Brown coal generation fell to its lowest level in the history of the modern power grid in the December quarter, as solar and wind generation surged and coal's retreat was exacerbated by scheduled maintenance and accidents.
The development marks another milestone in the evolution of the modern eastern states' National Electricity Market from a centralised grid dominated by huge thermal generators to a decentralised grid with a constantly changing mix of fossil fuel, solar, wind and hydro energy.
But
a resurgence in wholesale prices in the NEM shows the transition to
clean energy is still a work in progress, with supply and demand tightly
balanced, especially in South Australia and Victoria, and vulnerable to
hot weather, sudden fluctuations in renewable generation and outages in
ageing coal plant.
 |
| Progress towards the experts' vision of lower electricity prices thanks to the flood of wind and solar energy coming into the national grid is only being realised in fits and starts. Glenn Campbell |
Gas generation was also a big loser, plummeting to just 3183 GWh in the December quarter from 5692 GWH in the December 2017 quarter.
The big winners were rooftop solar, which surged by more than a quarter to 2690 GWh from a year earlier, utility-scale solar, which increased fivefold to 917 GWh as more large solar farms came online, and wind, up a fifth to 3426 GWh. Hydro generation also grew 17 per cent to 3400 GWh.
Betwixt and between
Average spot market electricity prices were higher in all states of the NEM in the December quarter.
Energy market agencies such as the Australian Energy Market Operator, the Australian Energy Market Commission and the Energy Security Board, and private energy experts say wholesale power prices should continue to moderate as more wind and solar supply floods the market because these are the cheapest forms of new supply and cheaper than existing coal and gas supply in some cases. |
| Average spot market electricity prices were higher in the December quarter than a year earlier in all states of the National Electricity Market - in some states sharply so. Dylan McConnell, Climate and Energy College, University of Melbourne |
But new options for firming variable wind and solar power – batteries, pumped hydro, transmission and interconnectors – are still too costly or dependent on geography for widespread adoption. That leaves the NEM in transition, suspended betwixt and between its centralised, coal-dependent past and its decentralised, renewables-based destination – the worst of both worlds with some of the world's highest electricity prices and dirtiest generation.
South Australia, Queensland and Victoria had the largest NEM price increases in the December quarter compared with the December 2017 quarter, according to data compiled by Mr McConnell.
Average NEM prices in SA jumped 17.6 per cent to just over $100/MWh, in Queensland 16 per cent to $85/MWh, and in Victoria 13.7 per cent to $100/MWh.
NSW prices increased 9.3 per cent to just over $88/MWh, and prices in Tasmania – which dance to a different drum because of the island state's vast hydro resources – increased just 0.5 per cent to $85/MWh.
Progress checked
December quarter prices in Victoria, Tasmania and Queensland also were higher than in the September and June quarters, while prices in NSW were slightly lower than in those quarters and prices in SA were mostly in line with recent quarters.
In the September 2018 quarter prices were lower on average than prices in the September 2017 quarter in all NEM states. In the June 2018 quarter average prices were 14-21 per cent below the near panic level prices in the June quarter of 2017, when prices soared after the closure of the Hazelwood power station in Victoria and a series of power outages in the previous summer.
Experts attributed the increase in NEM prices in the second half of 2018 to drought and low hydro storages ahead of a hot summer, higher gas and black coal prices rolling into generator supply contracts, a tight supply-demand balance in Victoria and NSW anticipated over the summer, and the Morrison government's ditching of the National Energy Guarantee.
 |
| Prices for grid stabilising frequency control ancillary services were lower than in the December quarter of 2017 and lower than the September and June quarters of 2018. Dylan McConnell, Climate & Energy College, University of Melbourne |
Grid stability
Prices for grid stabilising frequency control ancillary services were lower than in the December quarter of 2017 and lower than the September and June quarters of 2018.
But FCAS prices are still much higher than in the March quarter of 2018, when AEMO said the introduction of the Hornsdale Power Reserve (the 100 MW Tesla Powerpack battery at Neoen Australia's Hornsdale wind farm in SA) and demand response company EnerNOC's FCAS offering may have explained a sharp fall in prices for grid steadying services.
The lesson is that a single utility scale battery or demand response program is not a silver bullet for grid problems that have been allowed to fester for a decade and even now are only being addressed in an ad hoc fashion in the absence of coherent, bipartisan national policy.
Links
- 2018 Residential Electricity Price Trends Review
- Australia on track for 50pc renewables by 2030
- Snowy Hydro beefs up on solar, wind power to undercut market
- Unstoppable force of clean energy transition not controlled by government policy
- Tasmanian power prices plunge as hydro storages overflow
- Energy policy vacuum threatens big power projects as crunch looms
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