatisation was supposed to lead to lower prices for consumers. In fact, the opposite has occurred. Reinstating public ownership would eliminate rentier behaviour by transmission and distribution companies and the need to concede to the profit demands of big overseas investors. It would enable us to plan the energy system transformation, with a clear schedule for closure of fossil fuel generators to give certainty to workers, their communities and electricity grid managers. It would enable us to schedule fossil fuel generation replacement by renewables in a way that guaranteed supply, efficiency and reduced cost – and ensures we meet decarbonisation targets. It would enable us to ensure that workers are guaranteed a just transition to new opportunities and new industries.

Readers who would like a copy of Long’s background document can contact him at clong@vthc.org.au.

Both ETU and VTHC are part of the TUED network, and have played key roles in advancing the project.

How the Crisis Unfolded

In announcing the suspension, AEMO attributed the crisis to several factors unfolding in the weeks leading up to its decision. These included “planned” events that saw some generation and transmission assets out of service for scheduled maintenance, but also a combination of “unplanned” events that drove the system to the point of dysfunction. The latter included unseasonably cold temperatures — effectively an early start to the southern-hemisphere winter, raising demand for both electricity and gas — as well as significant periods in which specific weather conditions meant little power being generated from wind and solar sources.

But one additional factor was likely decisive in precipitating the crisis. Faced with rising international prices for coal and gas in the weeks before the suspension — widely blamed on the Russian invasion of Ukraine and its aftermath of sanctions — generators relying on those fuels to produce power began bidding into the wholesale markets at ever-higher prices. As a result, average spot prices across the NEM in the two weeks before the suspension rose to levels several times higher than those seen during the first quarter of the year — ranging from 3.5 to 5.6 times higher, according to a report from the Australian Competition and Consumer Commission published on July 17, 2022.

Faced with those surging spot prices, AEMO imposed a set of price caps on generators, in the hope of containing spiraling prices, and thus costs to retail electricity users. That move seems to have prompted several major power providers to take a substantial share of coal- and gas-based generation assets out of service, declaring them to be down for “unplanned” maintenance. Faced with the possibility of having to impose blackouts due to the resulting generation shortfall, AEMO instead suspended the wholesale markets altogether, simply guaranteeing generators profitable returns in order to ensure security of supply.

What Can Unions Learn from Australia’s Power Market Crisis?

One thing that should be clear from the recent crisis in Australia’s electrical power system is that markets cannot be relied upon to ensure reliable, affordable electricity for all. Unions in Australia and beyond increasingly recognize this fact, and increasingly embrace an alternative “public pathway” as key to advancing the struggle for climate protection and striving to reach decarbonization targets.

The recent electoral victory of the Australian Labor Party (ALP) may also offer an improved set of political conditions for advancing that struggle. The party’s election manifesto falls well short of embracing a comprehensive reclaiming of energy to public ownership and control, but it does promise a major (and necessary) upgrade to the country’s transmission system as part of its “Powering Australia” plan, and commits to keeping it in public hands (under the banner of “Rewiring the Nation”).

The Australian Crisis in Wider Context

Even before the recent crisis, energy unions throughout the Asia-Pacific region recognized the need for “publicly owned renewable energy for all.” At an online regional workshop hosted by Public Services International (PSI) in September 2021, leaders of unions from Australia, Bangladesh, India, Indonesia, Malaysia, Nepal, New Zealand, Pakistan, The Philippines, South Korea, Thailand and Japan met to share information and ideas relevant to the struggles around energy transition and climate protection across the region. The workshop also aimed at aligning participating unions’ collective call for “international solidarity and an end to privatization, and a shared demand that a low-carbon future is public.”

In closing the workshop, PSI’s Deputy General Secretary David Boys acknowledged the role of energy unions across the Asia-Pacific region in advancing the struggle for public ownership of energy, stating:

We depend on our affiliates and energy sector unions to lead this struggle for our members, and also the sustainability of our lives.

Globally, the call for a “comprehensive reclaiming” of energy assets and systems to democratically accountable public ownership has gained significant traction in recent months — especially since the launch at COP26 in Glasgow of the “Trade Union Program for a Public, Low-Carbon Energy Future” ("Program"; en français; en español; em português), which now has more than 50 signatories.

Unions that would like to sign-on to the Program are encouraged to send an email to irenetued@gmail.com.

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author.