SA Electricity Prices: Post-Coal Post-Mortem

Wind an solar power - SA wholesale electricity prices

Image: seagul

A report just released by the Victoria Energy Policy Center (VEPC) confirms renewable electricity generation has brought wholesale electricity prices down – and is likely to continue to do so.

While painting an international picture, a focus in the report is a case study of the situation in South Australia.

First the bad news – closure of 520 MW of coal generation capacity at South Australia’s Northern Power Station in SA and 1,600 MW of capacity at Hazelwood Power Station in Victoria raised wholesale prices in South Australia in 2017 by $23 per MWh from what they otherwise would be, due to increased use of gas.

The good news – renewables brought wholesale electricity prices down by $38 per MWh this year, more than offsetting that figure.

A $10/MWh reduction was attributed to 1,110 GWh of distributed solar energy generation (much of that from SA’s home solar power systems) and $28/MWh from 5,500 GWh of wind energy generation.

Subsidies For Renewables Provide Good Value

Additionally, the report also points out extending the life of Northern Power Station and the Leigh Creek coal mine would have required  an unknown level of public subsidy, along with subsidies to replace the foregone greenhouse emission reductions resulting from closure. However, on the renewables side of things, subsidies have provided good value – price reductions from renewable generation in South Australia are more than three times the cost of associated subsidies.

Traditionally, South Australia has always been subject to high electricity prices compared to other states – even when Northern Power Station and Hazelwood were operating. As SQ’s Ronald has previously stated:

“South Australia doesn’t have high electricity prices because it has renewable energy.  South Australia has renewable energy because it has high electricity prices.”

There’s been much said about Australia’s “energy trilemma”, the elements of which are decarbonisation, higher prices and power system reliability – and the bigger picture of the report is that renewables have the first two sorted.

“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,” says VEPC Director, Bruce Mountain. “But whether there is a dilemma between reliability and a cleaner power system remains to be seen.”

The report (PDF), “Does Renewable Electricity Generation Lower Prices?” was authored by Associate Professor Mountain, Dr Steven Percy, Dr Asli Kars, Adjunct Associate Professor Hugh Saddler and Farhad Billimoria.

VEPC is part of the Victoria Institute of Strategic Economic Studies within Victoria University, Melbourne. The Centre was launched in June this year by Victoria’s Andrews Labor Government to help inform energy policy development, but acts as an independent agency.

About Michael Bloch

Michael caught the solar power bug after purchasing components to cobble together a small off-grid PV system in 2008. He's been reporting on Australian and international solar energy news ever since.

Comments

  1. Des Scahill says:

    Just to reinforce the point about ‘renewables’ bringing electricity prices down.

    There is currently some outrage in the EU over Poland’s largest coking coal producer – Jastrzebska Spolka Weglowa (or JSW) – plans to increase its output by some 2.5 to 3 million tons above its current level of 15 million tons.

    To quote from this EuroNews article:
    https://www.euronews.com/2018/12/06/eus-largest-coking-coal-producer-seeks-growth-through-acquisitions

    ‘Reuters reported in September that JSW was considering a bid for control of Australia’s Prairie Mining , which owns coking coal assets that adjoin its mines.

    In November, JSW confirmed its interest in the assets, which would help it make up for production lost after a methane explosion led to the death of five miners in May this year.’

    As well, JSW is : ‘seeking to develop technology with Chinese partners, which would make it eligible for funding from Chinese banks.’.

    The article concludes with the words: ‘… Polish electricity costs rise rapidly, in PART because of higher carbon prices.’

    The rationale offered by the CEO of JSW is:

    ‘The world has to tackle the increase of carbon dioxide emissions, but I do not see a chance the world can live without steel these days and there is not an easy solution to substitute steel and substitute coking coal,’

    That statement does seem to blithely ignore the problem of low selling prices in the steel production industry, due in part to the huge amounts of steel produced by China, and a somewhat gloomy economic outlook world-wide, but that’s an aside.

    Poland is already considered one of most air-polluted countries in Europe, and this article gives some explanation of the historical reasons for that: http://countrystudies.us/poland/25.htm

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