Modern Australian

renewables reduce energy prices (yes, even in South Australia)

  • Written by Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University

Does renewable electricity raise or lower electricity prices? There is more to this question than meets the eye: are prices lower before or after renewable subsidies are recovered, how has variability been accounted for, how have changes in network costs been accounted for, and so on and on.

Faced with a complex problem, policy makers often turn to specialists who simulate the future using their assumptions of costs and investments and their characterisation of the power system and market. This sort of thing has a dismal track record in predicting prices and is susceptible to the perception, even if not the reality, that she who pays the piper picks the tune.

Read more: Explainer: why we shouldn't be so quick to trust energy modelling

An alternative is a data-driven regression that analyses large quantities of historic market data to understand the factors that have driven energy prices in the past. This approach requires few assumptions, and the quality and predictive power of the model is objectively measured. Even if the future is uncertain, we might be able to get a better sense of it by looking carefully at the past.

My colleagues and I used this approach to analyse South Australia’s wholesale prices from July 2012 to July 2018, during which period the annual average wholesale price increased by more than 30%.

There are many potential explanations for this increase: the last coal-fired power station closed in South Australia and two coal-fired power stations closed in Victoria; a greenhouse gas emissions tax came and went; electricity generation from the wind and sun increased by around 70%; while the price of gas climbed by a similar amount.

Read more: How to move energy policy models beyond bias and vested interests

However, our research found by far the biggest reason for higher wholesale electricity prices in South Australia is higher gas prices. It does not help that so much of South Australia’s gas-fired electricity generation is remarkably inefficient.

renewables reduce energy prices (yes, even in South Australia) Victorian Energy Policy Centre, Author provided Displacing expensive gas that is inefficiently used with cheaper sources of electricity can be expected to reduce wholesale prices. And so it does. In fact we found that in 2018, wind and solar generation in South Australia reduced prices by A$38 per megawatt-hour from what they otherwise would have been. Consumers were charged A$11 per MWh to subsidise this production, suggesting the subsidy paid for itself more than three times over. Yes, with the rise of variable renewable production in South Australia, spot market electricity prices are more variable in 2018 than 2013. But there is no evidence that the power system, properly operated, can’t cope with it. Indeed, prices have been far more volatile in the past, long before the wind and sun became significant sources of power in South Australia. In the market, prices are providing incentives for the development of storage and its substitutes and market participants are responding to these signals with investment in batteries and their substitutes and complements. Read more: Making Australia a renewable energy exporting superpower We also considered whether customers would have been better off if the state government had stepped in to extend the life of the Northern coal fired power station. Northern’s closure in 2016 raised wholesale prices by A$13 per MWh, but by 2018 all of this was offset by price reductions attributable to higher production from the wind and sun. If the government had stepped in to keep Northern operating, customers and/or taxpayers would have been charged for the foregone emission reductions needed to ensure that Australia meets its Paris Agreement commitment to reduce greenhouse gas emissions. Even before counting the public money needed to revive the plant and mine, Australians would have been worse off. We are now extending our research and expect to reach similar conclusions on coal generation closure and renewable subsidies in other parts of Australia. Chief Scientist Alan Finkel’s excellent energy policy review popularised the concept of an energy “tri-lemma”, suggesting that electricity policy needed to address trade-offs between prices, reliability, and emissions reductions. Read more: Turnbull's right: we need cheap, clean and reliable power – here's how But our research finds, emphatically, that renewable electricity generation brought prices down from what they otherwise would have been – and is likely to continue to do so. In electricity there is no dilemma between decarbonisation and lower wholesale prices. System reliability and security must be prioritised in the transition to cleaner sources of power. But whether there is a dilemma between reliability and a cleaner power system remains to be seen. The “tri-lemma” concept is already past its prime. Policy makers of all persuasions need to reflect this in their thinking.

Authors: Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University

Read more http://theconversation.com/the-verdict-is-in-renewables-reduce-energy-prices-yes-even-in-south-australia-108251

NEWS

The campaign with built-in R&R for voters

Politically speaking, the Easter break is a blessing for a jaded electorate, at least a partial rest for voters’ eyes and ears in a campaign that’s started as an impossibly...

the 'ball-tampering' budget trick they don't want you to know about

Just not cricket: Politicians make promises but obfuscate how those promises will be paid for.ShutterstockThe first week of the federal election campaign has been dominated by heated disputes about the...

three things to consider if you're thinking about homeschooling your child

Homeschooling allows more creativity in the way the curriculum is delivered.Max Goncharov/UnsplashThis is the last article in our series on homeschooling in Australia. The series answers common questions including why...

Adani, economics and personality politics

The Adani coal mine has become a key issue for voters.Wes Mountain/The Conversation, CC BY-NDOur “state of the states” series takes stock of the key issues, seats and policies affecting...

Antibiotic shortages are putting Aboriginal kids at risk

At any time, almost one in two Aboriginal children living in remote areas will have a school sore. That means right now, there are an estimated 15,000 children needing treatment.School...

What and where is heaven? The answers are at the heart of the Easter story

Wes Mountain/The Conversation, CC BY-NDThis is the second in a two-part series on heaven and hell by Bible scholar Robyn Whitaker. You can read her piece on hell here.My pious...

What is hell, exactly? We might joke it's other people, but the Bible has a more complicated answer

Hell is a complicated idea- and most Christians do not believe it has anything to do with fire and brimstone.Wes Mountain/The Conversation, CC BY-NDThis is the first in a two-part...

In Abdul-Rahman Abdullah's Pretty Beach, a fever of stingrays becomes a meditation on suffering

Abdul-Rahman Abdullah, Pretty Beach, 2019, installation view, The National 2019: New Australian Art, Museum of Contemporary Art Australia, Sydney, painted wood, silver plate ball chain, crystals, audio, image courtesy the...

Going to the beach this Easter? Here are four ways we're not being properly protected from jellyfish

Thousands of Queensland beachgoers have been stung by bluebottle jellyfish in recent monthsShutterstockThe Easter long weekend marks the last opportunity this year for many Australians to go to the beach...

a tale of amazing people, amazing creatures and rising seas

We have so much more to learn about Australia.Shutterstock/Lev SavitskiyThe Australian continent has a remarkable history — a story of isolation, desiccation and resilience on an ark at the edge...

how we value the fruits of our labour over instant gratification

The IKEA effect says 'that labour alone can be sufficient to induce greater liking for the fruits of one’s labour'.ShutterstockThere are some anecdotes just so good that almost every story...

Climate change is hitting hard across New Zealand, official report finds

Finance minister Grant Robertson (left) and climate minister James Shaw address school children during a climate protest, promising that New Zealand will introduce zero carbon legislation this year. AAP/Boris Jancic...

Popular articles from Modern Australian

Downsizing: What Is Too Small?5 unique ways to extract toxins from your bodyThe Art Of Bell-RingingModern Snapback Hats trending in Australia6 Mistakes to Avoid When Moving Overseas5 Tips Designed to Help Accentuate Your Hourglass FigureRoyal Edinburgh Military TattooThe inaugural Bondi Ocean Lovers FestivalHow to Plan a Remodeling at Home: Tips and TricksAchieving Facial Symmetry with RhinoplastyHow to Choose the Best Colors for Your BedroomFind Here the 3 Best Online Pokies in AustraliaHair Loss and Transplant SolutionsHere's All You Need For An Exuberant Cocktail PartyHow to Find Your Signature Style