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Energy prices crash as Queensland solar takes hold

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(Note: Here is an update to this story, as prices go negative in Queensland – in middle of the day!)

 

As Prime Minister Tony Abbott again attacked renewables for their presumed impact on consumer bills, wholesale energy prices in Queensland have slumped to unprecendented lows as rooftop solar continues to boom in that state.

Wholesale electricity prices this week in Queensland have fallen below $30/MWh – see graph below – far below the levels of other states as mild weather and sunny condition reduced demand and generated a large amount of solar electricity.

The dramatic fall in wholesale prices underlines why generators such as the Queensland government-owned Stanwell Corp and CS Energy want the renewable energy target to be brought to an end. Nearly 4,000 households a month are applying to put panels on their roofs in the south-east corner of the state alone, as consumer bills soar again.

Stanwell, which owns more than 4,000GW of coal and gas-fired generation, has already blamed solar for its inability to generate any profits in the last financial year, and the Newman government is now trying to sell both Stanwell and CS Energy. The conservative state government also wants the RET stopped, recently arguing that any efforts to curb emissions or clean up the energy system should wait until “society is wealthier.”

The fall in energy prices came as Abbott blamed renewable energy for lifting retail electricity bills. On Tuesday, Queensland electricity prices did indeed rise 18 per cent, but this was almost entirely the result of soaring network costs and rising gas prices. The impact of renewable energy on retail prices actually fell.

Abbott’s comments came despite the conclusion of his own hand-picked modellers, ACIL Allen, which said the renewable energy target would lower consumer bills over the medium to long term.

This confirms conclusions reached by other analysis, despite the fact that the numbers dialled into the modeling by ACIL Allen were “fossil fuel” friendly and did not reflect the real cost of renewables.

These softening impacts on customer bills from renewables come because they force down the wholesale of electricity, and incumbent generators do not like that.

Queensland is notable because it has installed very little large-scale renewable energy. There are no wind farms in the state, apart from the old Windy Hill installation in the north of the state, and just a few hydro and biomass plants.

In solar, however, it leads the world, with more than 1.1GW installed. According to a new report by Energex, it now has the highest per capita solar uptake in the world, with more than one if  four houses in the south-east corner having rooftop solar.

This graph of Queensland demand and prices on Monday and Tuesday from the Australian Energy Market Operator illustrates the problem for coal and gas generators. The middle of the day was when the fossil fuel generators used to generate most revenue, because demand was highest. Now, demand eases dramatically, as this graph shows. Demand is in the green, while the wholesale price in is the red line.

aemo qld prices

Here is another way of viewing the contribution of rooftop solar, taken from the APVI’s live solar map. It shows the contribution of solar in Queensland on July 1 at more than 10 per cent around noon, with output of more than 600MW, equivalent to a coal-fired power station.

apvi qld july 1

To get another view of what happened in prices, this table from Global-Roam data , which has its own detailed explanation from Paul McCardle on his Watt Clarity website, shows that Queensland prices were well below the Australian average on Tuesday.

roamAs their story notes: “A trader that I have just spoken with mentioned prices being “soft” in QLD today – I’m sure the generators here would be noting that they could not be much softer than this without being jelly!”

And later … “it does reveal how solar is really starting to cause a whole world of pain to existing generators in Queensland, and promising more.”

Watt Clarity further observes that “as solar continues to eat the midday lunch of scheduled demand, dampening prices through the middle of the day, it seems likely that the generators (starved of volume) will use whatever advantage they have to make back some of the losses in the mornings and the evenings.”

Indeed, nearly 4,000 homes in south east Queensland are making applications to install rooftop solar each month. Australia-wide, solar – currently standing at 3.4GW – is predicted by Bloomberg New Energy Finance to jump to 23GW by 2030, with 5 million homes installing rooftop panels.

BNEF has described the rooftop solar market as ‘unstoppable’ – not just in Australia though. Its 2030 Market Report released this week predicts $7.7 trillion of renewable investment across the world in the next 15 yard, with solar to make a significant contribution, including in the major markets of US, China and India.

energex june

 

The Energex network, which operates in the south-east corner and Brisbane, added another 13.7MW of rooftop solar in June, to take their total installed in the Energex network to 843MW on 261,500 homes and businesses.

