Energy prices crash as Queensland solar takes hold

(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.

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.

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.

As 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.

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.