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Solar sends energy prices below zero – in middle of day

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The combination of low demand and strong output from the Queensland’s 1.1GW of rooftop solar helped send the state’s electricity prices into negative territory on Wednesday – in the middle of the day.

Daytime electricity prices have historically been the “cream” on the cake for electricity generators because that is when demand is usually the highest, and prices too.

But the emergence of rooftop solar as effectively the fourth largest generator in Queensland has changed the dynamics of the market, particularly on fine, sunny and warm winter days that have been experienced this week. Demand is weak because there are no air conditioners in use, electric heating is not required, and the sunny days means that solar output is strong.

aemo solar price

As this graph above from the Australian Energy Market Operator shows, demand (the green line) in the middle of the day is plunging between the appliance-driven morning and evening peaks. At this time, the output of solar increased to around 60 per cent of its capacity (see below), accounting for more than 10 per cent of demand and sending out more than 600MW of capacity at certain times.

This situation has been exacerbated by restrictions on the interconnector with NSW, which means Queensland coal generators have been unable to send excess electricity to its southern neighbour, adding to the excess capacity in its own market.

As we reported yesterday, this has caused wholesale energy prices to plunge, highlighting the changing dynamics which are afflicting wholesale markets, and why fossil fuel generators want to slow or halt the progress of rooftop solar and other renewables.

On Tuesday this week, the wholesale price of electricity (in red in graph above) skirted around zero for several hours in the afternoon, and on Wednesday they plunged to minus $100/MWh at 2.20. (They were back at zero on Thursday morning between 11am and noon).

apvi solar qld july 2

Negative pricing events are not unknown, but usually occur at night, when an excess of capacity and low demand in the early hours of the morning results in some generators willing to pay others to take their output rather than close down.

This has happened for years due to overbuilding of base load coal generators, but has become more frequent with the addition of more than 3GW of wind energy across the southern states.

A negative pricing event in the middle of the day is extremely rare. One trader in the market said he could not remember such an event. Bidding, however, has been confused and unpredictable because of the proposed repeal of the carbon price, which will be backdated if and when it happens.

As we explain here, some generators appear to be bidding into the market with a carbon price, and others not.

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  • Matt

    Hi Giles,
    I recall that I flagged this possibility with you some time ago, in conjunction with SA solar output in summer. My prediction is that some coal baseload will eventually be removed from the market, saving on electricity production costs, but the current shoulder and off peak demand spikes, along with future overnight “baseload” will eventually be the very highly priced coal and gas derived power where the generators will make their profits.
    It would be very interesting to know what the components of the current baseload are, and what their magnitudes are. One can foresee that higher priced overnight electricity will drive more efficient street lighting and reduce overnight electric water heating dramatically.
    Investment by the generators in upgrading interconnectors is also likely, in order to mitigate the daytime oversupply problems you write about above.

    • sean

      While I would love to see this happen, I think it will be very interesting to see if it does happen, as there are many processes that have been moved to late night to give generators extra load (hot water heating for one)

      This is another reason i think the Time of Day metering should change to a spot price system, to allow consumers to change their consumption depending on supply, saving all consumers money from the current retail system that hedges consumption based on previous demand.

  • Andrew Thaler

    Or some smart cookie can turn the ripple controlled electric water heaters on for a noisy and sell the power via cheap rates rather than let the spot go negative?

  • Les Johnston

    What does this say about the logic of the reopening of the Tarong coal fired generators due to increases in gas prices? These coal generators will mean additional “base” load in the middle of the day. How does this stack up on a cost basis?

  • Owen Griffiths

    These graphs seem like a very strong argument for reducing new solar installations. We need renewable energy which can bring down the new peaks, not poke an even bigger hole in the middle of the day.

    This seems like a big problem with the RET scheme, which just requires any renewable energy, without rewarding generating at beneficial times.