February 8, 2017 / 10:30 PM / a year ago

UPDATE 2-Power outage fuels growing Australian energy debate

* Low wind, high demand spurs load shedding

* State accuses market operator of focussing on cost

* Federal govt blames over-reliance on wind, solar (Adds Prime Minister, state treasurer, AGL comments)

By Melanie Burton and Sonali Paul

MELBOURNE, Feb 9 (Reuters) - A power outage during a searing heat wave in South Australia state has worsened a row with the federal government over energy security and the state’s heavy reliance on wind and solar power.

Australia’s energy market operator cut power to about 40,000 homes and small businesses in the state for about half an hour on Wednesday when it was 41 Celsius (106 Fahrenheit) as electricity use spiked up as people returned home from work, but the wind died down.

The incident came just months after a major blackout hit the state, which is heavily dependent on wind and solar power, and followed a string of smaller outages and power price spikes which have sparked reviews of the national electricity market and Australian energy policy.

The federal government blames South Australia for failing to secure reliable power supplies while it has rushed into promoting renewable energy, putting major businesses at risk.

BHP Billiton’s Olympic Dam copper mine, the state’s biggest power user, was forced to stop production for two weeks last September after the state-wide blackout, while Alcoa’s Portland aluminium smelter was recently crippled by a power outage.

“We can’t afford to go the way South Australia has, which has the most expensive and the least reliable electricity in Australia. Bad for jobs. Bad for business. Bad for families,” Prime Minister Malcolm Turnbull told his cabinet’s energy committee on Thursday.

Wind drives more than a third of South Australia’s electricity supply, which has led to the closure of coal-fired plants and some gas-fired capacity and raised the risk of outages when there is low wind or limited power from neighboring states.

South Australia, however, blamed the rules around how power is dispatched by the national market operator for disrupting supply. A gas-fired plant owned by French firm Engie, had surplus capacity on Wednesday which the market operator chose not to call on.

“They made a decision that it was easier and cheaper to load shed than it was to turn on generation. Now that is unacceptable,” South Australian Treasurer Tom Koutsantonis told reporters.

To help ease the crisis, the state is considering building a new interconnector with neighbouring states and looking to encourage construction of new back-up power capacity.

The chief executive of AGL Energy, which owns a gas-fired power station in the state, said on Thursday that solving the problem would require a whole new architecture for the electricity market, but said it was achievable. (Reporting by Melanie Burton and Sonali Paul; Editing by Sandra Maler and Richard Pullin)

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