The myth about South Australia’s high electricity prices

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.