Another 3,563 homes added solar in the south east corner in June, despite the fact that they would only get paid 8c/kWh for electricity they export back into the grid.

From Tuesday, that payment by the network ceases and falls to retailers. But the payment is voluntary, and has to be negotiated between the customer and the retailer. More than 59,000 houses – with some 200MW of rooftop solar – now find themselves in this situation.

Whats more, new rules have been introduced which allow the network operator to require that no exports can be made back to the grid for new rooftop solar systems. Ergon Energy explained its reasoning here, saying it wanted to prevent “reverse flows” and encourage more solar and energy storage on its network.

 

 

 

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  • Stan Hlegeris

    Just a little math do help this article deliver the punch: that wholesale price of $30 per megawatt-hour is equal to 3 cents per kilowatt-hour.

    Those are the same kilowatt-hours for which you now pay more than 30c (in Queensland). Of that 30c, a big portion goes to meet network costs. Those costs alone are now greater than the cost of solar-generated electricity. Even if coal were FREE, coal-fired power will ALWAYS be more expensive than solar.

    On today’s prices, retail residential solar PV systems deliver electricity at 5c to 10c per kilowatt-hour. Add a little more for storage (or even that much again) and you’ll conclude that there’s no reason to buy another kWh from the grid.

    Yes, it would be more efficient to use the grid to distribute solar electricity and to deploy right-size storage on a neighbourhood or zone level, but that’s not going to happen with LNP governments at both levels implacably opposed. Regrettably, the grid will have to be pushed to financial failure before it can be recovered.

    • michael

      if it’s a financial no-brainer as presented by yourself, why the need for the RET? won’t it happen naturally as people protect their own hip pocket?

      • Stan Hlegeris

        Hi Michael–

        As far as individuals go, you’re already correct. You can go out and buy solar PV gear for your house or commercial building which will save you money, right now, even if you don’t have access to any subsidy scheme.

        The RET situation affects utility-scale systems. These, too, are already competitive without any subsidy. Some projects planned under the existing RET rules could be set back, but they’ll soon be replaced. But they require ACCESS to the grid, and this is what the incumbent generators seek to block; attacks on the RET are just part of that game.

        As you point out, solar PV is well past needing any subsidy, but it still requires political support to get past political barriers.

        • Matthew Wright

          Hi Stan,

          Actually most systems (I’d say 99%+) are being installed with the help of renewable STC – small scale certificates which amount to in excess of $0.60c per watt installed. So a $5000 5kW system out of pocket would actually cost $8000 unsubsidised.

          Matt

          • nakedChimp

            thats mostly because the installers and importers essentially grab the RET value from the customers..
            I’ve seen this before with the water tanks in rural QLD, they were subsidized by GOV at about $1000 per tank of volume x or such.. well, guess what happend after the support got removed for them? Correct, prices fell by roughly that amount..

            There is LOTs and LOTs of wiggle room in the prices that you get told for solar systems and components.
            I asked locally for panels and got told amount x and then checked the internet for wholesale prices in Brisbane.. 10-15% less easily. Once I got that sorted out and got back to my local installer and asked for install, all of a sudden they could match the price.. now with that I naturally go back to the wholesaler and tell him that and I need to make a long journey to pick up the stuff, and voila.. anther fall in price so the journey was worth it again.
            Have fun and haggle is all I can say.

          • wideEyedPupil

            You have a licence to install or you were offering to purchase panels and other system components and pay local installer to install? Do wholesalers deal direct with the public for one of system purchases?

          • nakedChimp

            I don’t have a license and I asked the local installer if he would be able to do it (before I was going to source the panels & gear) and it was fine – also asked his prices, so he knew what I was up to.
            And once I got all my stuff sorted with the cheaper gear (quotes, deliver dates) I got back to him.. and yeah.. in the end it was a nice trip, meeting friendly people and saving some bucks (money wize, not man-hour wize.. economically I’m sure my install is soaring easily past 4$/W).

