El Niño to Disrupt Energy Prices Summer 2023-24. What Businesses Need to Know Now!

What is El Nino? How likely is it this summer?

“Our atmosphere is warmer due to climate change and so hot, dry conditions that are associated with El Niño are exacerbated.”Dr Jaci Brown, Climate Intelligence Director, CSIRO

El Nino is a periodic weather pattern typically observed every two to seven years, where a warming of sea waters in the Pacific Ocean disrupts the climate, increasing heat waves particularly in the southern hemisphere. El Niño can affect the global weather, economies, and ecosystems – they often last for nine to 12 months, but they have also been known to last for multiple years.

International forecasts now predict a moderate-to-high strength El Niño event with high confidence. Alongside climate change, this El Niño could break warm weather records throughout the summer of 2023 - 24. This month the Bureau of Meteorology alerted the likelihood of an El Nino event, increasing to 70 per cent.

The pressure on power and prices

An increase in temperatures and heat waves raises the prospect of a stressed electricity grid. A stressed grid can lead to “load shedding” or blackouts – when power companies deliberately switch off the power supply to partial populations to prevent the system from becoming dangerously unstable. This happened in Victoria in 2019, when more than 200,000 customers lost power during extreme heat.

The electricity grid is also vulnerable to hydroelectricity generator outputs during reduced rainfall periods,, as was the case in Tasmania in 2016. These generators produce electricity by pumping water through turbines. Water scarcity sparked an energy crisis in the state.

The Australian Energy Market Operator (AEMO) earlier this year warned that electricity demand may exceed supply due to weather conditions and outages. It referred to delays to the Snowy 2.0 hydro project and gas-fired Kurri Kurri power station in New South Wales. System pressures are also affected by the compromised capacity of Queensland’s Callide C coal-fired power station, impacted by an explosion at the site.