Gas and diesel cash in as big batteries fade in South Australia’s heatwave and hottest ever night

South Australia suffered through an unprecedented heatwave on Monday – including the hottest ever night for Adelaide – and also one of its most costliest days on the grid.

Wholesale electricity prices sat at or near the market cap of more than $20,000 a megawatt hour for more than three hours on Monday night, as the owners of peaking gas plants and diesel generators cashed in on the state’s hunger for electricity to keep their air-con operating.

According to one leading energy analyst and consultant, Alan O’Neil, Monday turned out to be the third most expensive day since the start of the National Electricity Market – an average price of $2,263 a megawatt hour over the full 24 hours, which will no doubt inflate the state’s quarterly average.

South Australia leads the country, and the world, in the uptake and integration of wind and solar with an average share of nearly 75 per cent over the last year and a target of reaching 100 per cent “net” renewables by the end of next year.

It has a growing fleet of big batteries, but as O’Neil points out in a LinkedIn post, not nearly enough yet – in terms of megawatts and megawatt hours – to make a serious dent into the evening demand on Monday.

As this graph shows, the batteries nearly exhausted themselves by around 8.30pm grid time (AEST), leaving the grid demand and market pricing almost entirely in the hands of the operators of the fossil fuel generators. They did not miss.

O’Neil notes that South Australia’s existing fleet – the state was the first in the world to install batteries at scale – have relatively short storage, with an average of a bit under 1.5 hours of storage capacity.

“So a relatively long duration price event is always going to challenge what they can do,” he writes.

“We see the fleet come into the four-hour price spike (of prices more than $1,000/MWh) with around 90% storage which they ration out between 6pm and 9pm.

“You could argue they didn’t get best value for the first third or so of their stored energy (6pm-7pm) – but had they not started discharging then, prices might well have spiked to ($19,000/MWh) sooner.

” Soon after 8pm the fleet was running out of charge and the thermal generators were able to keep prices elevated for most of the next hour and a half.”

Did the big batteries run out of charge? Almost, but not quite. Dan Lee, from Watt Clarity, writes that the two biggest batteries in the state – Torrens Island and Blyth – both dropped to zero availability around 8.40 and 8.45pm with just 20 MWh and 10 MWh left in their facility.

“This suggests that much of the residual stored energy visible at the low point in the first chart reflects minimum state-of-charge being maintained on site, rather than energy that was genuinely available to the market,” Lee writes.

“However … availability across the fleet never quite fell to absolute zero — as we can see that the Mannum BESS briefly recharged and offered a small amount of capacity again from around 8:30pm NEM time.

“For most of the remaining high-price window after this point, effective discharge capability across the fleet had largely evaporated until after the period of extreme prices had ended.”

In coming years, particularly as the state reaches its target of 100 per cent “net” renewables, with at least a dozen new projects under construction or working through commissioning, including several gigawatt scale projects, and some four-hour battery set-ups (although the duration does always depend on the capacity sent to the grid).

These include the huge Solar River, Reeves Plains, Limestone Coast, Goyder, and Bunder batteries, among others, which should all be on line within the next three years.

And what were the two most priciest days on South Australia’s grid. According to O’Neil, they were both on days featuring very high temperatures, and when just one or two players with significant pricing power dominated the market.

The most expensive was on January 1, 2019 (a year when renewables and gas both contributed around 50 per cent of local supply), and when prices on that day averaged $3,346/MWh.

The second most expensive day was February 18, 2008, when the price for the day averaged $2,534 (and when the market price cap was significantly lower).

That was a time when fossil fuels dominated the grid, and renewables had barely been seen. Coal and gas met 90 per cent of annual grid demand in 2008, when renewables accounted for just 5.8 per cent of total generation.

As in any market, when one or two players with significant pricing power are in a dominant position, then prices will rise.

And given that more than half of the state’s trading periods now feature negative prices, due to renewables, the fossil generators are even more determined to cash in as much as they can when they have the opportunity.

See Renew Economy’s Big Battery Storage Map of Australia for more information.

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