The energy regulator forecasted a shortfall in electricity supplies in NSW between 3.30pm and 5pm on Wednesday brought on by high demand and outages at key coal-fired power plants.
Hundreds of thousands of public servants across the state were asked to lift thermostat settings on air-conditioners and take other energy-saving measures.
But by 6pm the energy warnings were downgraded as a cool front moved in and mass blackouts were avoided.
The risk of power supply shortage was significantly reduced on Wednesday afternoon, Energy Minister Penny Sharpe said.
"We thank the households, business and employees who have taken the steps to reduce demand on the system this evening," she said.
Major energy users such as water providers and the City of Sydney lowered their power demands between 3pm and 8pm, shifting electricity usage outside the peak window.
Earlier, Ms Sharpe stressed if people needed to use power they should do so.
Energy producers increased production as blackouts fears grew. (Bianca De Marchi/AAP PHOTOS)
"But what we are trying to do is reduce demand across the system by large energy users, by the government as well, and we now ask households and businesses to see what they can do … a lot of small activities actually really help demand across the network," she said.
The Australian Energy Market Operator's declaration urged industry to generate as much power as possible and restore all available powerlines across the grid to meet rocketing demand.
The Bureau of Meteorology issued severe heatwave warnings for large swathes of the NSW coast, including the Sydney metropolitan area, the Hunter region and the south coast.
Warnings were also in place for parts of ACT and Queensland, including an extreme heatwave for Australia's far-north tip.
Four coal-plant units are offline in NSW for maintenance before the summer peak in demand.
But climate change had extended the hot season, which should prompt a re-think on when maintenance takes place while renewable energy sources were rolled out, Premier Chris Minns said.
"Increasingly, you'll see heatwave conditions earlier and earlier in the year and obviously we have to manage that, but at the same time, we're seeing more solar come on and more battery technology that can fill the gap," he said.
— Bureau of Meteorology, New South Wales (@BOM_NSW) #Thunderstorm activity shifts eastward in #NSW on Thursday (28/11), clearing from the far west. #SevereThunderstorms are possible across most of the east and are likely around central districts including around the Sydney area. Warnings: https://t.co/Ss766eSCrL pic.twitter.com/zW4SBqveYMNovember 27, 2024
Federal Energy Minister Chris Bowen earlier insisted there was enough electricity in reserve to get through the day, adding the system was acting as intended.
Sydney's city centre recorded a peak temperature of nearly 33C late on Wednesday morning, while by early afternoon the mercury had risen to nearly 39C across a swathe of suburbs from the southwest to northwest.
Western Sydney peak temperature forecasts were more than 10C above November average maximums, weather bureau senior meteorologist Miriam Bradbury said.
"While anomalously high, these temperatures are not expected to break any records (but) it's more the duration of the warm conditions, including those warm nights, that is more significant," she said.
Rain is predicted to hit eastern NSW on Thursday.
20°C