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The myth about South Australia’s high electricity prices

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There’s a big myth going around South Australia’s renewable energy resources – surprise, surprise – and how they are supposedly responsible for the state having the highest wholesale electricity prices in the country.

We’ve addressed this issue on numerous occasions, along with a bunch of other myths, and cited this 2005 report from the local network operator just recently which explained why it was that South Australia has always had more expensive wholesale electricity prices than other states.

But given that the myth retains currency in many quarters, is being erroneously and shamelessly repeated by federal energy minister Josh Frydenberg, and is likely an issue in the upcoming state election, we thought it worth having another go.


This graph above – courtesy of Simon Holmes a Court from the Climate and Energy College in Melbourne – is a good an illustration as any of how this myth should be debunked.

It shows that going back to the turn of the century, the premium of South Australia’s electricity prices over other states was huge – the victim, as the utility ETSA pointed out, of its unique position in the market, its weather patterns, and the dominance of a few big players in the local grid.

That premium has persisted ever since, interrupted only by coal-heavy Queensland in 2015, before that state’s Labor government instructed the government-owned generators to change their bidding and forego revenue to keep prices down ahead of the recent state election.

Of course, Frydenberg has also been banging on about the lack of reliability in the South Australia grid, but over the last 12 months, since the Australian Energy Market Operator pulled its socks up, there have been no issues – and those that preceded it had nothing to do with the nature of wind energy.

Which goes to show that there is nothing scary about a grid with 50 per cent wind and solar, and indeed – as more energy storage is installed, and more facilities become “dispatchable”, the fossil fuel industry’s stranglehold over electricity prices can finally be broken.

The Tesla big battery next to the Hornsdale wind farm has already show how that can be done, smashing the gas cartel’s control over the FCAS market. As more storage is built – and there is plenty under construction and in the pipeline – prices will come down in wholesale markets too.  

Pocket
  • Peter F

    In most of spring SA power was cheaper than NSW, over summer with more demand and lower wind it was more expensive. So far in March it is still a little more expensive but the premium is down to $8 following table is interesting
    SA wholesale average prices from AEMO
    2016/17 2017/18
    December 97 83
    January 84 158
    February 179 109
    Av 120 116
    March 122 93

    The spike in January was related to lack of coal generation supply from Victoria but with about one GW of new solar and 600 MW of new wind across the south western part of the NEM as well as the new AGL gas plant and more storage, this situation is unlikely to arise again

  • Alex Hromas

    Right now the problem of increased penetration of renewables is not technical its political. It is difficult to get the message across in 30 sec. sound bites. When I start discussing this with most of my friends they glaze over and say “don’t bother us with all that technical stuff”. The sound bite “high energy prices are caused by renewables” seems to stick however. I have been responding with “i am a power systems engineer and that statement is utter crap” works occasionally anyone got better ideas?

    • Peter Campbell

      “A lie can travel halfway around the world while the truth is still putting on its shoes.” “For every complex problem there is an answer that is clear, simple, and wrong.”

      • Nick Kemp

        Three word slogans and lies – how to rule the muppets

    • Steve159

      I find going to the extreme with silly examples highlights the error of their thinking. Something like “yes, renewables have caused high power prices, and high tides. We’re going to be swamped by seawater because of renewables”. Makes as much sense.

    • BushAxe

      High energy prices are caused by poles & wires and gas?

    • neroden

      That’s a good one. I can’t use it because I’m not a power engineer.

      I usually say, “No, high prices are caused by a cartel who is jacking up prices. Solar and wind are cheap, but the middleman is jacking the prices up. Like Enron.”

      For people who don’t know the word “cartel”, I say “monopoly” or “conspiracy”.

      I can usually segue from that into “It may be cheaper to buy your own solar panels and batteries and put them on your house, even if you need a loan”

    • trackdaze

      Dont be a semmelweis.

    • DevMac

      “My last power bill was $80 thanks to my solar panels” gets the attention of people I wasn’t even talking to.

    • Rick

      Why does anyone in SA stay on the grid. It is cheaper to run a diesel. Even cheaper to use solar and a battery. The SA grid is dead but still kicking. How can grid scale wind and solar ever hope to compete with rooftop solar when there is no economy of scale but grid scale is saddled with 120% extra cost for transmission. The minimum demand in September 2022 in SA will be zero. That will be a very difficult grid to stabilise – get off now and save money. AEMO forecast 2024 for zero minimum demand but it will happen sooner than that as industry shuts up shop or switches to their own generation.

  • Norman Deards

    What prices are customers paying at the retail end? I guess that’s what should be compared. In Victoria I understand prices are half that of South Australia.

    • BeanBoy

      AGL Savers Plan: $0.38 / kWh ex. GST ex. 15% pay on-time discount
      Solar FiT: $0.603 / kWh (not subject to GST)

      • deedzy

        If I divide the Invoice Charge inc GST by the kWh used, a mix of Peak / Off peak + Service Charge, mine comes to $0.235 per kWh.
        If I add the Pensioner Discounts it’s $0.154 per kWh inc GST.
        No Solar.
        Pacific Hydro now Tango Energy

        • BeanBoy

          Highlights the shallow retailer pool here in S.A., doesn’t it? Ours is a bundled electricity + gas plan, and has been (just) the best on offer over the last five years, for our consumption. A quick look at AGL’s Victorian (metro.) tariff indicates $0.27 / kWh, but a considerably higher daily supply charge than ours.

