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SA power outages continues amid energy market debate

Thousands of households and businesses in South Australia remained without electricity on Friday as emergency crews sought to re-establish the network after a statewide blackout following extreme weather on Wednesday afternoon.

High-voltage network operator ElectraNet said crews were seeking to restore power to Port Lincoln and have begun inspecting transmission lines linking the state's far north, with SA Power Networks estimating as many as 10,000 users remained without power.

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Why did South Australia blackout?

The power outage in South Australia in September may have been an 'isolation' technique to prevent power loss reaching the entire east coast of Australia, Dr Iain MacGill explains.

The prolonged outage has prompted a fierce political debate about the role of renewable power and the state's energy security.

The South Australian government has already set aside funds to look at establishing a link with the electricity grid in NSW to help avert future power interruptions, with this move sparked by threats to power supplies in July when renewable energy sources were not generating at a time of high demand but with the availability of only limited energy from Victoria.

SA already has two connections with Victoria – the Heywood connector, which is being upgraded, and the smaller Murraylink.

However, earlier plans for a link with NSW were abandoned following a legal challenge. It could take as long as four years to build any link, given the time it would take to obtain the relevant government approvals and to finalise land access agreements.

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Some in the industry are calling for an overhaul of electricity, from its present 'energy' market, in which electricity companies are paid for what they generate, to a 'capacity' market in which there can be payment to ensure some capacity is available at all times, to help offset the intermittency of renewable energy sources.

"Rising demand and rising generation makes sense to have an energy-only market," one industry figure said. "But with declining demand and declining despatch, with power stations shutting down, then that brings difficulties."

As a result, some in the industry such as the new chief executive of AGL, Andy Vesey, have been vocal in calling for a switch.

In Europe, for example, as renewable energy sources have forced out more baseload power generation, many countries now operate capacity markets, whereby some generation capacity is 'paid' to be made available to pick up the slack from shortfalls in renewable energy, since its supply is only intermittent – when the sun shines or the wind blows.

Western Australia has a capacity market, but a recent paper by the Grattan Institute pointed out it can be a costly means of ensuring reliability while marking a return to 'state planning'.

"Between 2007-8 and 2015-16, Western Australia is estimated to have paid more than $1 billion extra for capacity than it actually needed," the institute's report noted. "Capacity markets open up the likelihood of a centrally-planned system, in which investment risk is shifted to taxpayers and consumers.

"Governments determine what and how much generation is needed and get the taxpayers and consumers to stump up the money to provide guaranteed revenue to generators in the form of capacity payments."