Burn, baby, burn – even when the sun shines

It’s Tuesday and it is a bright and sunny (and pretty hot) day all over Australia. Despite this, at 1pm Eastern Standard Time, 3.6GW of electricity is being fed into the national electricity grid from gas-fired plants. Meanwhile we are all being told to brace for huge increases in gas prices due to the demand from new export facilities coming online for our next export boom.

In theory this 3.6GW could be coming reliably from solar PV, or at least a large part of it. Queensland is using gas to produce around 2GW on a sunny day, yet has some of the world’s best solar resources and ready grid access. Likewise, NSW, while burning 1GW worth of gas, could closely match this with again readily connectable solar.

One of the major disadvantages of solar and wind, is intermittency. Conversely, one of the major benefits of gas is its ability to respond very quickly to demand, making gas-fired plants very efficient and profitable standby sources and a very neat fit for renewables. So why is this resource being squandered when renewables fit the bill and could help us reach our climate targets?

Economics

Below are 2015 cost comparisons from the Australian Power Generation Technology Report

The straight forward graph above shows the relatively cheap cost of gas fired electricity, at a zero cost for carbon emissions it romps in under the cost of solar by sixty dollars a megawatt hour, but this does not take into account the value of the great leveler in the form of Large Scale Renewable Energy Certificates. By applying the cross-subsidy of gas and solar, the gas that will be burnt in the future is effectively taxed, which should satisfy climate champions given that the world has still a long way to go before it weans itself of carbon.

The big issue, and one all Queenslanders should be very wary of is that at the moment 25% of our electricity is coming from gas, and generators such as Origin (630MW), Jemena (500MW), Arrow (450MW), may decide sell off their contracted gas supplies to the exporters. This leaves their generators only to capture the peaks, or the cream of the pricing cycle, electricity prices are then likely to skyrocket as the markets are manipulated by incumbent generators when they decide not to schedule their plant for next summer, driving up prices for what otherwise be a well. Marginally oversupplied market. The situation may occur where one or more of the generators decide to revert only to peaking duties and sell their excess gas, meanwhile those same incumbents who may own coal fired stations ramp those up on a higher baseline rate.

The problem is that these generators own the game, and come next summer when gas prices are likely to come under pressure, and without a means of displacing or generating baseload power during the day by a means other than coal and gas, we are at the mercy of these players. It should be blatantly obvious that there is space for two gigawatts of additional utility solar in Queensland right now, and at least one gigawatt in NSW.

Without any projects proposed anywhere near this capacity, next summer is going to be the start of a new gouge for electricity consumers. Even this week we are seeing prices reach $12000.00 per megawatt hour on spot markets when these would normally be kept under control from gas peaking plants, but if they are already running flat strap supplying base load it’s only natural we will continue to see these spikes more and more until they bring up the bottom of the average power cost, and this is likely to be significant. The addition of large scale solar will deter these gas fired generators from distorting the market and settings us all up for higher base load prices.

Second – Politics

At the end of the day, the owners of these gas plants will see their costs driven up by the export boom, yet they must be making enough these days to