            So in my situation this works because I’m keen to learn new stuff/like to do things myself, have lot’s of spare time and the price differential is so big from south to north Queensland.
            If I was a different person and used to let Tradie’s sort out their mishaps (read: don’t pay until the job is properly done) and would value my time differently I naturally wouldn’t do it this way.

            But what definitely works for everybody is to get different quotes and haggling, after you’ve done your home work and are able to compare apples with apples and oranges with oranges ;-)

    • http://www.emissionless.com Emissionless

      The retail price breakdown is approximately;
      Generating – 4.4 c/kW.hr (19.4%)
      Carbon tax – 2.3 c/kW.hr (10%)
      Transmission & distribution – 10.67 c/kW.hr (47.1%)
      Retail costs – 2.05 c/kW.hr (9%)
      Retail margin – 3.28 c/kW.hr (14.5%)

      • Ronald Brakels

        Wow! That’s some cheap electricity you’re getting there, Emissionless, 22.7 cents. Since you have the carbon price down as 2.3 cents there is really only one place in the world where an Australian level carbon price could result in such a massively high figure and that’s in filthy Victoria. (Filthy as in probably the most polluting electricity sector in the world. I make no moral judgements about Victorians, as easy as that may be to do.) Most Australians pay about 30 cents or more a kilowatt-hour. But then most states don’t have Victoria’s… disadvantages.

        • http://www.emissionless.com Emissionless

          Yeah, Victoria’s cheaper prices is the main reason take up of solar is not as high as say QLD. Also VIC hasn’t built a new baseload station in the last ~30 yrs, so capex has already been paid off. Whereas in QLD, there’s relatively new stations. Victorians complain heaps about their “filthy” energy and I’m sure most are embarrassed by the reputation, but still “most” choose to in favour of their hip pocket. All that said; the tide is changing and more and more Victorians are seeing the light. Hats off to them!

          • Ronald Brakels

            I would say Victorians have done well with solar installations, particularly Melbournites, given that they have the lowest electricity prices, get a lower RET subsidy than most Australians, and have the least amount of sunshine on the mainland. But still plenty more roofs to go.

          • http://www.emissionless.com Emissionless

            Indeed. Easy on the least amount of sunshine :)

          • Ronald Brakels

            Well, Melbourne only gets about 10% less sunshine than Sydney, though if you listen to Sydneysiders you might think it was 90% less. And about 13% less than Adelaide and 14% less than Brisbane. With a 5% discount rate, which is about what one would expect a lot of homeowners to have for a home improvement like this, rooftop solar in Melbourne still produces electricity for less than half the cost of their low low retail electricty prices.

  • suthnsun

    Society does not need to be wealthier, it just needs to come to terms with horribly bad investment decisions in the recent past. In the case of Qld, Newman could just blame the previous govt and get on with a more sane process of providing low cost distributed energy. Unfortunately for all, he is both ideologically and politically linked to the high cost status quo.

  • Blair Donaldson

    It’s hard to understand why (mainly conservative) state governments are opposing the RET when they could be divested themselves of outdated, polluting coal-fired generators while picking up taxes from renewable energy related industries and services – unless of course the same state governments are getting healthy and frequent “donations” from various fossil fuel companies.

    • Chris Fraser

      Ha. Surely they wouldn’t be receiving those donations … would they ?

      • Blair Donaldson

        If only… The QLD government seems to be returning to the Bjelke-Petersen days

  • sean

    Why is there no connector between SA and QLD?

    • Chris Fraser

      It seems to be an opportunity to do exactly that, and help share the bounty of wind all over the east. However I suspect connectors only go through densely populated areas, like the seaboard, to help reduce transmission distances and help collect, and disseminate, other central producers of energy. The answer would be to keep the existing routes, but beef them up and solve the issue of capacity.

      • wideEyedPupil

        If you are beefing up existing links why not run a few hundred kms of HVDC interconnection directly across. Less losses.

        Off course there are high wind areas in high insolation areas for utility solar in QLD too, just need a pricing mechanism to get them on the grid as the costs are upfront but marginal cost near zero. Now how could the government do that I wonder.

