AGL had earlier explained that the power shortage was caused by a loss of units at its Bayswater and Liddell power stations as well as a shutdown at Vales Point – owned by another company – and difficulties obtaining extra power from Victoria.

But in a written statement issued early on Friday afternoon, Tomago chief executive Mark Howell put his concerns on the record, saying the grid was “at a crisis point”, saying a “once affordable and reliable energy system had been degraded”.

Mr Howell said problems at Liddell, Bayswater and Vales left the power supply at the mercy of the weather.

“When the sun is shining in the middle of the day and the wind is blowing there is generally sufficient capacity,” Mr Howell said.

When we need it the most – early mornings and evenings in summer and winter, our solar resources are useless and the nature of wind resources frequently means that many wind assets are idle.”

Mr Howell said Tomago had been forced to switch off all of its potlines at one point or another during the week.

A lack of reserve power within the National Electricity Market on Tuesday evening required an urgent 300 megawatt power reduction. On Thursday evening, the same-sized reduction was needed again and the two remaining potlines were switched off for an hour each.

“Every time a potline is switched off to prevent rolling blackouts, we run the risk of a catastrophic potline freeze,” Mr Howell said

“This occurred at Portland Aluminium in December 2016; an unplanned power interruption resulted in some 70 per cent of the cells freezing. The event resulted in taxpayers bailing out the business to the tune of $240 million. Without this relief it may very well have led to the closure of that site with all the flow-on consequences to jobs and the community in general.”

Mr Howell said Australia was at a crisis point with our energy system.

“This is not summer with extreme demand. This is the likely future of our energy grid as once reliable baseload generators exit the National Energy Market and are mostly replaced with intermittent wind and solar projects with no practical storage to speak of.

“If we want to be a nation that makes things, rather than one that imports all of its needs, we must have internationally affordable and reliable energy - a system that can reliably deliver, independently of the weather.

“We applaud the use of renewables where it makes commercial sense. Many small businesses, homes and commercial enterprises rightly choose to lower their carbon footprint and their costs with solar PV and wind.

“Our energy debate should not advocate either renewables or conventional thermal. As with most things in life, we need a balance and we have reached a point where urgent rebalancing is required.”

Later in the afternoon, AEMO conceded the shortage of electricity, saying hte unplanned outages had led to a lack of reserve power.

“The energy system is undergoing unprecedented transformation,” AEMO said.

“With the recent exit of almost 5000 megawatts of generation in the last decade, Australia does not have the energy reserves it once had to lean on in times of need.

“As the market and system operator, we plan for extreme conditions and ensure our plans address most foreseeable events.”

AEMO said this included using contingency arrangements where required.

Earlier, AGL had described the situation at Tomago as a commercial decision by the smelter operator to reduce output rather than pay the price increase on its power. But Tomago says that it if it didn’t do this, there would likely have been blackouts in NSW because the smelter uses 12 per cent of the state’s power.

Various sources have confirmed that this week’s power problems were caused by a shortage of power from the Bayswater and Liddell power stations – both owned by AGL – a complete shut down of Vales Point power station and a limited amount of power coming from Victoria through the interstate interconnector.

Tomago said it had a “curtailment” incident on Tuesday night for 45 minutes and again on Thursday night when it had its power curtailed by two hours, causing a “thermal imbalance” in its potlines that employees were working urgently to restore.

The smelter had 200 “anode effects”. An anode effect is a situation in aluminium production where problems with the electricity supply disrupt the potline system, causing a range of unwanted physical and chemical processes.

On top of the anode effects, a sustained loss of electricity can allow the smelter potline to cool to the point where the molten metal starts to solidify, as happened at the Portland smelter in Victoria in December 2016, costing hundreds of millions of dollars to repair.

Tomago said each hour of problem at the smelter this week cost it 150 tonnes of aluminium production.

This week’s problems at Tomago are the latest incident in a series of turning points over the Australian energy market, which is in the midst of a political debate – and a physical rebuild – as the grid and its managers try to build a system that best combines new renewable technologies with older coal-fired generators.

Anti-coal advocates will likely paint this week’s power shortage as an example of the problems with coal fired power but the parties in this situation say this is not the case, as it’s the amount of power available, not the way that it’s generated, that is the issue here.

Paterson MP Meryl Swanson, whose electorate includes the Tomago smelter, said the demand response mechanism that allowed AGL to reduce Tomago’s power meant the state was effectively using the smelter as a battery.

“By having Tomago’s power cut, the grid is using the smelter as a backup battery, saying we can take its power and use it elsewhere,” Ms Swanson said.

“This is totally unacceptable. We don’t have the right policy mix and there is simply not enough investment in the industry. This is not the middle of summer, nor is it it a freezing day, and yet we have wholesale prices hitting $14,000 a megawatt hour.”

Hunter MP Joel Fitzgibbon, whose electorate covers AGL’s coal fired power stations, said the federal government had to allow AGL to quickly proceed with its investment plans in the Hunter.

“AGL plans to heavily invest in a Bayswater upgrade, new gas peaking station, pumped hydro, and large-scale solar and battery storage right here in the Hunter region,” Mr Fitzgibbon said.

AGL says it and the smelter are on a contract that AGL inherited from the days when Bayswater and Liddell were owned by the state government.

AGL says Tomago has a fixed price for its power unless certain “trigger” incidents allow it to charge Tomago the spot price for electricity, which can reach a maximum of $14,000 a megawatt hour.

The usual price is about $80 a megawatt hour.

AGL says in this case the triggering clause was about the amount of power in the system, which was down because of the power station outages and the interconnector shortfall.

AGL says that rather than pay the higher price, Tomago “chose” to do this.

The result was that both times one of Tomago’s three potlines were shut, reducing its power demand by about a third, or about 300 megawatts.

Tomago is preparing an official statement but smelter sources put the problem another way: “What would happen to the rest of the state if we said ‘no’?”. The implication being that there would be a shortage of power and blackouts, given that Tomago normally uses about 12 per cent of the state’s power.

This article will be updated as more information comes to hand.

Read more in Saturday’s Newcastle Herald.