The development of renewable energy technology is beginning to have a large effect on power providers – making peak generators obsolete.
These are the words of Giles Parkinson, editor of Renew Economy, who said energy companies are starting to show signs they are anxious of how popular rooftop solar PV and other sustainable sources are becoming.
"Renewables such as wind and solar have a zero marginal cost of generation, so they got priority in the electricity 'bidding stack'," he stated.
"But the problem is not so much that they are shunting the cheapest forms of fossil fuel generation a few rungs up the ladder, they are closing the door on the super-expensive peaking generators that are no longer required."
And herein lies the issue, he said, as this is where many providers are making a lot of money.
So how do energy markets work in Australia? Giles said the Australian system is similar to methods in place all over the world.
Priority is given to the suppliers who can provide the lowest-cost energy. In the old days, this was brown-coal generators, with black-coal plants not far behind.
Unfortunately, while these facilities are fairly good at keeping on top of things when it comes to baseload generation – they drop the ball when demand peaks.
So when it's a really hot day, for example, and people flick on the air conditioners, they begin to struggle.
When this happens, suppliers resort to peak generating plants, which have fast response gas turbines to pick up the slack.
However, these only switch on when wholesale energy prices reach $150 megawatts per hour.
Essentially, this is a big earner for energy companies, Giles explained, and he cited the recent Energy White Paper as evidence.
The document claimed 30 per cent of revenues from the country's entire generation fleet comes is accrued within just 30 hours of the year.
"And that is then passed on to consumers, who pay an estimated 25 per cent of their bill to meet the 'critical' peak that last just 40 hours a year," he stated.
Because solar power and other renewables would not rely on this system, it makes a number of existing facilities redundant, while also removing the need to develop various other fossil fuel projects.
Parkinson's comments came not long after the Climate Commission highlighted the importance of renewables in Australia's energy future, adding that the country was the world's most prolific installer of solar power in 2011.
Posted Mike Peacock