        • sean

          unlikely you would get govt. support, as it crosses state borders. however a HVDC that runs direct from port augusta to Ipswich might be commercially viable if the price difference between SA and QLD is big enough, frequently enough.

  • http://www.emissionless.com Emissionless

    Maybe the governments is anti-renewables because as households spend less with energy companies, less revenue ends up in the government coffers? Also remember that the government is subsidising the take-up of renewables. i.e. paying about 30% of the capex for each solar system installed.

    • Blair Donaldson

      “The government” isn’t subsidising anything, it’s taxpayers who are doing the subsidising. The same taxpayers who seem to be wanting government to move to renewables.

      • http://www.emissionless.com Emissionless

        If taxpayer are doing the subsidising then you point would be moot.

        • Blair Donaldson

          The point is conservative governments are not acting in accordance with the majority of voters in regards to renewable energy. As for revenue, the governments could be encouraging new industries, jobs in renewables and research, installation, servicing etc, all paying taxes.

          • http://www.emissionless.com Emissionless

            There is no evidence that the majority of voters voted in any government to prop up the renewables energy sector. Voters simply vote out a government that they haven’t been happy with. In 30 yrs of providing clean solutions, I can attest to the fact that consumers do not spend because they feel compelled by government actions or even laws. They spend because doing so delivers better financial outcome for themselves or their business. The renewables sector can do much better and needs to do much better, and needs to do so without government support. This way, both the industry and voters will be the winners. Critical mass has been achieved, hence it’s now pointless wasting any more money.

          • Ian Franklin

            Not all consumers “spend because doing so delivers better financial outcome”. This is a very one-dimensional view of people’s motivations.

          • http://www.emissionless.com Emissionless

            True, not all consumers, but the vast majority. Bear in mind that solar power systems has been around for decades yet the vast majority ignored it, despite its humanitarian & environmental benefit. The popularity in uptake of solar in recent times is purely a consequence of (most) people believing that by having solar they’ll be financially better off. This is not a bad thing, because the “interesting” decisions being made by governments is ensuring NEM energy prices will continue to rise. Hence increased uptake of renewables.

          • Alen

            Cost of PV has had a significant drop in recent years, as well the FiT introduction, before this it was expensive indeed to go this way and even for those that were very environmentally aware found this cost to be too high.

            Also note that although research and information about GW has been available for some time, it was mainly around the time Al Gore brought out his “inconvenient truth” book/movie that the issue gained momentum. People are now more aware, more facts & scientific evidence is available and the cost is favourable for people taking individual action on GW, whereas before there was limited option available for the average person

          • Blair Donaldson

            I did not say there was any evidence that the majority of voters voted in a government to prop up the renewable energy sector, clearly they voted on a vast range of matters. Rightly or wrongly, people assumed that Abbott would keep his word and not kill off the RET. Almost every poll taken in the last six or seven years shows strong support for renewables and some degree of action on climate change. Our antiscience, lying PM has demonised renewables at every turn since gaining power and he still regurgitates falsehoods while ignoring contradictory evidence from modelling commissioned by his own department.

            http://yes2renewables.org/2014/07/03/nigel-morris-dear-prime-minster-tony-abbott-can-you-please-stop-lying-about-the-ret/

            I think the baby bonus introduced by John Howard undermines your claim that consumers do not spend because they feel compelled to do so by government action or laws. Perhaps new mothers were not compelled to have children but our treasure at the time suggested it would be good for them to “have one for the country” and they certainly weren’t discouraged by the blatant vote buying stunt.

            But why should renewables have to develop without any assistance at all when our original electricity infrastructure was all, entirely supported by government backing? There is a huge double standard here. No new industry has ever developed in the last century that did not have some form of government assistance to assist it to get started.

            Certainly once it has obtained a critical mass, renewables should not need any help but expecting renewables to expand without assistance while fossil fuels receive huge subsidies is ridiculous. I don’t know how you can argue that a critical mass has been achieved when the majority of our electricity still comes from coal and gas fired plants.