          • Norman Deards

            It’s very difficult to compare prices for the average consumer. That’s why its easy to divide the invoice price by kWh used to see actuals costs. Doesn’t make it easier to compare all the various resellers and plans though.

          • BeanBoy

            For a typical consumer, yeah, it certainly might be difficult. The headline discount percentage often disguises a high supply charge and inflated base tariff. Every April (renewal month) I update a spreadsheet with our previous year’s consumption/feed-in and the new tariffs and charges on offer from retailers. Makes it easy to see, in a retrospect sense, the best retailer/plan for the next year. Not a concern in the old ETSA / SAGASCO days. :/

          • Rod

            Just wondering who your retailer is after plugging in to your spreadsheet? Trying to compare in SA is doing my head in due to FiTs and my very low use (4kWh/day)
            I’m looking at Diamond who have a 20c FiT (3 years) but only on the first 10kWh/day exported.

          • BeanBoy

            There’s still a few weeks before the current AGL plan expires and I have to act. I last updated the sheet a couple of weeks ago, following receipt of AGL’s renewal offer (which of course is less favourable to us than the current plan). With the information publically available at the time, Simply Energy’s RAA Plus plan (18% discount, $0.61 FiT) would be best for us. However, AGL will be made aware of this, and given a chance to improve their offer, as there’s also a few minor reasons to stick with them (FiT credit refunds, FlyBuys, local call centre).

            Keep in mind our plan is bundled, so gas is also an input.

          • Rod

            Thanks, yes gas is another level of complexity. Thankfully I am all electric other than a bottle for the stove top.

          • BeanBoy

            Amaysim now seem to be offering electricity in S.A., which I’m sure they weren’t doing this time last year. You might want to investigate their Solar 1 and Solar 2 plans – they show a reasonably good saving in my spreadsheet, given a $0.20 retailer FiT and a 28% or 33% discount on usage *and* supply.

          • Rod

            OK thanks, I’ll have a look.

        • Cooma Doug

          I use not much in NSW.
          5 kwh a day.
          I pay 55 cents a kwh.

          I could use a petrol generator cheaper.

    • Harry
      • BeanBoy

        Harry, the same tariff and supply charge as us, but with no discount. Are you on a Standing Offer?

    • JoeR_AUS

      NSW with Origin – Smart Meter

      Peak 53.01c
      Off Peak 14.42c
      Shoulder 23.79c

      Supply charge 96.85c per day

  • Jon

    Don’t let the truth get in the way of a good story, the Polies never do.

    I’ve been using OpenNEM in this discussion (and others)

    People love looking at stuff on phones, all the info is on one page which is about the average punters attention span. (Including mine…)

    The data at the moment (3:33pm 6/3/18) showing weekly average prices per MWh is;
    Average. $77.40
    Wind. $68.85
    Solar. $77.50
    OCGT. $99.65
    CCGT. $78.63
    Gas (steam). $82.86
    Imported from Vic. $94.90

    Exports. $63.50

    It’s pretty easy to see that it’s not the renewables that are pushing up S.A. power prices, the renewables in S.A. Are actually subsidising Vic with the low export prices

    It’s also a nice segway into solar’s peak shaving 🙂

  • Robert Westinghouse

    We all sympathise. But the LNP are using SA as a distraction…we are all being Donald Ducked with high energy prices. The people need to act because the government will not. Talk to your government member. Those who can afford it, get PV and batteries. I have borrowed money and have PV and batteries and hope in a few years to get more…and then we can watch the foreign owned AGL, Energy Australia etc BURN in hell. Viva la Batterie, mort à AGL, EA.

  • Jon

    The chart also appears to show that privatisation has had little to do with high prices…..about time we debunked that myth too!

    • IT67

      Careful how you interpret the chart – it shows the premium over the spot price – not the actual price.
      As you don’t have the spot price levels over the same timeframes you can’t draw that conclusion,

    • Rod

      In the short term you are correct but as with the carbon tax removal, it leads to a dearth of new investment. There is nothing in it for the cartel in SA to add more generation as they would be competing with themselves.

  • brucelee

    AEMO have pulled their socks and HPR has been a success, but was the decision to buy the rental generators the best use of money? or will they be sold again?….. Why not just procure 8 more HPRs?

    • Rod

      If they end up playing in the market they are a bargain. If not, then an expensive insurance policy.

      • brucelee

        I wonder what the resale value is on these?

        • Rod

          One owner, low mileage. You would think they would still have a lot of value.
          I’d be more than happy if they were sold to a new (to SA) Gentailer and were then free to compete. Maybe firming for one of the many RE projects.

  • itdoesntaddup

    It seems there are a lot of myths about South Australian electricity prices, starting with the official statistics:

    https://theconversation.com/australian-household-electricity-prices-may-be-25-higher-than-official-reports-84681

  • Chris Leyland

    The poles and wires , if you remember, were sold off or leased .. the reasoning is the government makes money.. the customer gets charged a premium for infrastructure.. and the government blames renewables as they make more money from coal kickbacks… simple really .. its easier to distract with a lie than disclose the real truth. Renewables do work but its all about the balance and how it’s stored…