“Nationally, we have commercial arrangements in place representing around 50 megawatts of demand response, with around 20 megawatts in Victoria, which can be activated during times of peak demand,” said the company.

The market operator has forecast a capacity reserve of 978 megawatts for Tuesday between 2.30pm and 6pm. This reserve is a buffer above the capacity required to meet peak demand levels and acts to insure the system in case anything were to go wrong.

But the operator said there would be reserve of only 658 megawatts available during that period, resulting in a 320 megawatt gap between the forecast requirement and what is actually available.

Serious problems arise on the grid as the minimum capacity reserve falls closer to zero and a deficit in the supply and demand balance arises, meaning more energy is demanded than supplied. In this case, the energy operator begins load shedding by turning off the electricity supply to groups of customers in order to redress this deficit.

Director of the Victoria Energy Policy Centre Bruce Mountain said there was a confluence of factors that stretched energy supply at this time of the year.  Wayne Taylor

Stretched energy supply

Experts said the reserve warning was not a cause for concern unless the energy operator had got its forecast wrong, the notice is simply a means for the operator to alert the market that it is seeking more capacity.

“The only circumstance in which they’ll have a crisis is if they’ve underestimated the gap,” said director of the Victoria Energy Policy Centre Bruce Mountain

Mr Mountain said there was a confluence of factors that stretched energy supply at this time of the year, including people going back to work from holidays, schools beginning class again and unusually hot weather in Victoria.

Northern Victoria, in particular, has been subjected to intense temperatures since Saturday. Bureau of Meteorology senior forecaster Michael Efron said “in the north, temperatures are generally ranging between 40 and 46 degrees for a lot of Tuesday and Wednesday”.

The highest January temperature ever recorded in Mildura is 46.9 degrees, this could be surpassed this week Mr Efron said.

The Melbourne weather station is almost next door to Melbourne Park, where the Australian Open is played, and Mr Efron said the players could expect to be competing in 35 degree heat, until a cool change is forecast to sweep through on Friday.

Releasing the reserve power mechanism

Reposit Power chief executive Dean Spaccavento said “it would be unsurprising if the Reliability and Reserve Trader mechanism is dispatched if this level two Lack of Reserve warning were to be realised”.

The Reliability and Reserve Trader mechanism is a 941 megawatt off-market reserve controlled by the operator that can boost the grid.

The energy operator said the Reliability and Reserve Trader initiative gives it the resources to manage potentially high-risk scenarios that typically occur in summer like heat waves, bushfires or unplanned outages.

On Monday’s level-two warning, the energy operator said it would have “no impact to power system security or reliability”. However, the energy operator will bring in a demand response and support generation if necessary.

“Lack Of Reserve market notices are an industry notification mechanism that simply provides an indication to the market to encourage more generation,” a spokeswoman said.

Energy companies respond

Origin Energy said they were prepared for the strain the summer period put on the grid.

“Our team worked hard over recent months to make sure our fleet of power stations across the country were prepared for summer heatwave conditions. Origin’s power stations are all operating well at the moment and we’re confident they will play their part over the coming days to help everyone stay cool,” a spokeswoman said.

Coal power generators underperform in hot weather, with higher ambient temperatures causing performance to be derated, according to Mr Mountain.

Mr Mountain said Monday’s reserve warning gave energy retailers more market power and they could now “conspire to affect supply”. Mr Mountain did not allege this was the case.

State of the Australian energy market

Mr Mountain thought the energy market in Australia was broadly in a good position.

“The fundamentals are pretty sound and we’re seeing an absolute tsunami of investment,” he said. “The market is transforming, it’s becoming ever more distributed, ever more local and stronger.”

The energy operator has not seen any noticeable change in the number of reserve warning notices for the first half of 2018-19.

The next level of notification is a level-three warning, which is when load shedding begins. Load shedding is considered a last resort management strategy by the energy operator.

A level-three notice has not been issued since 2016-17.

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