          • http://www.emissionless.com Emissionless

            The RET is not going to be killed off, not at least for a few years. Adjusted, yes – as most people would agree is appropriate. Industries should not rely on governments. I definitely don’t and neither do smart businesses. They are generally way ahead of politicians.

            People’s behaviour WRT the baby bonus validates my view.

            Did you forget that “our original electricity infrastructure” all once belonged to the “people” and the “people” through their own self interest chose….well you know the rest. We can’t turn back the clock, but we can learn from the past. One important lesson would be to avoid becoming dependent on subsidies. Renewables are already at a point where they don’t need much of a hand-out, which is amazing. It should be applauded, especially when compared with the disgraceful performance of the fossil sector.

            Critical mass does not mean or require majority mass.

          • Blair Donaldson

            Why should the RET be adjusted (downward)? And for the record, I am not arguing for subsidies, just a level playing field. By all means strip support for renewables but let’s do the same for coal and gas, along with the recompense for the genuine damage they do to health and environment. Then we’ll get a fair idea on relevant costs and benefits.

          • http://www.emissionless.com Emissionless

            So that its cost doesn’t unduly impact grid-connected energy consumers.

            When the people were blissfully ignorant of GW did they think fossil energy was doing genuine damage to their health and environment or did they enjoy the comfort and immense benefits of that energy. Talk of recompense is irrational. We’ve already paid for what we wanted and appropriately rewarded. So just let bygones be bygones and get on with what we know is “right” for now. Who knows, in 25 years time we may discover that PV panels are harmful to the environment. Don’t laugh, have you really thought about where the input raw materials come from and how will we recycle them at the end of their lifespan. Let’s not even bring up the A word. Aluminium, oops I was just thinking it.

          • Blair Donaldson

            Why is talk of recompense irrational when in the last three years, there have been two mine flooding events resulting in polluted water being pumped into the local river and one well publicised mine fire which has caused a lot of physical damage to property and health in the surrounding population of 11,000?

            It would be nice if you stopped assuming I believe that renewables are entirely free of problems and do not have various inherent weaknesses.

            Given the various materials required for the construction of solar panels, I’ll be very surprised if there are not unforeseen issues to deal with in the decades to come with the number and quality of panels produced today.

            Part of the farm my parents once worked is now under the pondage used by the Hazlewood turbines and I know for a fact that many people in the area have looked forward to clean energy alternatives and a move away from coal-fired electricity since at least the 70s. I’m one of them.

          • Catprog

            What about the R word, Recycling.

          • http://www.emissionless.com Emissionless

            The energy consumed by aluminium production and also its recycling is an energy deficit. A possibly better alternative might be; http://reneweconomy.com.au/2014/bluescope-unveils-world-first-solar-roof-with-heat-and-power-32417

      • http://au.linkedin.com/in/paulmcardle/ Paul McArdle

        Slight correction (but an important one) Blair – it’s not the government subsidising – it’s the government mandating that energy users subsidise, per kWh

        Given that the industrial energy sector consumes roughly 50% of the energy generated in the NEM these guys are contributing to reducing the capital cost of the solar PV that more than a million people (including me) have put on their roof. The largest EITE companies have partial exemption but that is only for a few (in relative number) companies.

        For the rest:

        1) They pay a subsidy to reduce the capital cost we pay to install solar at home;

        2) They don’t share in the revenue we receive (but help to fund it), if we are in the 100,000s who have attractive feed-in-tariffs – like me:
        http://www.wattclarity.com.au/2014/05/full-disclosure-3-a-beneficiary-of-qlds-44c-solar-feed-in-tariff/

        3) They do benefit from the price suppression currently occurring in the wholesale spot as a result of the overcapacity – but, as noted here, which generators will blink first and permanently mothball significant capacity to bring spot prices more into “normal” levels:
        http://www.wattclarity.com.au/2014/05/a-few-thoughts-on-the-ret-review-process/

        • JonathanMaddox

          That “contracts for closure” thing was meant to be an incentive to blink first. Ferguson scuttled it.

  • Colin Nicholson

    The RET is to prevent predatory behaviour from the incumbents, but I forget that the electricity companies are gentlemen and would never engage in such hank panky.

