How the ACT's 100% renewable electricity target is saving households cash | RenewEconomy

How the ACT’s 100% renewable electricity target is saving households cash

ACT has demonstrated how turning to renewables can slash emissions, and protect customers from soaring electricity prices.


The federal Coalition government is fond of telling us that switching to renewables will be the death of the economy, and cause electricity prices to go into orbit. But it doesn’t have to look very far to see how successful a well-thought out renewables scheme can be.

In less than two weeks, the Australian Capital Territory, the seat of Australia’s federal parliament, will reach its target of sourcing the equivalent of 100 per cent of its electricity needs from renewable energy.

Not only has it demonstrated that the target is doable, it has proved to be a lot less expensive than anyone thought.

One of the greatest successes of the ACT scheme is that in achieving the 100% target, the ACT has been able to use policy mechanisms that will also shield ACT consumers from rising wholesale electricity prices.

For the first three months of this year, the ACT government has been able to save Canberra households money through the contracts it has in place with renewable energy projects.

In effect, the ACT has not just gone green, it has shielded its population from the absurd rises in electricity prices caused by the lack of any coherent policy from the federal government.

The ACT secured its supply of 100% renewable electricity by pioneering the use of innovative contracts-for-difference arrangements with multiple solar and wind projects.

The ACT Government first used a ‘reverse-auction’ process, soliciting bids from a range of potential renewable energy projects, allowing the territory to enter into projects that were able to offer electricity at the cheapest price.

The ACT then entered into ‘contracts-difference’ with the cheapest projects and under these contracts, the price paid for the electricity generated is fixed.

Energy users make top up payments if the ‘fixed’ price is less than the ‘spot’ price under the National Electricity Market, and projects pay back the difference if the spot price is greater than the fixed price.

This arrangement is ideal for the projects themselves, as it provides a fixed, predictable, source of income that significantly de-risks the projects for both the project developers and project financiers.

It is also an ideal arrangement for ACT consumers, as the contracts likewise lock in their costs for electricity. Households will pay no more and no less than the fixed prices for their wholesale electricity. Just as it provides a price floor for renewable energy projects, the contracts effectively provide a price ceiling that shields Canberra households if wholesale electricity prices surge higher.

And wholesale electricity prices have indeed been surging, as evidenced by the ASX’s index of wholesale electricity prices.

NSW electricity futures
Source: ASX Energy

The ACT was able to lock in prices with many of the projects in the range of $75 to $90 per MWh. So with NSW wholesale electricity prices regularly trading above this range, it resulted in a situation where the renewable energy projects were making payments to ACT consumers.

Analysis from wind engineer David Osmond has spelled out exactly how much ACT energy users were better off in the first quarter of 2019; $4.3 million in just three months.

The benefit of these negative feed-in-tariff payments will flow through to Canberra households through supressed electricity prices.

Not only has the ACT shown how it is possible to quickly transition to sourcing all of its power from renewable sources, it has arguably been able to achieve this while doing a better job than the Federal coalition government at shielding households from rising electricity prices.

That’s 4.3 million that will be passed back to ACT households through lower electricity prices.

The savings have been achieved through the low cost contracts the ACT was able to secure from several wind farm projects. The ACT is sourcing the vast majority of its electricity from these wind farms, and as Osmond notes, effectively delivered a refund to ACT consumers that will lower their overall energy costs.

Credit: David Osmond

The ACT is still providing top up payments to its three solar farm projects which required higher fixed prices, but the volume of electricity being purchased from these projects is comparatively small compared to the amount of electricity being sourced from the wind farms.

It should be noted that these projects were some of the very first large-scale solar projects in Australia (hence the higher prices), but have helped achieve the dramatic project cost reductions that are now driving a significant expansion of the utility scale solar sector across the country.

The ACT will again use the contract-for-difference as it looks to secure up to an additional 250MW of electricity supply later in the year, as the territory seeks to cover any potential growth in electricity demand and maintain its status as a 100% renewably powered jurisdiction.

The ACT will seek proposals that can include 20MW/40MWh of battery storage, providing a significant boost to the territory’s energy storage capacity.

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1 Comment
  1. JackD 11 months ago

    “The federal Coalition government is fond of telling us that switching to renewables will be the death of the economy, and cause electricity prices to go into orbit.”

    If the Federal Government were an Australian business they may have found themselves in breach of Consumer Laws, for uttering false statements.

    Enuff said.

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