  • Rob Campbell

    One thing that we all should be screaming from the rooftops is the fact that these “network charges” which are passed through to Qld electricity users are a fraud. Queenslanders are being forced up to the NSW daily network charges, remember that 13 months ago it was 26 cents today it is 92 cents, this is all because they are claiming Nanna Bligh’s 44 cent FIT as a network cost and also have included a customer procurement/retention cost from the retailers. Since when have either of these costs had anything to do with electricity generation or delivery. I smell a big revenue raising (and illegal) RAT

  • juxx0r

    “Whats more, new rules have been introduced which allow the network operator to require that no exports can be made back to the grid for new rooftop solar systems. Ergon Energy explained its reasoning here, saying it wanted to prevent “reverse flows” and encourage more solar and energy storage on its network.”

    Which rules are they Giles? You failed to outline them in the two articles you linked to.

  • Alen

    Pushing up the electricity price is not a very smart idea when you are already complaining about the high uptake of solar systems. Come the next power bill, I predict a great many more will seriously consider purchasing a system (have they just sped up the death spiral?)

    Any news or developments on the PV solar farm (400 MW) planned near the sunshine coast?

  • WA David

    I wouldn’t be to surprised if the price offered for power from PV systems on new residential systems in QLD quickly drops to reflect this price (3c/kWh) under voluntary system in place for retailers. While, the price may be a lot higher in the height of summer, most days of the year it will end up being about this price as more and more PV is put on.
    In the long term, I wonder if prices will go negative during the day. This would not require a total negative load, but rather a load that is sufficiently small such that the coal generators can’t ramp back anymore and thus are prepared to pay to put power on the grid in order keep their systems running to then make their money back once the sun sets.
    Potential impacts:
    Retailers try to charge PV customers per kWh they force onto the grid when prices are negative.
    Retailers offer free power to customers in the middle of the day if they are prepared to move off the flat tariff to a TOU tariff.

  • Tony

    In the first two graphs I couldn’t help but notice that the peek demand for power is in the morning and in the evening, but the peek production by solar is in the middle of the day when demand is the leaset. Since there is no storage for the excess power being produced, wouldn’t that make extra panels pointless as the extra power is just wasted.bmaybe if panels worked when the power is most needed would be better?

    • Catprog

      Of course demand is the least. That is when the power from the panels are being used instead of from the grid.

      • Tony

        Ok, so what’s the point if they a producing power when it’s needed the least, isn’t that like watering the lawn while it’s raining? What’s the environmental benifits?

        • Catprog

          From the article:

          The middle of the day was when the fossil fuel generators used to generate most revenue, because demand was highest.

          In other words the solar has reduced the demand enough that it is no longer the highest demand.

          And that analogy only works if power from solar has to be thrown away.

          A better analogy is if the rain is not enough to water the lawn. Do you need more or less water then if their was no rain?

    • JonathanMaddox

      Demand for power is as high in the middle of the day as it ever was.

      Demand for power from the grid is lower, because distributed PV generation on rooftops is viewed by the network operator as reduced demand, not as increased generation.

  • patb2009

    “Indeed, nearly 4,000 homes in south east Queensland are making applications to install rooftop solar each month. Australia-wide, solar – currently standing at 3.4GW – is predicted by Bloomberg New Energy Finance to jump to 23GW by 2030, with 5 million homes installing rooftop panels.” It will be a lot more a lot sooner.

  • Michel Syna Rahme

    When I ride my scooter down the residential Burleigh Street, board in the racks, thinking about who on Earth would actually want Brandis, Hunt, and Abbott and Co as their leaders, seeing all the solar on the roofs of homes – some housing progressives, some rednecks – I must admit it does make me smile!!!

  • http://au.linkedin.com/in/paulmcardle/ Paul McArdle

    As a quick PS to this discussion, initial analysis suggests that it’s probable that changes in bidding behaviour (removal of carbon in prices) is more responsible for the price drops observed above:
    http://www.wattclarity.com.au/2014/07/have-generators-backed-carbon-out-of-their-bids-post-30-june-but-prior-to-the-repeal-passing/